Which subscription models are a good fit for your products or services?
25 October, 2022
Before you go to market with a new subscription service you have to decide what subscription model to use.
The different subscription models
These subscriptions are priced based on the number of users or units who have access to the service during a given time period. This is a model widely used in the software industry.
Unit price based
This subscription model is most common in transaction-based businesses. You pay a fixed amount for a set volume of products delivered over a certain time-period. Delivery, invoicing & payments are usually handled automatically. Historically, this has been the preferred model within retail.
You pay for the actual volume you have consumed over a given time period. This model is commonly used by energy & utility providers.
Use as much as you like over a set time period for a fixed price. This model is used among digital entertainment providers with low marginal costs. Spotify, Netflix and other streaming providers use this subscription model, making it the most prolific in the world today.
Package or module based
The customer is given a choice between different service levels, usually with a consumption cap per level. The model is frequently used in the software industry.
Models are often combined into hybrids to provide greater benefits for the customer, and increased revenues for the vendor. Time- & consumption based is probably the most common combination. Loyalty- and membership schemes have a more complex approach – for a fixed fee you get access to a set of discounts on various products or services, which you can then buy at a reduced price, within a certain time period.
Software as a subscription service
We also offer up our own software as a subscription service. Ours is a consumption based model, measured either by number of subscriptions or transactions processed through the system. This is a bit unusual for our industry, but we believe it`s a good model for our customers, because it provides a stable cost/income alignment. This model also means that we get a stable cost/income alignment, making it a balanced business relationship.
For many years we have helped companies succeed with their subscription business – get in touch if you want to have a talk about your recurring revenue project.