The Rise of the Subscription-Based Business Model

Commerce is changing, but not necessarily into something new. Flowers, books, movies, deodorant and shavers are just a few of the items that can now be delivered to your door on a monthly basis for a recurring fee. This is a subscription business model that has seen an increase in recent years as brands change focus to customer retention over acquisition. 

Yet, this isn’t a new model. It’s actually been around for a really long time, just not quite as wide-ranging as it is today.

Where Did It All Begin?

When I first moved out of my childhood home, I had the unfortunate job of clearing out all the junk I had somehow accumulated in my 18 years of life. It’s incredible what I deemed worthy enough to keep in hidden corners of my room. Cinema tickets of first dates; birthday cards ranging through from ages 5-18; tiny shampoo bottles from hotels across the globe. Most of it was easy to part with, until I came across the one section of my room I had been dreading: the stash of Kerrang magazines.

There were hundreds piled on top of each other.

I had a subscription. I would be sent a new issue whenever they were released, and I just decided to hold onto them. They became a part of the decor, and I would get so excited every time a new issue dropped through the letterbox. After all, I was a teenager, no one would be sending me letters! That’s what MSN was for…

There’s a reason I’ve embarked on a trip down memory lane here, the subscription-based business model isn’t new. For newspapers and magazines, it’s been around for hundreds of years. Even the milkman/woman could see the power of recurring payments! 

There’s a mixture of convenience and excitement involved with subscription services. Sure, I could have walked to my local shop and picked up a new copy of Kerrang every week, but there’s something about receiving that little wrapped gift through your door that brings a whole new thrill – just me? 

I doubt it. We all know you sit there at work excitedly tracking your delivery online. It’s natural. The subscription business model just prolongs that feeling.

How Does the Subscription Business Model Benefit My Business?

The best thing about a subscription model is that it increases the lifetime value (LTV) of your customer. Instead of them buying one item, forgetting you exist or moving on to a competitor, they’re reminded of your presence every week/month/year and you continue to receive their ongoing payments. Even better, if someone decides to sign up and pay for an annual subscription, you know you are guaranteed that revenue. This makes business planning and revenue forecasting much easier.

How Do I Set Up a Subscription Model?

Most ecommerce businesses could provide their customers with some sort of subscription service. There is such a large variety of products and services available in this format and they are continuing to thrive. You could also add a discount for your existing customers, reinforcing trust and loyalty of your brand.

If you’re serious about a subscription model or you would just like more information, get in touch with one of our ecommerce experts today. Give us a call on 0121 369 5874 or email success@5874commerce.com.