What do the biggest companies, milkmen and mobile apps have in common? Explore subscription-based business model and how it impacts your mobile app.
The subscription business has been exploding in recent years, and everything from software to car ownership is migrating to subscription. Everything is becoming “as a service” and even light (yes light) can’t seem to escape this trend. But why? Why are companies so keen on switching to this model? And why as Cherry, we have chosen to focus on this model as well?
To understand better, let’s go back to 1860’s to discover the first examples of this model. It is funny to see that at the origins of this model lies an example which a lot of retailers would kill to own today: “Milk as a Service”. Yeap, one of the first examples besides magazine subscriptions, was to subscribe to deliveries of milkmen.
The appeal for the customer is obvious: convenience. Subscription-based models make the buying process very practical for customers who are buying the same product at a specific frequency.
Have you heard of the Dash-Button from Amazon? It is a small device you can put in your home, and which allows you to order pre-selected items by pressing it, and you have it on your door in a couple of hours. That’s it! And what about Dollar Shave Club which started a razor blade subscription and built a 1Bn$ business in just 5 years? Who doesn’t want the product they regularly buy delivered to their door every month? Today, you can even subscribe to the tour of rock bands. Metallica, allowed you to attend all concerts on their 2018 tour with one subscription ticket.
The appeal for business is even greater with several advantages. Here is a brief list. Every company will have different priorities and some can have reap other benefits as well but we covered the biggest ones below.
Benefits Of Subscription Based Business Model
1. Better Revenue Prediction & Money Management
Subscription-based business models improve the degree of assuredness about your finances. With a known subscriber base, paying a set recurring fee, you have a high degree of certainty about your future income. It also lets you precisely plan in the right levels of production and purchasing if you sell physical stock.
2. Improved Customer Loyalty
As long as customers are getting what they need and are satisfied with the product that they are looking for, they won’t need to look elsewhere. Even if the customer is not entirely happy with your product, it can be hard for a customer to cancel a subscription. While this in no way is an excuse for poor customer service, it does allow some leeway to solve any issues and recover their loyalty.
“Subscription-based models increased to $13 billion revenue in 2020 (with %79 of the iOS)”
3. Better Growth Opportunities
Subscription models allow users to try your services for free which removes the barriers for the customer to test your product. More people will experience and see the benefits of the service you’re providing which will improve your bottom line in terms of growth.
5. Focus on R&D
The predictability mentioned above is also a great asset for investing more on R&D. Fact based predictions enable you to focus on the future of the product and also unlock investments more easily. With this increased focus and resources, you can increase your advantages in the market and build a self reinforcing circle.
Subscription-based models increased to $13 billion revenue in 2020, (with %79 of the iOS) the business model has long been viewed as a successful alternative to a transactional — or one-off purchase — models and are more and more accepted in the marketplace by customers. This is also very true for the mobile app business.
Cherry has been focused on the subscription model from day one and has acquired a non negligible expertise in this specific segment for apps. We found an incomparable value in this business strategy and we’re ready to share all the tips and tricks we’ve learned to unlock the full potential of your apps. We will share more details of our specific know-how as well as some tips in our next posts so stay tuned!
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