Subscription Model Vs One Time Sale
Did you know that the Subscription Economy has grown nearly 6x (more than 435%) over the last nine years?
A few years back, you could purchase software like Adobe or Microsoft by simply paying upfront and use it forever without any additional cost. But now, most of the solution providers charge their customers on a monthly or annually basis. Why do they do that? Why not charge upfront and enjoy the money in the bank?
The answer is simple. Subscription-based pricing models yield more value and revenue for the business. PERIOD.
So should you also start charging subscription pricing to your customers?
No. It depends a lot on your business, your product/ service, and your goals.
So let’s deep dive and understand both the models and choose the right one for your business.
Type of product/ service
It’s imperative to look at what you’re selling to determine the type of pricing you should adopt.
SaaS and other regular services like consulting, fitness, coaching, club memberships, TV packages, etc. can easily be categorized as subscription services.
On the other hand, products like washing machines, T-shirts are better off with a one-time payment. However, laundry services can fall into the subscription service model as you provide continuous service to your customers month on month.
Subscription models also suit better when you want to charge your customers based on usage like TV, Wifi, and music app subscriptions.
Benefits of subscription-based pricing:
- Steady Revenue Stream: The best part of the subscription-based pricing model is the stability of revenue month on month. As a business, you need some clarity of your top line to make decisions like profitability projections, hiring, expansion, etc.
Moreover, with subscription-based pricing, there are no gaps in the billing cycle that prevents the leakage of revenue.
- More affordable for customers: EMIs (Equated Monthly Installments) or part payments are preferred by the customers in comparison to one time upfront payments due to obvious reasons like:
- They don’t have to pay the full amount upfront
- It allows customers to try the product/ service at a lower cost
- Customers can pay as long as they use the product/ service
- Easy set-up and management: Setting up your subscription or recurring payment is easy and simple with Subscribie. Subscribie allows you to create your own subscription page, manage your plans and collect recurring payments without any coding knowledge. That’s not all, it comes with a 14 day free trial period.
- Higher chances for up and cross-sell: With a subscription service model, you are in constant touch with your clients. Being on top of their mind helps you build trust and relationships. If you have any additional services to offer for an upsell, it’s easier to do with a subscription model.
Trust and relationships make them receptive to any added value you can provide.
Benefits of one-time-sale:
1.Easy to understand: Probably the biggest advantage to one-time pricing is that it is far easier to make the sale. Not only is it easy for the customers to understand, but it also helps businesses in ramping up sales quickly.
Selling subscriptions, on the other hand, is challenging. Convincing your customers to keep paying every month is a bigger ask and involves a certain level of uncertainty.
Subscribe allows its users to receive subscriptions as well as one-time sale plans. All you need to do is to set up an upfront cost plan, and you can accept one-off payments like donations, etc.
2. Upfront Revenue: You get the entire money upfront. Receiving money today is not only better in terms of Net Present Value, but you can also use that money for investments in your business and to grow it further. But there is a limit to what your customers are ready to pay upfront for a service or product they haven’t used. Hence, upfront pricing offers lower Customer Lifetime Value when compared to its subscription counterpart.
Conclusion
Although the type of product you’re selling determines the pricing model you should adopt, the reality is, no business is built exclusively for any pricing model.
During covid times, many businesses pivoted their business model to include subscription services in their pricing structure.
For example, when Covid hit, Craig Skudder, a professional golf instructor, started a youtube channel. Through Subscribie, he started giving access to his content on a subscription basis.
What’s your business model? Write in the comments below.