Subscription-Based Business Models for SMEs
Posted: Sun Dec 22, 2024 6:53 am
For any company, it is always interesting to investigate new sources of income, and even more so if these help them to de-seasonalize sales. This is the initial promise of subscription-based business models.
But of course, generating constant and recurring income is not a simple task. It requires creating a community and making it grow, so that these models are profitable (beyond the added complexity inherent to the business). Therefore, although the initial promise is very attractive, these models require prior study.
That said, in line with the contents of the Marketing Guide for SMEs , my intention is to explore this world to give you ideas that you can implement as part of the marketing strategy in your companies.
But let's start at the beginning with a brief introduction.
What is the subscription business model?
Its definition is relatively obvious and we can also get an idea from companies that have been using it for a long time (gyms, for example).
“The subscription business model is the sale of products and services on an ongoing basis in exchange for scheduled recurring payments.”
In recent years we have seen how this model has been extended to new categories of products and services that until recently were unthinkable.
Types of Subscription Models
As a general rule, subscription models can be applied to any product or service that can be paid for in monthly installments (in reality, renting a home or joining a gym are the closest thing to a subscription). In some cases, you pay per use and in others, you keep the product.
The challenge is to think about how we can add a subscription model to our offering to achieve recurring revenue and greater customer loyalty.
Subscription to Physical Products
This model is nothing new. From its origins with Círculo de Lectores, newspapers and magazines, to cosmetics (Birchbox), food (HelloFresh, DegustaBox), clothing (Lookiero), wine, usa phone numbers list
etc. Subscriptions to physical products have evolved beyond beauty and food boxes.
Below are some less common examples to try to inspire you:
Public Goods (home and garden): sustainable products for the home, from food to cleaning supplies.
Maker Crate (Hobbies & Crafts): Monthly craft kits and DIY projects for people interested in learning new skills.
ScrawlrBox (art product subscription): art supplies and creative challenges.
Subscription to Services
Beyond streaming services and gyms, there are numerous opportunities for service subscriptions:
This is one of the best known and most widely used by television platforms such as Netflix or Spotify with music. But we have many examples with training, digital products, etc.
Recurring Revenue and Financial Predictability
This is the main goal. Subscription models provide us with a steady stream of income, and make it easier for us to plan financially and invest in growth.
Improved Customer Retention
Subscriptions foster customer loyalty by providing ongoing value. This not only improves retention but also reduces the need to constantly acquire new customers, which can be costly.
Ongoing Relationship with Customers
Regular contact with customers allows for constant feedback and adjustments to the offering, personalizing the customer experience and increasing their satisfaction and loyalty.
This business model continues to grow, and we can find companies like CrowdFarming that allows you to subscribe to organic agricultural products or Breobox for technological products and the latest innovations.
But of course, generating constant and recurring income is not a simple task. It requires creating a community and making it grow, so that these models are profitable (beyond the added complexity inherent to the business). Therefore, although the initial promise is very attractive, these models require prior study.
That said, in line with the contents of the Marketing Guide for SMEs , my intention is to explore this world to give you ideas that you can implement as part of the marketing strategy in your companies.
But let's start at the beginning with a brief introduction.
What is the subscription business model?
Its definition is relatively obvious and we can also get an idea from companies that have been using it for a long time (gyms, for example).
“The subscription business model is the sale of products and services on an ongoing basis in exchange for scheduled recurring payments.”
In recent years we have seen how this model has been extended to new categories of products and services that until recently were unthinkable.
Types of Subscription Models
As a general rule, subscription models can be applied to any product or service that can be paid for in monthly installments (in reality, renting a home or joining a gym are the closest thing to a subscription). In some cases, you pay per use and in others, you keep the product.
The challenge is to think about how we can add a subscription model to our offering to achieve recurring revenue and greater customer loyalty.
Subscription to Physical Products
This model is nothing new. From its origins with Círculo de Lectores, newspapers and magazines, to cosmetics (Birchbox), food (HelloFresh, DegustaBox), clothing (Lookiero), wine, usa phone numbers list
etc. Subscriptions to physical products have evolved beyond beauty and food boxes.
Below are some less common examples to try to inspire you:
Public Goods (home and garden): sustainable products for the home, from food to cleaning supplies.
Maker Crate (Hobbies & Crafts): Monthly craft kits and DIY projects for people interested in learning new skills.
ScrawlrBox (art product subscription): art supplies and creative challenges.
Subscription to Services
Beyond streaming services and gyms, there are numerous opportunities for service subscriptions:
This is one of the best known and most widely used by television platforms such as Netflix or Spotify with music. But we have many examples with training, digital products, etc.
Recurring Revenue and Financial Predictability
This is the main goal. Subscription models provide us with a steady stream of income, and make it easier for us to plan financially and invest in growth.
Improved Customer Retention
Subscriptions foster customer loyalty by providing ongoing value. This not only improves retention but also reduces the need to constantly acquire new customers, which can be costly.
Ongoing Relationship with Customers
Regular contact with customers allows for constant feedback and adjustments to the offering, personalizing the customer experience and increasing their satisfaction and loyalty.
This business model continues to grow, and we can find companies like CrowdFarming that allows you to subscribe to organic agricultural products or Breobox for technological products and the latest innovations.