Are All Customers Created Equal? Why Your Company Should Consider A Subscription-Based Business Model
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Are All Customers Created Equal? Why Your Company Should Consider A Subscription-Based Business Model

Many businesses are getting creative and converting their business model into one that is more subscription-based. Taking into account that 41 percent of U.S. retail revenue is generated by repeat customers, a recurring billing option for one-time customers might not be such a bad idea.

Forbes reports that Amazon’s Prime membership could add $18 billion to their revenue by 2020. Stats like Amazon’s, makes us question: Are all customers created equal? Here’s why your company should consider converting one time customers into subscribers.

One time customers become lifetime customers

Remember when you would go to your local electronics store and buy Microsoft Word or Office CD’s to download the software on your computer? Well, today Microsoft has a subscription option for customers who would have otherwise been one-time customers. Microsoft’s subscription plan offers a one month free trial, then an annual $99.99 per customer. Seeing as though Word is most likely necessary for those who own computers, Microsoft has a lot of lifetime customers.

Increase Sales for Seasonal Businesses

If your company has a seasonal product that is only in high demand around certain holidays or seasons, a subscription plan can help balance sales throughout the year. For example, Bouqs is a flower subscription service that allows customers to schedule deliveries throughout the year.

Helps Your Customers Budget Better

By allowing customers to subscribe to your service or product, your company can become a part of your customer’s budget. For example, I make sure to factor in $15.99 for my Netflix account and $19.99 for my Tidal subscription. It makes maintaining my monthly budget easier because I know exactly how much I’ll allocate to each service.

Easier Ability to Scale

Subscription makes it easy for customers to upgrade a product or service if they decide. For instance, a Netflix customer can add more screens to their current plan from the comfort of their own home and start enjoying their new upgraded package asap, unlike the loads of paperwork and time required when choosing to trade your car in for a newer model.

Build Customer Loyalty

Once a customer has a positive experience with a brand as a subscriber it is likely that the customer will remain loyal to that brand. According to a Small Biz Genius report increasing customer retention by 5 percent can lead to an increase in revenue by 25 percent to 95 percent.

Investors are Likely to Invest in Subscription Companies

According to Subbly, over $300 million was invested in subscription companies in 2013. A reason that subscription companies are more attractive to venture capital firms and investors is because of the predictability that is afforded by customer subscriptions. It gives investors a positive look into the future of the company.

It might behoove your company to look into moving towards a business model that promotes or offers reoccurring subscription options. Not only does it help customers budget better and provides scaling options but it can also improve your overall revenue by building financial longevity.