Startup Tips

The Subscription Business Model - Your Key to Future-Proofing Your Business

Remember the time when buying products and services in India meant one-time transactions? Now, fast forward to the present, where the subscription business model has seamlessly woven into the fabric of the Indian consumer landscape, addressing the growing preference for access over ownership and offering convenience and affordability like never before.

Where is it going? 

The dominance of easy accessibility has fueled the subscription economy's rise, transforming how Indians access products and services across various sectors. The trend is evident in the growing market size of such business models in India with around Rs 1,200 crore in 2017-2018, and a projection of $478.2 billion by 2025.

Where did it begin? 

Early adopters: The entertainment revolution

The subscription model initially gained traction in the media and entertainment (M&E) sector. The arrival of Over-The-Top (OTT) platforms like Netflix, