Subscription business model: Difference between revisions

Revision as of 10:06, 9 January 2024

Revision as of 10:22, 9 January 2024

Line 44:

==Effects==

===Vendors===

Businesses benefit because they are assured a predictable and constant revenue stream from subscribed individuals for the duration of the subscriber's agreement. Not only does this greatly reduce uncertainty and the riskiness of the enterprise, but it often provides payment in advance (as with magazines, concert tickets), while allowing customers to become greatly attached to using the service and, therefore, more likely to extend by signing an agreement for the next period close to when the current agreement expires.<ref name=":1">{{Cite web |last=BlackCurve |date=March 9, 2016 |title=The Power of Subscription Pricing |url=https://blog.blackcurve.com/the-power-of-subscription-pricing |access-date=January 9, 2024 |website=BlackCurve}}</ref>

An integrated [[Software release life cycle|software]] solutions, for example, the subscription pricing structure is designed so that the revenue stream from the recurring subscriptions is considerably greater than the revenue from simple one-time purchases. In some subscription schemes (like magazines), it also increases sales, by not giving subscribers the option to accept or reject any specific issue. This reduces customer acquisition costs, and allows [[personalized marketing]] or [[database marketing]]. However, a requirement of the system is that the business must have in place an accurate, reliable, and timely way to manage and track subscriptions.

Line 55:

===Customers===

Consumers may find subscriptions convenient if they believe that they will buy a product on a regular basis and that they might save money. For repeated delivery of the product or service, the customer also saves time.<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. An example might be the Computer Science Book Club.{{citation needed|date=January 2021}}

Subscription pricing can make it easier to pay for expensive items since it can often be paid for over a period of time and thus can make the product seem more affordable. On the other hand, most newspaper and magazine-type subscriptions are paid upfront, and this might actually prevent some customers from subscribing. Fixed price may be an advantage for consumers using those services frequently. However, it could be a disadvantage to 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 would have been. 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 a 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 in particularly secure environments without internet access, after the vendor has stopped supporting the version or software, or even has gone out of business thereby leaving the customer without a chance to renew the subscription and access his own 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" />

Subscription models often require or allow the business to gather substantial amounts of information from the customer (such as magazine mailing lists) and this raises issues of [[privacy]].<ref name=":1" />

A subscription model may be beneficial for the software buyer if it forces the supplier to improve its product. Accordingly, a psychological phenomenon may occur when a customer renews a subscription, that may not occur during a one-time transaction: if the buyer is not satisfied with the service, he/she can simply leave the subscription to expire and find another seller.<ref name=":0">{{cite web |url=http://news.cnet.com/2100-1012-5169536.html |author=Alorie Gilbert |title=Software Execs Bash Their Industry's Approach |publisher=news.com.com |date=March 3, 2004 |archive-url=https://archive.today/20120527035007/http://news.cnet.com/2100-1012-5169536.html |archive-date=May 27, 2012 |url-status=dead }}</ref>

This is in contrast to many one-time transactions when customers are forced to make significant commitments through high software prices. Some feel that historically, the "one-time-purchase" model does not give sellers incentive to maintain relationships with their customers (after all, why should they care once they've received their money?). Some who favor a subscription model for software do so because it may change this situation.{{Citation needed|reason=Reference to this theory or any literature |date=August 2022}}

The subscription model should align customer and vendor toward common goals, as both stands to benefit if the customer receives value from the subscription. The customer that receives value is more likely to renew the subscription and possibly at an increased rate. The customer that does not receive value will, in theory, return to the marketplace.{{Citation needed|reason=Reference to this theory or any literature |date=August 2022}}

===Environment===