Subscription Based Pricing – Is It Beneficial for Your Web Store?

Date posted: July 14, 2017

pricing

By Paul Simmons

A business startup needs an impressive business model to mature and flourish in the market. The subscription-based pricing is not a mere pricing methodology. But, in fact, it is a complete business model. It requires the customers to subscribe to a service or a set of products, and opt to receive them over a period of time.

The online stores need a consistent stream of income. The beginners would like to survive, whereas the established businesses are looking forward to an expansion. But, the uncertainty of getting orders limits them to meet the operating expenses, and do not think beyond it.

The subscription-based pricing is the solution to such an uncertainty. It empowers you to convert the one-time buyers into regular buyers by seeking their permission and sending their required products or services monthly, quarterly, bi-annually or annually.

How subscription based pricing works?

Subscription based pricing originated from the press media, whereas news and magazine publishers users to offer subscriptions for a set period of time. It is at the users’ discretion, to subscribe to receive a magazine or not. The newspaper agencies are still carrying the same model as it helps them predict revenues based on the number of subscribers.

This model negates the concept of offering the same price for every unit sold. It requires you to set pricing for the different duration of the subscription. In simple words, a user who subscribes for a longer duration saves more.

Though this model was limited to press media for long, but it’s a trending concept in the eCommerce industry. Today, the online stores are attracting users to subscribe to the products and services they use in routine. The users are subscribing to monthly grocery, quarterly men’s socks, the fortnightly box of latest toys, daily cleaning services, annual accounting, budgeting and planning, and lots of other things.

Now, you can implement subscription-based pricing for a variety of products. It is no more a thing of the service industry. The software industry is greatly benefiting from this business model as it allows the users to avail software as a service (SaaS), avoid upfront charges and pay a nominal subscription fee.

Is it beneficial for your web store?

The concept of subscription based pricing may be a bit new and unique in the eCommerce industry because the merchants are still reluctant to implement it. If you try to evaluate its beneficial aspects for your store and consumers, you will have it on your web store. Following are few of the benefits you may enjoy being a store owner.

  • Recurring revenues. The subscription of a number of users for a specific time period results in the recurring revenues. Every month or week, you generate a computed amount of revenue without making the extra effort of branding, promotion, marketing or outreaching.
  • Easily predict revenues. The financial management is often subject to risks and reward, which bounds you in taking investment decisions confidently. With recurring sales, you can quickly predict revenues for a given time frame. Remove the uncertainty of getting traffic, leads, and conversions by turning your customers into subscribers.
  • Better inventory management. The online stores often incur major expenses on ordering and holding an inventory to meet customers’ demand. In a conventional business model, they either need to hold more inventory than required or have to pay a higher price for ordering just in time. With the subscription economy, you are quite sure the time you will need an inventory. Thus, it improves the inventory management of your store.
  • Minimize the retention cost. The online users often expect to receive discounted offers through email marketing, ads or social media. It becomes difficult for an online store to make their users return and shop again. On the other hand, the subscribers automatically come back or get the services on their doorstep. So, you minimize the retention cost as it is not compulsory now.
  • Quick feedback mechanism. The customers who are receiving your products or services regularly will never quit until they have another alternative. The moment they alter subscription preferences, you can reach them to know if there is a problem. This serves as an instant feedback mechanism to understand a decline in quality on your part or something else. You can rectify it easily rather than chasing the abandoned carts.

Subscription-based pricing is helping companies to retain a continuous flow of income. It is encouraging customers to sign up for a longer duration to enjoy peace of mind. It sets them free to negotiate the price and evaluate the quality of service each time they need it. For your store, it can prove a game changer to retain an active group of customers who likes to shop on regular intervals.

Paul Simmons is an eCommerce web development veteran. His industry rich experience makes him an expert in foreseeing the beneficial features for web stores. He has mentored various eCommerce projects which primarily include the custom plugin development. Among the useful tools he has developed, the WooCommerce CSV import is a worth mentioning plugin.

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