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The World Needs Subscriptions:

How to find the right subscription model for your product

t3n, 10 September 2020:The subscription model‘s time has come. “Wanting to have” has given way to “being able to use”. If you’re also planning to sell your products or services in a subscription, you can read here about what models there are, and which one will best suit your needs.

Do you have to have a Porsche in the garage, or is it enough to be able to drive it when you want to? This thought lies at the heart of subscription models, which have now gone far beyond Netflix and Spotify membership. Customers and companies alike can profit from subscriptions. While customers gain a maximum in flexibility, often save hard cash and profit from a greater choice, companies are attracted by long-term customer relationships, a high degree of cost-control, and thus a significantly better planning capacity. You can read about further advantages and all of things that are available via subscription here.

If you, too, are thinking of offering your products or services in a subscription, then you’re spoiled for choice because there are numerous different models.          

The Different Types of Subscription Models:

  • Replenishment Subscriptions: Here, the same or similar products are sent to subscribers at regular intervals. This is particularly worthwhile for articles that are used regularly. Customers save time (when buying) and money (because of the quantity, and the time that you save by not buying). An example: The Female Company, which offers menstrual hygiene products.              .
  • Curated Subscriptions: With curated subscriptions, different products are put together in each case – often according to personal preferences that are compiled when the subscription is obtained. The subscribers are surprised by each new delivery and have the option of testing a variety of products. Examples: Hello Fresh for food and Glossybox for cosmetics.
  • Club Membership: If subscribers opt for a club membership, they receive access to exclusive content or concessions – just like with classic membership of a gym. Well-known examples here mainly come from the entertainment sector (Netflix, Spotify, etc.), but this subscription type is also in the fashion segment, for example, JustFab.              
  • Consumption Subscriptions: Here the customers only pay when they actually use the product or service, which gives them maximum flexibility. Classic examples include carsharing (sometimes with a basic fee for a cheaper use-price) or e-scooters.
  • Rental Subscriptions: Rental subscriptions are aimed at two things: long-term use with simultaneous greater flexibility. They include, for example, innovative models such as Porsche Drive, where you subscribe to a car for a fixed term. Depending on the price, a change of the model is possible. If problems arise, or if something breaks, the provider will take care of it.

Deciding on a particular subscription model is the first step – deciding how the subscription is billed is the second. For here, too, there are many different possibilities and a lot to consider.

How Subscriptions Can Be Billed:

  • Use-based Billing: Use-based billing is familiar from e-scooter providers such as Lime or Tier. Here, there are usually no flat fees: instead, the customers only pay for the actual service that is provided, for example, for the time used or the number of kilometres travelled.
  • User-based Billing: In contrast to this, user-based billing is independent of the actual service provided. A fixed weekly, monthly, or annual amount is paid – regardless of whether the customer has used the product or service. A classic example: gym membership or Netflix subscriptions.
  • Gradual Billing: Here there are various levels such as bronze, silver, and gold, or basic, advanced, and premium. Each level covers a different scope of services and has an ascending membership fee corresponding to the level.
  • Hybrid Billing: Hybrid billing is a mixed form drawn from various payment models. Here for example, there is the option of paying monthly or annually. An annual payment brings financial advantages, a monthly payment brings greater flexibility for the users.
  • Freemium: This involves a free service with the possibility to upgrade to a paid premium service with a greater selection or with more functions. A well-known example: When interrupted by ads, Spotify can be used for free – if users want undisturbed enjoyment of music, they have to invest in the paid premium service.

As is so often the case, there’s no right or wrong, better or worse answer to the question of the right subscription model or the ideal billing-type. Instead, what matters is the products you are selling, or the services are offering – and what your customers want.

If you need any help or support in deciding on your billing process, you can get in touch with nexnet, who have been experts in this field since the rise of the subscription model.

If you want to find out more about the various subscription and price models, take a look at nexnet’s free White Paper.

  Download White Paper