The "Subscription Economy" is a term used to denote the modern avatar of the subscription or recurring -payment based business model. The basic premise of the subscription model is that instead of a one time fee for a product or service, the business charges for continuing usage of the product or service. Think of how Netflix charges a monthly subscription and allows users to stream content as long as the subscription is active. The success of the subscription model is now creating a mini-revolution and many companies which traditionally couldn't utilize the subscription model effectively are now turning to it to better manage their revenues.

The Subscription Economy - Is it for you?

The subscription model offers a lot of benefits to both the customer and the seller. Here we look at a few of the advantages and examples of how companies in different industries use them.

Customer retention - Subscription based models usually lead to more stickiness with the customer base. There are various methods to do this - for example, charging a lesser amount for a 6 month subscription and locking a customer for six months. Another example is what Tinder did when it drastically increased its monthly subscription for new users, while retaining the same pricing for existing users. These existing users who now pay about one-fifth (in some countries) the amount as new users, consider their membership to be a financial asset!

Flexibility and Convenience - Subscription based models allow users to use the service in more ways than once. For example, users may be able to access software services (SaaS) or a music streaming app from any device where they can login. Some stores even offer a subscription-based delivery of groceries or personal hygiene products that are delivered automatically every few days as long as the subscription is active.

Continuous upgrades - A great example would be how Microsoft intends to run Windows 10 (for Enterprises at least). The old way was to buy a new Windows package every 2-3 years, which meant a lot of hassle in shifting all your data and programs, compatibility issues, new bugs, security loopholes etc. Now with Windows 10, Microsoft will continuously keep updating Windows 10 for all subscribers.

Stable cash flows - Subscription models generally allow for a more stable cash flow situation which is tremendously helpful in running a business. The predictability of cash flows allows for better planning, more efficient use of working capital, reduced interest expenses and best of all - peace of mind.

In conclusion

It would be safe to say that the subscription economy is here to stay and will only get bigger with time. With innovations in payment technologies and platforms, more and more business can take advantage of the benefits of a subscription based model. As we have seen from the few examples mentioned above, almost any business can use the subscription model as long as they can provide users with the right value proposition - the perfect combination of price, convenience and utility.

While the ultimate decision to choose this model should be based on a consideration of feasibility, additional revenue expected, customer interest, long term goals etc., platforms like Payzoff can provide simple and elegant solutions to merchants. Payzoff has specific features that aid in recurring billing transactions and when combined with Payzoff's large list of available payment options, integration options and mobile adaptability - the road to the thriving world of the subscription economy is left wide open.