Are you losing customers by failing to evolve?

The way we buy is changing and from individual purchases to access to goods and services in return for a subscription (or reoccurring income model). This model has evolved from magazines, music, and streaming to software, cars, groceries, clothing, and much more.

According to loyalty specialist Tim Peniston-Bird this is simply a natural evolution of the purchase process. “If you take cars, many of us now enjoy the ease and reassurance of a ‘just add fuel’ model where we pay a fixed monthly fee that covers everything except our fuel. This means that we can stretch to a more expensive model than we could otherwise and the vendor can get us to upgrade more frequently as well as virtually guaranteeing our loyalty for servicing, parts, insurance and repurchase.”

Why adopt this strategy?

There are a number of reasons to adopt this strategy:

• It’s popular with customers – by spreading payments across the year, customers can plan and avoid nasty surprises
• Allows businesses to plan – the predictable cash flow and profit margin for the business, this means you can invest in equipment, stock or employees with confidence.
• The recurring revenue business model helps create a deeper relationship with customers and improved retention.
• It’s more resilient i.e. if you have an on-going contract it is less likely to be canceled during unusual events like a pandemic
• Makes adding goods or services easier – by offering bolt-ons for £xx’s per month.

Types of subscription model

Here are some of the most common types of recurring revenue models:

• Fixed contracts – where there is a fixed price based on a specific amount of goods or services – think broadband
• Usage-based subscriptions – where the customer agrees to a payment plan but are responsible for the overall usage – either through a variable payment or a reconciliation – think utility bills
• Tiered billing – the pricing structure has several tiers. Once a customer exceeds the quantity allowed in one tier, they move to the next tier
• Per seat billing – the customer is billed based on the number of users accessing the product
• Hybrid billing – two or more revenue models are combined
• Freemium – provides access to the product or service free of charge, but charges for additional or advanced features

How to make subscriptions more attractive?

By creating value added features, you can make the subscription much more compelling:

Invitations to launch or sale previews

Added value services like third party discounts that you can negotiate

Virtually any business can adapt to a subscription model and we have worked with companies successfully including this for: theme parks, heating engineers, hair dressers and beauticians, night clubs and even restaurants.

Third party benefits can also be used as part of the sales process – for example if they feature discounts on everyday living costs like groceries, utilities, shopping and transport then you can demonstrate how you are freeing money up to pay for your subscription – especially helpful during the big squeeze.