How to find the right model for your product
It is the heyday of subscription models, because the trend worldwide is moving away from "want to have" towards "can use". If you also want to sell your products or services as a subscription, read here which models are available and which one is right for you.
Do you have to have a Porsche in your garage or is it enough to be able to drive it when you need to? This is the idea behind subscription models, which are no longer limited to Netflix and Spotify memberships. After all, both customers and companies can benefit from subscriptions. While customers have maximum flexibility, often save money and benefit from a wider selection, companies are attracted by long-term customer relationships, a high level of cost control and therefore significantly better planning.
If you are also thinking about offering your products or services as a subscription, you are now spoiled for choice, as there are numerous different models.
These subscription models are available:
- Replenishment subscriptions: Here, the same or similar products are sent to subscribers at fixed intervals. This is particularly worthwhile for regular consumer goods. Customers save time (when shopping) and money (due to quantity and time, as they save on shopping). An example: The Female Company, which offers period products by subscription.
- Curated subscriptions: With curated subscriptions, different products are put together in each case - often according to personal preferences, which are collected using a questionnaire when the subscription is taken out. Subscribers are surprised with each new delivery and have the opportunity to test different products. Examples: Hello Fresh for food and Glossybox for cosmetics.
- Club membership: If the subscriber opts for a club membership, they receive access to exclusive content or discounts - similar to a traditional gym membership. Well-known examples here come primarily from the entertainment industry (Netflix, Spotify, etc.), but also exist in the clothing sector, for example at JustFab.
- Consumption subscription: Here, the customer only pays when they actually use the service, giving them maximum flexibility. Classic examples are car sharing (in some cases with a basic fee for a lower usage price) or e-scooters.
- Rental subscription: Rental subscriptions are aimed at two things: long-term use combined with a high degree of flexibility. This includes, for example, new models such as Porsche Drive. You subscribe to a car for a fixed term. Depending on the tariff, it is sometimes possible to change the model. If problems occur or something breaks down, the provider takes care of it.
Deciding on a particular subscription model is the first step - thinking about how to bill it is the second. Because here, too, there are a lot of different options and a few things to consider.
This is how subscriptions can be billed:
- Usage-based billing: Usage-based billing is familiar from e-scooter providers such as Lime or Tier, for example. Here, there is usually no flat fee; instead, the customer only pays for the service actually provided, for example the time used or kilometers driven.
- User-based billing: In contrast, 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: a gym membership or Netflix subscription.
- Tiered billing: There are different levels such as Bronze, Silver and Gold or Basic, Advanced and Premium. Each level offers a different scope of services and has a correspondingly increasing membership fee.
- Hybrid billing: Hybrid billing is a mixture of different payment models. For example, there is the option to pay monthly or annually. Annual payment offers financial advantages, while monthly payment offers greater flexibility for the user.
- Freemium: This is a free tariff with the option of upgrading to a paid premium tariff with a larger selection or more functions. A well-known example: Spotify can be used free of charge with ad breaks - if the user wants to listen to music undisturbed, they have to invest in the paid premium plan.
As is so often the case, there is no right or wrong, no better or worse when it comes to the question of the right subscription model or the ideal billing method. Rather, it depends on the products you want to sell or the services you offer - and what your customers want.
If you need help making a decision or support with the billing process, you can turn to nexnet, who have been experts in this field since the advent of subscription models.
