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The Reasons to Try a Subscription Business Model (+ How to go about it)

May 13, 2023

A lot of creators are shifting away from a one-time pricing structure and are moving to a subscription-based pricing structure. It is because of a simple reason that the regular payment structure permits them to earn regular revenue.

Have a look at the successful founder of Sew it! Academy Mimi Goodwin as an model.

A typical one-time sales conversion rate for all industries is between 2.35 percent and 5.31 percent. If you launch your online course using an upfront cost model only 5 percent of people who view your online course will buy the course. It may appear to be a bit high at first but it's impossible to know how much money you'll be able to make during the following month, particularly if number of people visiting your sales site changes.

If you opt to utilize the model of subscription for company, then it's likely that the initial payout may be smaller, but you'll be able to forecast how much money you'll earn over the next couple of months. Therefore, instead of trying to attract more customers, you might improve your existing online classes for learners.

This improves your learners' happiness, increases their confidence and motivates them to promote your courseand result in higher number of subscribers.

Read on to find out:

What is a subscription model?

A subscription business model is one in which customers must pay either a weekly, monthly or annual cost for access to your product or service. Based on the time they select, the client may renew their subscription at any time during the duration of using your product.

Business models that are based upon subscriptions can benefit both the person creating the courses, as well as the customers. For the course creators (and the proprietor of the business), you can leverage your existing relationships with clients to earn predictable income. This allows you to keep spending money on your business as well as preventing you from over-saturating the audience with your courses often. The students have the option to unsubscribe at any time you want but without paying more than they had made a prepayment.

If you provide the best product or service in the right industry, a subscription business strategy could prove to be a profitable source of revenue.

What is a subscriber-based business model work?

The basic principles behind the subscription model that is used in business is straightforward.

You charge your customers with recurring payments for your service or product and give them the possibility to cancel or renew anytime. The customer decides when and what time period they would like to purchase your offer. If they continue to renew their payment (usually using a debit or credit card) the offer is open to the customer. However, if they do not keep their payments up to date, they will lose ability to access the offer immediately.

The subscription model for business was introduced in the early 17th century by the publishers of periodicals and newspapers. With the advancement of technology, many websites, businesses, and software-as-a-service (SaaS) platforms use this business model.

Some of the most popular firms that are charging their customers by subscription are Netflix, Microsoft, and Spotify as well as Microsoft and Spotify. They have been reaping the benefits of this model for years. It's good to know that this business model isn't limited to big companies. It's possible to use it to develop your own products as well.

Advantages of a recurring business model

The subscription model of business provides many advantages. These are just five:

Predictable revenue stream

One of the best aspects of a subscription business model is that it allows you to predict the amount of money your business will generate each month (or every year). Since clients pay you on regularly, it's simple to determine what amount they'll be required to pay in addition to the exact date they'll be required to renew their subscriptions.

If you consider your churn percentage as you calculate the churn percentage, then you'll be able calculate your monthly recurring income (MRR) close to being precise.

For example: Say you've got a 7% turnover rate, and you have 2,500 students sign up for your course for $20 per month. Even if there are no new students the following month, you'll earn minimum $40,000.

The longer the time your plan is in place is the better able predict how many customers you gain or lose during an exact time. It's simpler to figure out the amount of your MRR and annual recurring revenue (ARR).

More effective Customers Acquisition

Imagine that you make $2000 per month in your part-time job as a barista and you're looking to enhance your knowledge by registering in a course on project management. This one has two pricing options that include $1,000 for one-time payment and $70 per month. What pricing model is more to meet your requirements at the moment?

My money comes from an annual subscription.

Sometimes, the price of an item may seem expensive to the potential buyer. Breaking the price down into weekly, monthly or annually-based installments, it makes it more affordable and allows potential buyers to include it into their budget. This way, more people that can afford to pay per month can be converted and enrolled into your classes.

Lower customer retention spends

If your students continue to make payments for your classes which means that you are not required to set aside an equal amount of cash to reach them like you would if your class was based on a one-time pricing structure. Because they continue to renew the amount they pay, it's possible to conclude that they are committed to a long-term association with you. It's less likely to lose customers, which means that you won't have to spend lots of cash to maintain the customers.

Stronger customer relationships

With a single-payment system that allows customers to pay one time for your program and that's it. Except for a handful of people who will contact you to inform you of the course's progress, most of them will likely not interact with your company in any way.

Subscription models are a good option, but let customers access you (and to you in turn) throughout the day. If your customer support team will always be available to answer your students' inquiries and helping them solve their issues, they'll start to trust your company's reputation. This could significantly influence the final decision to either keep or decide to end their subscription.

Possibilities for upselling as well as cross-selling

In 1968, social psychotherapist Robert Zajonc devised the mere exposure theory. The theory states that if a person is exposed to a stimulus, they develop more positive attitudes towards the stimulus.

In the case of business, this means that the longer your customers are able to access your products it will be more readily accessible to the people who purchase from you. In turn, your customers will be more inclined to purchase other products or services that you may have to provide.

With cross-selling you're creating additional offerings that complement existing products for a cost higher. For instance, if you're offering only the online course for $25 per month, you could add your exclusive membership plan and sell the two for only $35 per month.

With upselling, it's possible to convince your customers who are already buying the product at a higher price. In the case of providing a class for $25 per month then you could promote a comparable, but more expensive class for students at the amount of $30 monthly.

The new customer might be reluctant to choose the more expensive choice immediately. If they've accepted your program for a time of six months can change their plans (or take the course at a higher cost) depending on the they can gain from the program.

Moving to a business model which is sub-addition based

If you're considering using a subscription business structure for your product, here are the six things you should do:

 Figure out whether your business is a good match for this price structure.

