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August 27, 2021

What is the Subscription Economy? Understanding the Subscription Business Model

The subscription economy grew 435% in the past nine years. From streaming services to gym memberships, consumers have more subscriptions than ever before.

For bloggers and ecommerce retailers, adopting the subscription business model unlocks the potential for significant business growth.

In this post, we’ll explain the subscription economy, including:

  • How a subscription business model works.

  • The advantages of subscriptions.

  • How to set up your website to sell subscriptions.

What is the Subscription Economy?

The subscription economy refers to the growth of businesses selling subscriptions for products and services. With a subscription business model, customers automatically pay on a recurring basis. Subscriptions are essentially a contract between you and your customers. Customers agree to pay the regular fee in exchange for you delivering a product or service on repeat.

Examples of subscription businesses include:

  • Streaming Services. These include TV or movie providers and audio services like Netflix, HBO Max, Disney+, and Spotify, for example.

  • Software as a Service. SaaS subscriptions include any software you pay for, like Adobe and Microsoft 365.

  • News and Information. This area consists of content like magazines and newspapers or information like LinkedIn Premium or Sales Navigator.

  • Food and Consumer Goods. A relatively new area of subscription services, these include items like HelloFresh, Barkbox, or anything with repeat delivery.

  • Memberships. Perhaps the oldest form of subscription services, these include things like gyms, theme parks, and golf clubs.

Advantages of a Subscription Business Model

The subscription economy continues to grow as more businesses realize the benefits of subscriptions for their bottom line. Therefore, subscriptions are a smart and profitable business strategy.

Benefits of the subscription business model include:

  • Recurring revenue.

  • Decreased customer acquisition costs.

  • Better content and customer insights.

Recurring Revenue

Why do businesses love subscriptions? The answer is simple: recurring revenue. Without a subscription model, a company starts each month with no revenue. But, when you offer subscriptions, you’ll know the minimum number of sales you’ll make each month. You can count on subscription renewals each month and begin to have a more predictable revenue stream.

Yes, you probably won’t be able to count on 100% renewals. Subscription businesses experience some natural attrition. But, not as much as you’d expect. Think of the subscriptions you’re paying for personally. Most consumers have at least half a dozen subscription charges hitting their accounts each month. If you offer a solid product and customer service, cancelations likely won’t be an issue.

Recurring subscription revenue is particularly beneficial for bloggers. In our post on how to monetize a blog, we addressed how creating a members-only area is a great way to add a revenue stream to your blog. Affiliate marketing and display advertising have low click-through rates, requiring bloggers to generate thousands of page views to receive decent payouts. A subscription membership area offers bloggers the security of recurring revenue while they work to build up traffic and advertising revenue.

Decreased Customer Acquisition Costs

Subscriptions are a powerful tool because it’s easier and cheaper to keep current customers than acquire new ones. Attracting new customers costs six to seven times more than retaining existing customers.

Subscribers offer several advantages to a business. Existing customers are the ones most likely to buy from you again by either trying new products and services or upgrading their accounts. For example, if you’re a blogger with a members’ area and want to launch an online course, your subscribers are the perfect target audience.

Better Content and Customer Insights

Subscribers provide excellent intel on your content and customer service strategies. You know more about subscribers than you do an anonymous visitor to your website. You can track the reading and purchase habits of your subscribers. You can also ask for basic demographic information as a part of your sign-up process.

All of this data can help you build an ideal customer profile. Use what you learn to create targeted marketing campaigns and to tailor your paid content to their preferences.

Adding Subscriptions to a Website

Adding subscriptions to a website is simple, especially if you’re running your website on WordPress. And, since it’s the most popular content management system in the world, odds are your site is running on WordPress.

Adding Subscriptions to a Blog

If you’re a blogger who wants to adopt the subscription business model, we recommend building your membership site with WPQuickStart by Nexcess. WPQuickStart helps you build a membership site in less time with an intuitive set-up wizard.

Each WPQuickStart plan includes:

  • Fully-managed WordPress hosting by Nexcess.

  • Perfect plugins and themes including Restrict Content Pro, a $349 value.

  • Built-in payment integrations with Stripe, Braintree, 2Checkout, Authorize.net, and PayPal.

  • Multi-level subscription packages.

  • Automated emails to communicate and connect with your subscribers.

  • Detailed reporting.

Adding Subscriptions to a Store

If you’re trying to add subscriptions for products instead of content, you’ll want to consider adding a subscription functionality to WooCommerce. Look for a WooCommerce plugin with automatic and manual renewals and the billing frequency to match your subscription business model.

For a step-by-step guide and examples, check out our post on how to start a WooCommerce subscription box service.

Embracing the Subscription Economy

The subscription economy will continue to grow. People are dropping cable TV subscriptions and replacing them with multiple streaming subscriptions. You can get anything shipped to your house on repeat, from laundry detergent to dog food.

Consumers love the convenience of subscriptions and are more willing to pay for them as the subscription business model becomes more commonplace.

Adding subscriptions to your blog or ecommerce store is a great way to grow your business.

Nexcess can help you embrace the subscription economy. Get started with a WPQuickStart Membership Site today, or check out our WooCommerce resources for setting up subscriptions in your store.

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