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How Businesses Might Benefit from A Subscription Model

0 min read · 1328 views Bong-Geun Choi Nov 29, 2021

A recent survey from PYMTS highlighted that 81% of US consumers have access to at least one type of subscription service.[1]  While companies are responding to consumer demand, there are many benefits that companies may enjoy by offering subscriptions.  Here are some examples: 

 

Potential Benefits of a Subscription Model

  • More predictable cash flows:  Subscriptions may provide regular, recurring income streams for a company.
  • Better financial forecasting:  More predictable cash flows may lead to better financial forecasting as the company can better predict at least a portion of its revenue stream.  Additionally, the company may better manage its inventory as it knows what products need to be delivered and when.
  • An additional revenue stream:  Subscriptions may offer access to consumers who either do not want to own a product or service outright or are looking for a more flexible form of consumption.
  • Increased engagement, better relationship with customers:  Companies have a regular touchpoint with their customers as they deliver a product or service regularly.  This allows the company to glean information about customer preferences and customize product offerings and services.
  • Greater customer loyalty:  Increased engagement and greater customization may lead to higher customer loyalty.
  • Increased return on the cost of acquiring new customers:  Subscriptions imply repeat business, so the return on acquiring customers may be enhanced.
  • Lower retention spending:  The implied repeat business from the subscription model may also lead to lower costs associated with retaining customers.


 


[1] Subscription Commerce Conversion Index, PYMNTS, 2021

 


 

Bong-Geun Choi

Chief Economist

bchoi@fountinvestment.com

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Risk Disclosure:

 

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors, as well as increased volatility and lower trading volume. 

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