Why the Subscription Model is Everywhere in Business

“Subscription model” businesses are not new exactly. After all, people have been subscribing to newspapers and magazines for decades.

Digital media and the decreasing price of storage have changed the game for all of us as well in terms of subscription services. Streaming media companies like Hulu, Spotify and Netflix have made paying-by-the-month for movies and music ubiquitous in all of our lives. What is new, however, is the proliferation of this model in business areas you might not expect. Consider:

Subscription beauty/fashion/grooming products: Partnering up with high profile beauty companies, Birchbox offers consumers a tantalizing array of high end cosmetic and skin-care samples. StitchFix promises to take the pain out of shopping for clothing by sending customers a custom-selected box of new clothing each month. Even humble products such as shaving razors and toothbrushes have found wild success: Dollar Shave Club offers a simple way of re-upping your razors each month, while Quip promises an easier electric toothbrush experience.

Car travel: We give our personal information to Uber via an app in exchange for the opportunity to summon a vehicle to wherever we are at the push of a button and Uber handles the transaction, no questions — and no cash — required. Want to drive? Consider Zipcar, which allows you to rent a vehicle on the spur of the moment with none of the inconvenience of standing in line or looking for parking.

E-commerce: As business operations become more and more cloud-based, the need for digital services grow, and new b-to-b companies are popping up to serve those needs. Consider Dropbox, which puts all of your files in their virtual storage, freeing up your hard drive and allowing your computer to run faster. A few years ago, Adobe and Apple stopped selling their popular multimedia software in hard copy, preferring instead to have consumers subscribe to use Premiere or Final Cut respectively.

From commercial supply needs to personal grooming kits, from physical products to services, you’ll see the subscription model everywhere. The question is, why are so many businesses abandoning old models to jump on this bandwagon.

The Future of Business?

According to Subscribed author Tien Tzuo, today’s consumers prefer convenience and access to the maintenance costs of owning something, from a car to a vacation home. From a business perspective, the appeal of a subscription model is obvious: it’s recurring revenue, the holy grail of “passive income” in many instances. We’ve all heard the story of the person who buys a gym membership and then never goes. With money steadily accumulating in a subscription based model, executives can relax, right?

Not so fast. The new subscription model is about more than just collecting revenue from undemanding customers. It might be better termed a “member model.” It allows companies to develop and expand a relationship with their most desirable customer segments. Because of that relationship, this model is really a two way street. For as much you offer a product or service, you also want to constantly be on the lookout for ways of expanding your product line or service offering.

Consider the case of Airbnb: it transformed the hospitality industry by offering a service where individuals could both book a stay in someone else’s home and also rent out their own spaces for profit. Airbnb members started staying in some really far-out accommodations, including castles, cabins, and even treehouses. New friendships were forged. A “sharing economy” was sparked. And along the way, Airbnb realized that their product was a lot more than just a place to bed down for the night, it was an “experience.” And so you now see the company experimenting with offering more than just accommodations but also traveller guides to cities where visitors are going. It’s a expansion that started with a member model and grew.

Affiliated Businesses 

Subscription model businesses have in turned sparked an uptick in affiliated businesses, from cloud storage and management companies and also, of course, shipping and logistics.

Subscription in Recruiting

Here at ACCUR Recruiting Services, we also have a subscription offering, which is our Recruitment Process Outsourcing (RPO). This solution allows you to rely on our global network of recruiters to handle an vacancy that arises, while saving money on hiring a full-time in-house recruiter. Contact us for more information on this offering.