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Convenience: Why a Subscription Business Model Has High Customer Retention Rates

Updated: Mar 10

Convenience is the linchpin of a sustainable subscription business model.

What could possibly be more convenient than getting all your groceries delivered without needing to put in the order every week, or the daily news in your inbox?

It’s a convenience that drives the value proposition of subscriptions. The higher the value, the higher the customer retention rates.

We’ll be breaking down what a subscription business model entails. In addition, we’ll delve into how subscription models fared in 2019 with a look towards the future of convenience.

What Is a Subscription Business Model?

In the simplest terms, a subscription-based business model is a type of business model that charges its customers a recurring fee. It’s exchanged for receiving a product or to get access to a service.

This fee tends to be charged on either a monthly or yearly bases, however, it can differ depending on the business’ preferences.

Subscription Revenue Model

The way a subscription revenue model works is by capitalizing on the compounding value of customer relationships.

Basically, as long as your customer keeps getting value from your subscription, then they’ll continue to pay for it. Moreover, you have recurring revenue models that provide stable predictions of your income.

A Quick Look at Subscription Models Performance in 2019

The overarching consensus is that subscription models continue to grow in popularity.

According to a survey by McKinsey, 46% of customers are currently paying for online subscriptions of one type or another. With 15% subscribed specifically to an e-commerce subscription, all within a year of the survey.

How Convenience Ties It All Together

Convenience is the cornerstone of a subscription business for both the business itself and its customers.

For instance, recurring payments allow a business to identify sales opportunities and have a foundation of predictable cash flow.

In addition, as merchants of physical products, they get to know about the numbers of orders in advance. In short, it’s way more convenient to estimate income and plan ahead when you have accurate data to work with.

Furthermore, subscription models are applicable to a wide range of industries. Its sheer number of benefits is worth the initial investment of transitioning to a full-fledged subscription platform.

The same convenience goes for the customers. Generally, having predictable expenses works in favor of the customers’ financial health and planning.

With payment getting automatically charged, which is where auto-renewals shine. There is no friction between the customers getting their products or discontinuation of their services.

Membership Management for Subscriptions

There is no doubt that subscriptions and memberships will be in vogue for the foreseeable future.

Shifting to a subscription business model, or —at the very least— integrating it to your current business structure, can be nothing more than a boon on the short-term and an active accelerator of business growth on the long-term.

If you’re curious about what a subscription business model can do for your business, feel free to schedule a demo with our team. We’ll be delighted to showcase what a membership management software can bring to your business.


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