I just finished reading this article, and it reminded me how much I love subscription-based business models. It’s fascinating to see how more and more startups are employing this model with great success (e.g. Birchbox). Here are a few reasons why the subscription economy is here to stay:
By having only a few set price points, you can accurately predict your monthly revenues and run rates better.
Easier for the consumer to buy.
By having a streamlined number of options with fewer price points, consumers will not be inundated with excessive choices, leading to quicker buying decisions.
Can be very profitable.
Costco makes billions just from their annual membership dues. It has allowed them to keep prices low and, in turn, keep their members coming back for more. Startups are now finding ways to do just that.
Can save and change certain industries.
Companies like Spotify have employed the subscription model with great success. People get unlimited music, Spotify makes tons of monthly revenue and the music industry gets a decent cut.
Dollar Shave Club is another great example of how using the subscription model can shake up an industry.