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Future of Subscription Service
  • May 30, 2024
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Future of Subscription Service for Business Growth

What is a subscription service business? 

If you think subscription service models are a new phenomenon in business strategy, think again! People have been subscribing to services and products for the longest time. An example would be the milkman bringing you milk every day or doorstep newspaper deliveries; it’s all just become digital now to provide you with virtual products and services. For businesses trying to retain customers and increase company revenue, the best way to go is subscription services. 

A subscription service is a model in business marketing where a customer pays a fee in order to receive a product or service. What makes this different from a regular purchase is that it is not a one-off transaction, it is a recurring payment that allows customers to continue receiving the product or service. It is the perfect way to get customers to commit to whatever service it is you may provide. It always helps to learn the best ways to retain customers

THE FUTURE OF THE SUBSCRIPTION SERVICE BUSINESS 

How big is the subscription service economy? 

Statista says that the subscription service economy has seen a massive increase between 2020 and 2024. It is also predicted that by 2025 the market will see a 126% increase with an estimated revenue of $1.5 Trillion. Many companies make use of subscription services with the highest numbers coming from streaming services such as Netflix, Hulu, and Disney+

What demographic uses it? 

According to nScreenMedia the largest number of customers who subscribe to the services of companies on a repetitive basis comes from streaming sites and the typical users are White people averaging a whopping 60%. Black and Hispanic users tie in second with 17% each and the Asian community records the lowest usage of 4%.

However, whether customers subscribe to your products depends largely on whether you are reaching the right demographic for your business. Here is How to Identify your Target Demographics. 

Are they popular? 

Using Subscription Models is the most popular thing in business strategies now and it certainly isn’t a trend that is going to fade after seeing a great season of boom. If you are asking why? – Well, the answer is simple – It produces the numbers. In customer retention and revenue, it just lifts the numbers. 

WHAT NEXT? 

What companies are employing Subscription Models? Is it good for your business? 

The next question to ask is where to take up a subscription business model and whether it would do your business any good. All types of businesses make use of subscription models, other than streaming platforms, some popular businesses that employ subscription models include Microsoft Office, Scribd, Blue Apron, Duolingo, LinkedIn, and People Connect LLC  etc.  

Image of Subscription Service Companies

The wonderful thing about the subscription service business model is that it is applicable in almost any industry and can be employed by almost any business from software service providers to books and magazines. As long as your business has a product to sell or a service to render, you can take advantage of Subscription Service Models and get started with a Subscription Business.  

Starting a Subscription Business 

When offering a subscription service to your customers, choosing the right subscription model is one of the most important parts. You need to know what model works best for the type of product or service you offer or what works considering your target demographic.

Things to note other than setting competitive pricing are; your billing cycles; whether to have subscription levels such as classic, premium, gold, etc.; and the recurring payment platform to use. Getting this right according to your customer demographic makes your business more appealing to the market. 

When applying subscription services to your business model, it is always good to offer a limited level of services for free, aka freemium services. According to Jochem Gerritsen, there are seven reasons to offer freemium services. For one, it has become an industry standard. 

It also helps attract new customers with no cost to them to use your product or services and increases the opportunity to convert those customers to paid subscribers.

What are recurring payments and how do they work? 

They are automated payments that are charged on a regulated basis in exchange for a product or service. It is a large aspect of the subscription business and there is so much that can be learned about it.

To implement a subscription business model properly and successfully, ensure that you have a seamless recurring payment system in place. Platforms like Stax and GoCardless help to ensure a seamless and automated billing process. 

What are the challenges in using Subscription Service model? 

Before you get moving, you should take note of the challenges that you may encounter when using subscription models. Don’t be daunted, even the best things have their challenges but once managed well you can overcome them. 

Customer retention is one of the first and most common challenges any business faces and subscription service businesses are no exception, however, there’s an easy way to acquire and retain customers; Target Marketing! being able to reach your target customers and provide them with top-notch services.

Focus your marketing strategies on reaching your specific demographic first before branching out to acquire a wider range of clientele. 

This also ensures that you have a low churn rate, this is the rate at which clients cancel their subscriptions. There are various factors that may cause this, like an inability to meet client expectations; pricing issues; changes in the needs of customers.

Image of how to overcome challenges in Subscription service business

Try to maintain a reasonable price range and frequent communication with customers by preparing a feedback form or sending update emails when issues may arise. This creates a more personal relationship between your business and your customers. 

Another likely challenge that a subscription service business may face is problems with recurring payment processing and billing, especially in the case of international clients. Glitches and hiccups in payments can make it difficult for customers to remain loyal to your business.

There are payment platforms that are easy to set up and make payments seamless. Using good and secure payment gateways is one of the quickest ways to ensure customer satisfaction. 

CONCLUSION. 

The subscription service business shows how well customers engage with products and services that you may provide. While there are definitely challenges that may be encountered when using subscription strategies in business, those that are able to prioritize customer satisfaction and adapt well in the market are sure to prevail and ensure long-term success. By leveraging the tool that is subscription strategies, businesses can open themselves up to an infinite number of possibilities

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