Why is the subscription business model so trendy?

06.08.2019 87

Some time ago, when we needed hardware or software we had to buy it. Full price! Break the piggy bank and count every coin for purchasing something that we are not 100% sure we’ll need in the long run. How awful was that? Thank God for the subscription model!

What is the subscription business model?

The subscription model is the idea of providing a product or service on weekly, monthly or yearly payments. The focus is long-term, creating lasting relationships with customers.

The subscription business model is far older than computers. It first started in the late 17th century (1). At that time, there was a subscription for books in English.

The subscription business model works perfectly in the modern internet era. It is far more practical to use online hosting for your website and make it international with a variation of DNS’s than to buy different servers all around the globe.

The business massively adopts the SaaS (software as a service) model, where you don’t buy the software, but rather use it for a monthly fee. The same goes for hardware. Renting a server and delegating all the hardware responsibilities to another company is the preferred choice for many.

It is getting so trendy that up to 80% of the vendors will be offering a subscription-based model in the near future.

Benefits for the customers

  • No high-cost at the start. How can a small startup predict accurately their needs from the start? If a startup team’s idea grows at the awesome pace they’ve promised to the investors, they will need a massive capital investment for technology in the beginning. If not, the money saved on the latest and greatest tech could buy the startup enough time for it to get stronger.
  • Better planning. Most of the subscription models allow you to use few resources in the beginning and update easily as your needs grow. That can be extremely useful for new businesses which can start small and plan easily their expenses. When the businesses start earning more, they can update to better service and respectively pay a bit more.
  • Simplicity. Most of the time, the service or product is ready to use out-of-the-box. You, as a customer, don’t have to go through any difficult installation processes to start using it.

Benefits for the business

  • Long-term clients. Now it is easier to have a better relationship with your clients instead of just selling somethings once and forgetting about the customer. You can learn more about their needs and how they gradually change in time. This information can be very useful for developing new products, services or a package deal.
  • Cross-sales. You know your costumers well and you can offer extra products or services to them. You can even create a custom deal for them and provide excellent quality.
  • Steady profits. Instead of having random sales during the year, now you will receive payments at the end of each month. You can plan the cash flow better and not be surprised by a sudden lack of money.

Conclusion

The subscription business model is here to stay. For both clients and providers, it is beneficial. It is clear that modern consumers would often prefer to pay a smaller amount rather than purchasing expensive hardware of software at once. And with the pace of tech development, it might be the better option. Users can focus on today’s tasks and forget about external worries. The providers, like us from Cloudware.bg, check for the latest options and include them in their subscription packages in order to be competitive. If you are looking for a great Dedicated server or Cloud server, we recommend that check our offers. There are many excellent options for any need.

Sources:
https://www.journals.uchicago.edu/doi/10.1086/387957
https://www.gartner.com/smarterwithgartner/moving-to-a-software-subscription-model/