What are the benefits of subscription? Detailed explanations from the perspectives of both the user side and the provider side

In recent years, with the diversification of lifestyles, the number of consumers yearning for a life without possessions is increasing. Subscription services are attracting attention from both companies and users as a business model that matches these values.

The market scale is expanding year by year, and it is predicted that it will continue to expand in various industries in the future. This rapid expansion is probably due to the great benefits enjoyed by stakeholders.

So, what kind of benefits does the subscription actually bring to both the provider and the user?

Table of Contents

Background of subscription expansion

Background of subscription expansionSubscription is a business model that provides usage rights on a flat-rate basis. Users can use products and services within the scope of the contract for a certain period of time, and the number of companies providing services is increasing. Similarly, the number of users is also increasing, and further market expansion is expected.

The background to this is the diversification of lifestyles. With the spread of smartphones, online shopping is rapidly progressing in recent years, and at the same time, the purchasing process is diversifying. I was.

In addition, there are consumers who want a low-cost, easy-to-use service model due to the tendency to save as much as possible for economic reasons and the desire to own more because they already own enough. increasing.

In other words, the idea that you can use it only when you want to use it is leading to an increase in the use of subscriptions.

For a time, sharing services were all the rage, but most of them were material, and sharing services was difficult. Since then, the increase in the use of video distribution sites and the expansion of SaaS have led to a growing tendency to emphasize the availability of services rather than personal use of substances.

Subscription services are recognized as a mechanism that responds to diversified user tastes and satisfies economic and psychological values, and are expected to expand in various fields in the future .

What are the benefits for users of subscription services?

What are the benefits for users of subscription services?As mentioned above, subscriptions are a mechanism that responds to diversified user preferences and makes it easy to feel the benefits. So what exactly are the advantages?

1. Can be used at a low cost without incurring initial costs

Subscriptions are services that can be used at a fixed price, and for personal use, many of them have no initial cost. In addition, there is a plan with a lower price range than single item purchase, so it is a big advantage that you can use it at a low cost . The unlimited service, in particular, is set up so that the cost is lower for heavy users.

2. No need to pay each time

With one-time purchases of products and services, there is the hassle of paying by cash, bank transfer, or credit card each time. On the other hand, subscriptions are paid for at a fixed monthly rate, so there is no need to pay for each item separately . Since you can pay directly online, including credit card payments, the renewal procedure will also be done automatically.

The advantage is that there is no need to pay for continuous use and it is easy to budget .

3. Free trial is often provided, and the introduction hurdle is low

Many subscription services have a freemium or free trial period, making it easier to use. In addition, there are services that offer discounts only for the first time, so even if you are new to the field, you can easily try it.

It will be a great advantage for users to get a variety of experiences because they can try out services that they were not able to afford because they were worried about the cost.

4. Up-to-date and available

The subscription service is provided online and in an environment that is easy to update, so it is also attractive that you can use it in the latest state . The fact that old information can be updated and the service content and content provided can be expected to expand, which can be said to be a major factor in favor of subscriptions.

5.When using B2B, it can be recorded as a fixed cost

The monthly fee setting according to the usage period can be recorded as a fixed cost in the same way as when using a lease, so it is easy to make a budget for the future . In most cases, subscription services include the cost of maintenance and management in the flat-rate fee, and unlike the one-time purchase type, there is no need to depreciate at the time of accounting.

6. Virtually no physical management required

Many subscription services are used only for a certain period of time, and there is no real burden of managing products and services. For example, rental subscriptions such as furniture and fashion can be returned after the usage period ends.

Another advantage of SaaS, which uses the cloud, is that you don’t have to worry about updates like on-premises, and you can always keep it up-to-date without the hassle of managing it when you own it.

7. Easy to cancel

Subscription services are often set for a fixed monthly fee and can be used for a short period of time. Therefore, it is a great advantage for users to be able to cut out and select only the services they want to use for the period they want to use .

The hurdles to cancellation are low, and the environment where you can try new fields one after another is also a positive aspect. However, some B2B services have a minimum contract period, such as an annual contract.

8. Expand the possibility of encountering new content

As mentioned above, you can easily introduce it when you want to use it, so you can challenge new fields without anxiety. There is a possibility that you will encounter content that you did not know, and it will be an opportunity to broaden your interests.

What are the disadvantages for users?

What are the disadvantages for users?

Users get many benefits from using subscription services. On the other hand, users also feel the following disadvantages.

1. The same usage fee as the first time does not necessarily last forever

Even though the price range was a good value at the beginning of the introduction, there are cases where the price increases during the continuous period. Even if you expect an update, few users will be happy with the price increase that comes with it. Also, even if you are satisfied with the trial price, which is discounted only for the first time, you will feel dissatisfied with the regular price .

2. Total cost may be high

Users know that for long-term use, the total cost can be higher compared to single outright purchases . Although it depends on the frequency and scope of use, it is a well-known fact that it will be expensive in the long run because the cost of updating is included.

3. If you cancel the contract, you will not have anything left at hand

Unlike outright purchases, the disadvantage is that if you cancel the service, you will not be able to use it at all . For example, in the case of digital content such as videos and e-books, some users are dissatisfied with the fact that the data will not be retained when the service is canceled.

