Businesses that offer software as a service, basically SaaS companies, often use a subscription business model to sell their services. The subscription model is not going anywhere – it is here to stay for the long run. The concept is straightforward – clients have to pay a fixed amount (weekly, monthly, or annually) to get a pre-decided service in return.
The subscription model is one of the significant business approaches in the software industry, and it would not be easy to find any industry that hasn’t seen any subscription success story in the last few years. For this reason, this strategy is so appealing – all in all, it’s a powerful model for business growth.
By knowing how this business model works and how you can use this strategy, you can build the foundation for your business success.
What is a Subscription Model?
The subscription-based model is a business model that charges clients a recurring fee – weekly, monthly, and annually – to access a service and product.
A subscription business model can help you capitalize on the compounding value of client relationships. It means that as long as your consumers see the quality of services or products your firm offers to them, they will continue to pay you for it.
The Dominance of the Subscription Model in the Software Industry
Subscriptions are not just everywhere; that’s why they feel inescapable. Everybody from Disney to Apple is adopting a subscription-based billing model, linking to popular digital media businesses, such as Spotify and Netflix.
However, this model is nothing new in the software world. Over the last two decades, the software industry has gradually switched from the conventional licensing model to a web-based subscription model.
The subscription-based business model was introduced by early web companies, such as NetSuite and Salesforce. These companies vanished the trend of the traditional business model, where software vendors used to bound clients into their long-standing contracts.
The idea of the cloud-based subscription model is: users get billed for their uses, with no commitment and contracts. All you have to do is – simply log on and insert your credit card details to start using the services of cloud software. This business model is often called “SaaS” or “Software as a Service.”
Today, subscriptions are only about standards all across the software market. Renowned companies such as Adobe and Microsoft have made significant changes towards subscriptions. Businesses, including Zoom and Slack, depend on subscription revenue, and every new SaaS startup is using this strategy.
Benefits of Subscriptions in the Software Industry
There are definite benefits to the subscription business approach.
Advantages for Companies
Subscriptions mean constant recurring sales – a smooth flow of revenue. And businesses with inventory, this business model makes them easy to manage their inventory. It also helps companies in building brand loyalty, creating a strong client base, and lowering the pressure of sales teams to make things easier and take the business to the next level.
Advantages for Consumers
Subscriptions provide convenience and more optimized recurring pricing so that brand expenses can be budgeted. That means no more decisions about what to purchase and when to purchase it, no need to visit physical stores for shopping.
A More Flexible Model
As per analysts, businesses often prefer to use this approach. While they are paying a little more for subscription services, the benefits of not having to maintain, optimize, and update apps themselves are worth it. Also, the flexibility of being able to add and subtract customers at your will makes it more ideal.
Helps in Building Stronger Bond with Clients
According to software providers such as Adobe, Microsoft, and Salesforce, the primary benefit of a cloud-based subscription approach is that it enables them to have a direct connection with their clients. When software can be updated multiple times each day, it becomes quite more comfortable to include new features that resolve real issues.
The best thing subscriptions have enabled businesses to do – having direct communication with clients. And if used wisely, it can lead companies to grow and boost their revenue.
Over recent years, the subscription business model has been a slowly evolving trend in recurring revenue from both B2B and B2C firms. SaaS (Subscription as a Service) has reached new heights and demonstrated to be hugely successful, as more and more people choose to rent the software instead of buying it at once.
Recurring bills and online payments bring a stable stream of business revenue, which assures highly sustainable profitability for a firm compared to sales with one-time fees. For example, Adobe adopted subscription-based services in 2017, and just in one year, the company experienced around 77% hike in their revenue.
So if you’re still not using the subscription model strategy, do not waste your time and invest in it immediately.
Besides, if you’re experiencing any problem in managing your recurring billing and online payments, contact Chargezoom. The mission of Chargezoom is to help businesses simplify their billing and payments. Browse the website for more details.