Before setting up an underlying subscription-based pricing model to your firm, you need to decide if it's a best pricing strategy for your business. For instance, if the service you offer clients require continuous access to for example, fitness programs or an online boot camp -- the pricing structure for subscriptions is perfect for your organization. If it's only a once-off program, it will not be the best selection.

Once you're sure you're certain that the subscription model is a great choice for your service Next, you can take your next steps.

Set realistic goals for your subscription-based business

Your goals that you want to achieve through your business will determine the price points and the tiers you choose. When you are deciding on pricing consider what I would like to achieve with the subscription model of my business?

Do you need to achieve greater growth in revenue or faster growth? Or is it better retention of clients and customers?

Furthermore, your goals aid in determining the rates you will need to will help you attract the perfect customers They'll also affect the tone of your site/sales pages' copy.

Pick a subscription price strategy

Then, you can get to the most enjoyable element of creating those subscription bundles.

If you're just trying out an existing subscription-based pricing method in the beginning, it's feasible to keep things simple by creating at minimum three or two packages. When you've measured your conversions and gathered feedback from your clients you'll have an opportunity to design additional levels to meet their needs.

In order to do this, take note of the following aspects:

  • Your way of communicating the value of your product to your customers
  • The industry standard
  • The price incentives for your package

If you're uncertain which direction to take, consider the options the competition offers. It's crucial to customize your packages more appealing to the customers you intend to reach.

When it comes to offering Pilates for new parents, it is possible to look over the cost packages for different Pilates classes on the internet. If you discover that price is between $20 a month to $65/month, then it is possible to use this as a base.

A beautiful packaging design doesn't necessarily imply that your product is priced cheaper than the competition. It is possible to charge the same amount, but provide slightly higher incentives or benefits. You can be more expensive that is higher than the competition when you're providing benefits they're offering benefits that they aren't.

The main point is that your clients should examine your pricing levels and believe that you're the best choice. If they did business with you, they'll receive an excellent price.

It is a simple way for potential customers to sign up

The procedure of signing in for a subscription should be straightforward and straightforward. Customers shouldn't be confused about how to sign up after they visit your site. Also, you don't want the visitors to take 30-60 minutes searching through your sign-up form.

Include a hyperlink for your price page within the menu navigation of your website so visitors can effortlessly locate it. The pricing page on your website, the subscription plans and prices should be clearly displayed in a way that your target visitors can be able to comprehend.

Furthermore, you need to give customers options to change their billing information, and change or cancel subscription plans.

 Increase your company's reach by utilizing the right technology

As the purpose is to get recurring payment from customers, it is important to make sure that the billing software you use has the right tools to receive and process these transactions.

If you usually deliver various goods to clients at the same time using the bulk delivery option It can simplify the delivery process as well as reduce costs.

Provide exceptional customer service

Your website must provide a variety of ways for prospective customers or customers to get in touch with your customer service department if they need help or encounter issues. Some contact options include chatbot and live chat as well as email or phone calls.

It's how easy people have in contacting your customer support team and the level of service they receive may very well decide whether they'll stick with the subscription or not. It is essential to ensure that you provide the best service to your customers base, and establishing connections with your customers.

Here are a few examples of products which use the model of subscription

Subscription models for business are employed in a variety of ways by companies in various niches. Below are five businesses that have had success with the subscription model for pricing.

Online courses - Copy School

Copy School is a reputable online program that shows people how to create all types of copy that is strategic which includes content for social media websites, website advertisements, as well as emails- for companies. This course is intensive and has resulted in extraordinary copywriters working with multi-million dollar companies, and make top dollar.

Due to this, Copy School's cost Copy School is expensive -it costs $3,997 in one-time payment to get life-long access (or 1.998 per month to use an advertising-supported software). But, Copy School has two subscription options that help customers to afford it -the monthly cost is $348 (ad-supported) and 697/month over 6 months.

streaming platforms - Netflix

At the time it launched onto the market, Netflix initially was an online rental platform for DVD's. But with the introduction the internet's broadband, mobile phones, and smart TVs, Netflix changed its name to the video-on demand (VOD) streaming service. Netflix is now a streaming service with subscriptions, which allows customers to view movies and television shows using connected devices via the internet.

The pricing levels of Netflix vary between $6.99 up to $19.99. The plan you choose depends on video quality and the number of devices users want to connect to their account.

Software-as-a-service platforms -

Members ClassPass ClassPass

ClassPass is a program for membership designed for fitness and beauty enthusiasts. By registering for the ClassPass membership, members can schedule appointments or classes in top gyms, studios as well as salons and spas around the world. ClassesPass's subscription plans start at one-time payments of $19 per month (for 8 credits) all the way to $159 per month (for 80 credits). ).

 Physical products BirchBox

Birchbox delivers its customers box that contains between two and six products of beauty every month. Beauty boxes are designed according to a questionnaire that the client takes at the beginning. The boxes allow customers to test the various products available, since the same item cannot be delivered twice.

When a customer finds a product they love and want to purchase it the option to purchase it is through the BirchBox website. A monthly subscription costs $13/month You can also get discount rates for 6-month, 3-month, and 12-month subscriptions.

Make more money by implementing the model of subscriptions for your company

When you work in a subscription-based business, you can't just make up a list of prices and sit and wait for people to sign up. You have to put in the effort. Your clients are only able to renew their plans when they believe they're getting benefit from their investment.

In order to provide the benefit you promised, you'll have contact your customers discuss their issues and offer them tried and tested solutions. This is the only way to assign fees to your offerings that customers will be delighted to subscribe to.

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