Benefits of subscription models

[Andy Black]

It's Saturday morning and I'm sat in the car dealership while they track down a knocking noise in my trusty Corolla. I've recently deleted the Facebook and LinkedIn apps from my phone so brought a book to read:

Before I even open the book I look up and see a big banner in the customer waiting area for their "Service Plan":

This has me thinking about subscriptions and how they're more than just a way to stabilise cashflow (for businesses and clients alike.)

In this case the subscription would appear to be "just" annual car servicing paid for in small monthly instalments.

Here's the copy from the ad:

ServicePlan from Toyota

From just €14 per month.

BUDGET for the cost of servicing

• Guaranteed against price increases
• Affordable monthly payments
• 10% discount on additional work not covered by the plan **
• Free vehicle health check
• Free puncture Repairs
• And a lot more...

** Excludes tyres. (Some other legal blurb.)

...

Offering the 10% discount on additional work not covered in the plan is clever.

If you did this for your own business, then the subscriber now wants to use YOU to get other work done to avail of the 10% discount. ("I'm paying for this already, so I might as well get my money's worth.")

You're now become their go-to destination for all repair and maintenance work for their car.

...

How can that be applied to other businesses?

Accountant offering quarterly VAT / PAYE returns:

Instead of a quarterly bill that has to be sent and chased up, what about a monthly automated bill? It can be a the usual quarterly cost spread across three months and the benefit is that the payments are spread evenly, OR there can be a financial incentive to pay monthly (10% off if you pay monthly?).

If the hours worked that quarter are higher than normal then hours are billed at 10% less than normal hourly rate.

*** Additional services are 10% cheaper. *** (You might offer this anyway to your loyal customers but have never explicitly said it, or made it a selling point.)

Free vehicle health check. (Not sure what this means, but presumably it's something simple and people only take it up when they are worried about something they are likely to pay to get fixed anyway. You'd probably offer this free anyway and it's your "foot in the door" to help explore a piece of paid work.)

Free puncture repairs. (Something that won't happen often, is cheap to perform anyway, but the offer gives people peace of mind.)

...

Other thoughts:

Don't call it a "retainer". ("So I'm paying you each month just so I can pay you even more when I need you?")

Call it an "XYZ Plan" - a way of spreading payments for something they would *already* pay for each quarter or year or irregularly. ("BUDGET the cost of servicing.")

 

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[MattR82]

Audible subscription plan got me pretty well lol.

I was racking my brain trying to think of where else your above mentioned could work. Feels like mainly traditional businesses where there are decent one off payments that are necessary but could happen at any time. I dont know if it could work for accounting though.

But. Growing up around tradies my whole life showed me how people could get stuck. Maybe this month someone is short on money. But their electrical mains die, or their hot water heater dies, burst pipes, whatever. Most of the time you don't have the luxury of waiting, it needs to be done.

Don't know if it could work for an individual contractor, but if someone, a contractor in one of those areas or otherwise, set up a monthly or so payment plan that covered a bunch of those areas, using his connections and network to get the best price if it was outside of his niche, there could be something interesting there.

Also, I'm seemingly a big fan of rewards points, particularly for hotel booking platforms. Have stuck to the same one for 8 years almost exclusively because of that haha. Maybe something else that could be considered. Has a different feeling to a discount.

 

[MattR82]

Or maybe if they are stuck for payment in an emergency sitch offer the monthly payment to catch up that they can then continue at a reduced rate once they are used to making monthly payments for the next time.

 

[MattR82]

My dad was an electrician but now has a cafe with his partner. So was thinking also how cafes or restaurants could do it. Would be cool if there was some kind of app or platform biz owners and customers could link up via where a subscription model is used with a discount available for using it. Would often lock in those customers that aren't loyal to yours yet for some small reason.

You really have me thinking about subscription models now lol I like it.

 

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[johnp]

Process:

I think subscription models can also help with predictability - not just in revenue, but in process and production of the goods or services.

For example:

I'm selling a consumable physical product that people will want to buy again if they like it. My core focus isn't really in making one-off sales. All of the competitors are doing that.

Instead, my focus is in selling the person into an auto-delivery program, where they get the product shipped every 30 or 60 days. Aside from getting predicable cash flow, one huge benefit is that every month production and fulfillment will be more predictability - which is so important when you're just a one man show.

So, I think that the subscription model also provides huge benefits when it comes down to process.