Even if there is downloadable content, there are many services that cannot be used after cancellation because they depend on a specific platform.

4. Purchasing and leasing types are troublesome to manage and return

Lease-type services such as cars and furniture need to be carefully managed because they will be purchased if there is a scratch or defect that is not covered by the warranty. In addition, it is a disadvantage that it takes time and effort to pack and ship after the contract period has passed .

In some cases, there is a separate fee for returning and collecting, and there are cases where unexpected costs occur, which will be a dissatisfaction material as a disadvantage.

What are the benefits for companies that offer subscription services?

What are the benefits for companies that offer subscription services?

Next, let’s take a look at the benefits the company offers.

1. Stable income

Subscription services are premised on continuous use, so they bring in a steady income from month to month and year to year. In the case of one-time purchases, revenues are highly volatile, but subscriptions can be calculated at a fixed price, making financial forecasts easier . It is also an advantage that it is easy to implement measures according to the set profit target.

In addition, since the number of users is always clear, inventory management can be optimized.

2. Easy to receive feedback and improve service

Users who continue to use for a certain period of time have many touchpoints, making it easy to collect data. Since it is easy to get feedback, issues can be quickly identified. In addition to improving products and services, it is also a great advantage that it is useful for reviewing usage processes and improving operations.

3. Leads to improved LTV

Continued use will result in improved LTV. As I mentioned earlier, it is easy to collect data, so it is easy to identify good customers and approach them. For single users, it is also possible to aim to improve LTV by inducing upselling and cross-selling.

4. Enhance the customer experience

Collecting user data in real time enables complex personalization in service guidance and recommendations. By understanding latent needs and making proposals that are close to the user, it leads to an improved customer experience. As a result, customer loyalty is strengthened and brand power can be expected to improve.

5. Optimization of services through data utilization

As I have said many times, the subscription business model has the advantage of making it easier to collect data. Therefore, it is possible to quantify the current situation and measure the results, and it is easy to review the management policy by data-driven . We will be able to work on improvements based on our metrics, which will help us optimize our services.

What are the company’s disadvantages?

What are the company's disadvantages?While subscription services offer many advantages for businesses, there are also disadvantages. Disadvantages on the company side affect business results. It is important to fully understand it and make use of it in marketing policy proposals.

1. High churn risk

The ease of cancellation, which is an advantage for users, is a big disadvantage for companies. This is because the subscription service is a revenue structure that assumes continuous use, and if there are only short-term users, it will not be possible to secure the costs for customer support and content maintenance, resulting in a decline in quality.

As a result, there is a risk of causing a vicious cycle of further user withdrawal, so it is necessary to adopt measures to reduce the risk of cancellation.

2. High customer support costs

High-quality customer support is also required for freemium and free-trial users, so it is also a disadvantage that it is expensive. Even for users who do not contribute to sales, support is essential to encourage continued use.

In the unlikely event that a problem occurs within the support, continuous use may stop, and the product or service itself may stop. In such a case, careful measures are required to prevent user withdrawal, and at the same time, there is a risk of ballooning human and economic costs.

3. You need to keep providing the latest content

Users benefit from always having the latest, updated content available. On the other hand, companies on the provider side have to search for user needs and constantly pursue optimization, which is a heavy burden .

In particular, cloud services such as SaaS have a fast cycle to the latest model, and continuous updates are essential in order to comply with competitors. Even if it is a purchase type or a lease type, there is a drawback that it is necessary to manage inventory while being aware of trends.

Points to avoid disadvantages in providing subscription services

Points to avoid disadvantages in providing subscription services

Benefits for users present various challenges for companies that provide them. In addition, countermeasures should be taken to prevent users from using subscriptions.

So how can we avoid these drawbacks? I will explain each point in detail.

1. Thorough customer success

Users can easily cancel their subscription when they lose interest in the products and services we provide. In order to avoid cancellation risks, it is important not only to improve the quality of products and services, but also to be conscious of initiatives from the user’s point of view . It will be necessary to take detailed measures such as improving customer support and optimizing the usage process.

In doing so, the key is the perspective of customer success. Think about ways to enhance the customer experience and encourage continued use.

2. Establish clear indicators and use data to improve

I have told you that collecting data in real time or at a quick timing is a great advantage for companies. However, even if there is data, it is meaningless if it cannot be used. Also, even if you think about improvement measures, it will be difficult to understand the current situation without clear indicators.

It is important to set specific and clear indicators and make improvements based on quantified information. Let’s set KPIs and prepare a mechanism for optimization while turning the PDCA cycle.

However, if there is a gap with the KPI that is the corporate policy, it will be difficult to achieve the expected results. In addition, it is necessary to remember to review KPIs regularly, as the business model is subject to rapid change with rapid progress.

Understanding the structure and providing higher quality services

Subscription services have the advantage of providing stable revenue for businesses and ease of use for users. On the other hand, the risk of cancellation is high, and if withdrawal progresses, the quality of service will deteriorate and revenue will decrease significantly.

It is important to understand the merits and demerits on the user side and reflect them in service improvement. For the success of the subscription business, set clear indicators, strive to improve through regular quantitative evaluations, and work to improve customer success.

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