A person using an online subscription service on their laptop.If you’re an entrepreneur, business owner, or even a creative freelancer you’ve got two basic options when it comes to bringing in revenue from your customers and clients: charge by the service or product or work out a subscription billing model. The former might sound simpler and easier to sell, but there are numerous advantages to subscription business models – for you and your customers alike.

If this weren’t the case, why would subscription-based businesses be booming right now? Netflix has replaced Blockbuster; Dollar Shave Club has cut into the profits of the corner drug store; waiting for Blue Apron to deliver has become the new grocery shopping; even the e-commerce world has plunged into the subscription game with Amazon’s well-publicized Prime service.

But why is this the case? What are the benefits of the subscription business model? Let’s take a closer look.

The Subscription Model Offers Convenience and Predictability

From the standpoint of the consumer, subscription services let them pay for the goods and services they use with a single flat rate, often deducted automatically from their bank account. For every subscription service they subscribe to, there’s one less chore to do or errand to run. Subscription billing also lets consumers budget more accurately – flat fees are predictable fees and easy to work into a regular spending tally.

For the business owner, subscription payments also provide regularity and stability in much the same way. It’s easier to worry about things like payroll and expenses when you have as accurate a picture of incoming revenue as possible. A subscription business model makes this happen.

Subscriptions Encourage Customer Retention

One of the most costly and time-consumers tasks any business has is tracking down new clients and expanding the revenue base. With a subscription business model, customers are much more likely to stay on as a customer and grow their customer lifetime value (LTV).

To look at this with some hard numbers: in commerce, 4% of customers are repeat purchasers with two or more previous purchases. Yet this demographic represents a whopping 30% of all revenue. Harvard Business School has also estimated that a 5% increase in customer retention rates corresponds with an increase in profits between 5% and 25%. Obviously repeat buyers spend more, across virtually all industries.

Shouldn’t you be doing everything in your power to encourage customer retention? An easy subscription model is one way to do just that.

Subscriptions Create a Built-In Marketing Base

Email has long been known as the most effective digital marketing customer-563967_960_720tactic out there. When you have a pool of subscribers, you also have a pile of email addresses belonging to people you know are interested in hearing what you have to offer. Having a subscription business model means having an easy way to market to existing customers, as well as encourage them to refer their friends and family to get new customers with little effort on your part.

For example, sending this as an offer to existing subscribers via email is a surefire way to bring in new and recurring customers with a great LTV: “Refer your friends to our subscription service for a free month!” Why shouldn’t you?

Subscription Billing Done Right

Of course if you’re going to take advantage of the benefits of a subscription billing model, you’re going to need to have the proper tools at your disposal. Namely, a good automated billing software to streamline the process and help with the myriad details that go into membership and subscription management.

Subscription DNA is a cloud billing service that helps with recurring billing, one-time payments, subscription management, paywall and premium content management, group communications, and more. Get in touch to learn more about how Subscription DNA can help you enjoy the perks of a subscription business model.