Subscription business model: Difference between revisions

Revision as of 12:28, 20 December 2024

Latest revision as of 11:49, 19 August 2025

(22 intermediate revisions by 20 users not shown)

Line 2:

{{Original research|date=June 2020}}

{{redirect|Subscription|the subscription process for shares etc.|Subscription (finance)|its use in religion|Confessional subscription}}

The '''subscription business model''' is a [[business model]] in which a [[customer]] must pay a recurring price at regular intervals for access to a [[Product (business)|product]] or [[Service (business)|service]]. The model [[Publication by subscription|was pioneered]] by publishers of [[book]]s and [[periodical]]s in the 17th century,.<ref>{{Citation |last1 = Clapp |first1 = Sarah L. C. |title = The Beginnings of Subscription Publication in the Seventeenth Century |journal = Modern Philology |volume = 29 |issue = 2 |pages = 199–224 |publisher = The University of Chicago Press |___location = Chicago |date = November 1931 |jstor = 433632 |doi = 10.1086/387957 |s2cid = 162013335 }}</ref> andIt is nowparticularly usedcommon bynow manyfor businessesdigital products, websiteswhich lend themselves more naturally toward a subscription model.<ref name=":2">{{Cite webjournal |last=BarseghianEinav |first=AlexLiran |titlelast2=CouncilKlopack Post:|first2=Ben What's|last3=Mahoney Behind|first3=Neale The|date=2025 Rise|title=Selling OfSubscriptions The Subscription Model?|url=https://www.forbesaeaweb.comorg/sites/forbestechcouncil/2019/08/12/whats-behind-the-rise-of-the-subscription-modelarticles?id=10.1257/aer.20231612 |access-datejournal=2021-01-13|website=ForbesAmerican Economic Review |language=en |archive-datevolume=2021115 |issue=5 |pages=1650–1671 |doi=10.1257/aer.20231612 |issn=0002-12-288282 |archive-url=https://web.archivestanford.orgedu/web~leinav/20211228070023pubs/https://wwwAER2025.forbes.com/sites/forbestechcouncil/2019/08/12/whatspdf |archive-behind-the-rise-of-the-subscription-model/date=April 30, 2025|url-statusaccess=livesubscription }}</ref> and even pharmaceutical companies in partnership with governments.

Subscriptions can be a more convenient, hassle-free transaction for consumers.<ref name=":2" /> However, due to inertia among some consumers, they may inadvertently pay for subscriptions that they no longer value because they do not realize that they are subscribed.<ref name=":2" />

==Subscriptions==

Line 18 ⟶ 20:

** Periodicals, such as a newspaper or magazine, have several types of subscriptions:

*** [[Magazine#Paid circulation|Paid circulation]]

*** [[Magazine#Non-paid circulation|Non-paid circulation]]

*** [[Magazine#Controlled circulation|Controlled circulation]]

** [[Subscription box]]es contain a variety of consumables

*** [[Community-supported agriculture]]

*** [[Meal delivery service]]

*** [[Meal kit]] delivery service

Line 52 ⟶ 54:

Additional benefits include a higher average [[customer lifetime value]] (ACLV) than that of nonrecurring business models, greater customer inertia and a more committed customer base as it transitions from purchase to opt-out decisions, and more potential for upselling and cross-selling other products or services.<ref>{{Citation | title = Subbly.co: Best Practices for Online Business Models | url = http://www.subbly.co/blog/10-best-practices-for-online-subscription-business-models/ | access-date = 9 July 2014 | archive-date = 24 August 2017 | archive-url = https://web.archive.org/web/20170824181102/http://www.subbly.co/blog/10-best-practices-for-online-subscription-business-models/ | url-status = live }}</ref>

Some software companies such as [[Adobe (company)|Adobe]] and [[Autodesk]] have moved from a perpetual licensing model to a subscription model, known as "[[software as a service]]". This move has significant implications for sales and customer support organizations. Over time, the need to close large deals decreases, resulting in lower sales costs. However, the size of the customer support organization increases so that the paying customers stay happy.<ref>{{Citation | title = Software Pricing Trends | url = https://www.pwc.com/us/en/technology-innovation-center/assets/softwarepricing_x.pdf | access-date = 14 August 2016 | archive-date = 27 August 2016 | archive-url = https://web.archive.org/web/20160827131306/https://www.pwc.com/us/en/technology-innovation-center/assets/softwarepricing_x.pdf | url-status = livflive }}</ref>

===Customers===

Consumers may find subscriptions convenient if they believe they will buy a product regularly and might save money. The customer saves time for repeated delivery of the product or service.<ref name=":1" />

Subscriptions which exist to support clubs and organizations call their subscribers "members" and they are given access to a group with similar interests. <ref name=":1" />

Subscription pricing can make it easier to pay for expensive items since they can often be paid for over time and thus can make the product seem more affordable. On the other hand, most newspaper and magazine-type subscriptions are paid upfront, which may prevent some customers from subscribing. Fixed prices may be an advantage for consumers who frequently use those services. However, it could disadvantage a customer who plans to use the service frequently but later does not. The commitment to paying for a package may have been more expensive than a single purchase. In addition, subscription models increase the possibility of [[vendor lock-in]], which can have fatally business-critical implications for a customer if its business depends on the availability of software: For example, without an online connection to a licensing server to verify the licensing status every once in a while, a software under a subscription-model would typically stop functioning or fall back to the functionality of a freemium version, thereby making it impossible (to continue) to use the software in remote places or particularly secure environments without internet access, after the vendor has stopped supporting the version or software, or even has gone out of business leaving the customer without a chance to renew the subscription and access his data or designs maintained with the software (in some businesses it is important to have full access even to old files for decades). Also, consumers may find repeated payments to be onerous.<ref name=":1" />