It is increasingly common for sales areas to apply the subscription model in their business strategies. This means that they offer their services and products for a monthly fee, generally flat, in order to guarantee monthly monetization through customer loyalty and commitment. To do this they use access to prizes, exclusive content, personalized attention, and the optimization of time and material resources as a flag.
The subscription business model is not new to the era of globalization. We have known and used it for years, in areas of services such as video clubs, subscriptions to magazines and newspapers, among others, which offer us easy access to the goods or services they offer. This type of business has been evolving and strengthening thanks to the age of the internet and the use of mobile applications, which brings us even closer to what we want to consume.
The Netflix phenomenon
The gradual disappearance of video rental stores left an empty niche in the movie rental market, which the founders of Netflix discovered and set out to fill with an innovative idea: streaming. From renting movies by mail, which was the company’s initial business, they went on to offer a wide catalog of content available on their website for all those who could pay for their services. Years after its reinvention, joining the web, they have become a service with a presence in more than 190 countries and various languages. The iconic video stores evolved.
The success of its positioning is related to the offer of content adaptable to different users, the possibility of connecting to its catalog from any device with an internet connection, and the offer of exclusive content for its subscribers. The Netflix team has used and refined the search algorithms of each user in such a masterful way that it offers the different members of the same subscription content adapted to their search patterns. Its position in the market is so solid that today most of its subscribers have become prescribers of its services. It is very common to hear their users advertise their content, even putting them at the top of the public arena on social networks.
The overwhelming success of the evolution in the way of sharing television content, using communication technology, and a classic subscription system, has encouraged strong television channels and film producers to develop their own video rental sites. We could call it the Netflix revolution.
The profitability of subscription services
Except for the case of Netflix, which is the panacea of subscription services, we can ensure that this type of business can be highly profitable if you learn to manage it properly. One of the pillars of its success is the use of sales strategies based on the consumption patterns of potential customers.
A classic example of a sales strategy designed in consumption patterns is those that gyms offer us every year. It is common for people to have exercises in their New Year resolutions to improve their physical appearance and health. In this sense, gyms offer their annual membership on the dates when people are most willing to pay. This is how hundreds of memberships are sold around the world, to customers who will not attend the gym facilities even half the time they pay. Would we say that it is a failed strategy? No, gyms will continue to receive the monthly membership fee whether or not customers visit them.
Although it is true that the essential purpose of any business is to monetize, and in the particular case of subscription businesses, to generate dividends even if customers do not use the service, which will guarantee our permanence in the market is customer loyalty. Only people who are satisfied with the attention and quality of the services we provide them are the ones who feel committed to us in the long term, and who will become our promoters. Getting to that point requires a high commitment to the care we provide to their needs and inconveniences. They must feel part of our brand.
Another factor to consider when developing subscription services is infrastructure. Given that a good part of business failures is related to a lack of scalability, it is vitally important that subscription businesses project the potential growth of their subscribers, and determine how they will manage such demand in order to keep customers they have already consolidated and continued adding new ones. It is important to have the technological systems and work teams that provide the necessary support for growth, since the ability to react quickly and assertively to customer demands affects directly their perception of quality and seriousness of your product, resulting in its permanence or desertion. In other words, you have to have an action plan so that the success of the service does not end up being the reason why it succumbs.
We can then say that offering subscription services is profitable, but it’s necessary that we know the consumption patterns of our market and the needs of our clients. If we also use the appropriate technological services and are prepared for growth, we will achieve permanence in the market and the loyalty of our clients.