Subscription Business Model

With the subscription business model, customers or members pay a set amount each week, month or year, and in return, they get a service.

Today the subscription business model has become the standard for many tech companies.

From Netflix to Spotify and Amazon Prime, the subscription business model allows companies to build a more stable turnover.

In fact, you can easily understand the power of the subscription business model compared to a traditional product or one-time service sale.

Let’s take two scenarios. In the first, you launch a product that sells at $200 to 100 people. In the end, you have $20,000.

Let’s take the case in which you sell a service for $100 to 100 people. In this case, you made $10,000.

Yet, the coming month or year, you’ll not start from zero but from a predictable revenue. That is why many businesses are adopting the subscription business model.

Also, today the way of consuming things, in general, has changed. We’ll see in this article, why the subscription business model is taking over entire industries.

We’ll also evaluate if and when this is an effective business model. Many talk about the subscription business model as something new.

Yet it’s not. In fact, this is the way the traditional media industry has worked for centuries.

• The subscription business model is as old as the newspaper
• Is it the end of ownership?
• The total cost of ownership and why cars become expensive in the long run
• Online vs. physical? That might be the wrong dichotomy
• Why subscription model might actually be easier for consumers
• The Subscription Economy
• Amazon Subscribe & Save
• Dollar Shave Club
• Ipsy
• Blue Apron
• Birchbox
• Take a snack box mix it up and you get Gaze mini-snack subscription box
• Three models of subscriptions
• Replenishment subscription
• Curation subscription
• Access subscription
• Other subscription business model examples
• Netflix
• Spotify
• Slack
• Amazon Prime
• Beware of members churn
• The magic metrics
• Subscriber acquisition cost
• Monthly recurring revenue (MRR)
• Churn rate
• Monthly recurring costs (MRC)
• Lifetime value (LTV)
• Monthly active users (MAU)
• Does a freemium work with the subscription business model?
• What subscription models can you apply to your business?
• Key takeaway

The Power of the Subscription Business Model - FourWeekMBA