How to Use the Subscription Business Model

In the subscription business model, a product or service is offered over a specified period. Pioneered by the magazine and newspaper industries, subscription business models have been successfully employed by book and music clubs, cell phone providers, premium cable or satellite TV services and other companies.

Instructions

Difficulty: Moderate

1. Determine whether your business will be best served by a subscription model. This model should be reserved for products and services that can be enjoyed consistently through the year and are not subject to seasonal peaks and valleys.
2. Define the specific terms of use for your particular product or service and the limits of their usage. For instance, some subscription business models base their rates upon how often or for how long a customer uses the service.
3. Offer substantial savings to the customer when you offer subscription-based services or products. Motivate the customer by showing him how much money he will save by committing to a long-term business relationship, as opposed to a one-time purchase.
4. Consider offering a "lifetime" membership, which allows the customer to enjoy your products or service without limits for a certain price. While this may make it more difficult to sustain the business model over the long term, it creates sufficient capital up front that you can use for financial investments and further research and development.
5. Make the renewal process effortless. This may involve automatic renewals, where the customer will be charged once the original term of usage expires unless she specifically designates otherwise. Be aware that many customers may find this practice unethical, so make it as clear as you can during the initial contract.
6. Carefully word all contracts between the customer and the subscription service so that the terms are legally binding. Make sure the customer understands everything before he commits.