As you may know, I teach business strategy for Baruch College (CUNY) and at the same time as we’re discussing different business models to choose from (e.g., cost-leadership vs. product/service differentiation. We discussed how repeat customers were far more profitable than transactional ones (as they often spend more and require less pre-selling costs) and also provide increased peace-of-mind with greater predictability of revenues each month, smoothing out of demand, and greater ability to plan. We discussed how subscription models ensure a steady flow of repeat customers; (see John Warrilow’s ).
I thought I’d share some with you.
- Membership website model – providing ongoing expertise, secrets, deals etc. to people who are willing to pay for 24/7 access, rather than having to spent lots of time looking for it everywhere else.
- All-you-can-eat library model – An opportunity to store and access information, songs, data, etc. that you want at any time (e.g., Ancestry.com, Netflix.com)
- Private club model – Designed for people who want to join a group of people who share the same interest (e.g., leadership, networking, etc.) or gain special status (e.g., “exclusive resortsâ€., etc.)
- Front-of-the-line model – For people likely to use a service/product often, this model sells “priority†to members who want to “jump the que†in getting earlier access.
- Consumables model – Rather than have to worry about getting a consumable replenished (e.g., run out of diapers or razor blades), with these subscriptions you never run out, as they provide them on a routine basis.
- Surprise box model – Some people want to explore new options within a category (artisanal foods, sports gels, workout supplements, etc.), and by subscribing to monthly boxes of sample products, the businesses meet their needs as well as those of the companies wanting to introduce their products.
- Simplified model – With life getting more complex and producing overload, many people appreciate simplification – and these businesses offer to manage a domain for you (e.g., technology at home or office, and home protection systems)
- Network model – This model is used when a group of people can benefit from, increasing the number of people who use the organization’s infrastructure. WhatsApp, Zipcar, Costco, etc., examples of this model.
- Peace of mind model – This is the subscription provides a monitoring service which acts like an insurance policy against greater costs. Example are LoJack (a stolen vehicle recovery system), SafetyNet (a GPS-enabled wristband to track children and adults) and ADT (home security and people monitoring systems).
Note some companies combine several of these models. For instance Salesforce.com is a subscription business that provides software for sales teams to store and manage their contacts online. In addition it offers subscription service packages for technical support: you pay more if you want immediate responses when a critical outage occurs, rather than wait as long as two days.
What are your experiences with any of these models? How have you used them to increase sales and profits? Share with us your experiences!