Subscription economy awaits
Subscription economy awaits

The reason why more companies are building subscription businesses - and outgrowing their competitors

According to recent reports, subscription based businesses, like Spotify and Netflix, are growing 5-9 times faster than the market. Waking up to this reality, major retailers and other businesses are seeking ways to get into the subscription game. We at Nets are making sure to play our part as the payment partner for companies who want to join this new economy.

Subscriptions are an engine for better customer satisfaction and innovative business models

Is your business investigating shifting from traditional transaction based business to a subscription business? You may think of big players such as Spotify, Amazon Prime and Netflix when you think of companies with a subscription based business model, but don’t get intimidated. Thanks to better technology, virtually any company can build a subscription based business.

Some examples of subscription based businesses

  • Juica: A Swedish juice company that offer fresh juice as a subscription.
  • M Room: Haircuts as a subscription. One yearly fee gives you unlimited access to barber services.
  • uBiome: Mapping your gut microbiome. Subscription allows you to track changes in bacterial flora over time.
  • Glossybox: A subscription box where subscribers get 5 makeup and beauty products each month. 

It is important to note that subscription businesses do not only have to offer services, but can also include products. We're not endorsing any of these services listed above, but this shows you the huge variety of services that are available as a subscription these days - and even small companies can get in the game.

Traditional business vs. a subscription based business

Business used to happen in cycles of marketing and sales. After every sale a new cycle of marketing and selling would start, aimed at getting the customer to purchase again. This takes a lot of effort from both the customer and the business.

Subscriptions changed that. The customer signs up once, and then it's your job to keep delivering great service and make sure the customer never leaves. Subscription businesses treat the customer relationship as their most valuable asset and invest in customer happiness.

Traditional business vs subscription model

Five reasons why you should consider moving to a subscription model

The key reasons why more and more businesses are shifting to subscriptions include:

  • Predictability: You know your future income to a high degree.
  • Profitability: In most subscription businesses people rarely max out the service they have signed up for. As stated earlier, subscription based businesses are growing much faster than traditional businesses.
  • Simplicity: Your business model becomes incredibly simple when you shift to a subscription business. All you need to do is to make sure the customer lifetime value exceeds your costs. You can suddenly start A/B testing, optimizing conversions, and building a business that is optimized like an engine.
  • Feasibility: The technology that is required to set up a recurring payment system and integrating it with your own business is now widely available. The cost of development, marketing, and delivery for subscription businesses are rapidly declining.
  • Customer preference: Most people find shopping and getting services a hassle. Subscription billing or easier payments are simply providing a superior customer experience compared to more traditional ways of purchasing. 
  • Customer relationships: It is easier to retain existing customers than to attract new ones. A subscription based business gives you the opportunity to build long term relationships with your customers. With the ongoing subscription, you can focus on creating more value for your customers – resulting in more loyal, long term customers.

The five benefits of subscription based business models

Easy payments are powering the subscription economy

Subscription for fresh juice or haircuts has one thing in common: it needs to be paid for. In fact, getting paid is one of the most critical points in running a successful subscription business.

Every single customer in subscription businesses is critically valuable. Your payment service needs to support maximal conversions and make it easy for you to manage payment details.

Optimizing payments is one of the lowest hanging fruit for subscription businesses. Do you want to learn more about how you can use payments to increase conversions in a subscription economy and how to get started with recurring paiyment? Download our free e-book below.

Lassi Eronen is Nordic Digital Marketing Manager at Nets. His great passion is to understand and improve how businesses work. He is often found typing away on a blog, recording a podcast or brewing the "last cup of coffee for the day". 

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Lassi Eronen

Build a successful subscription business

Download our free e-book and learn how to

  • Optimize recurring payments
  • Manage customer details
  • Get started with subscriptions
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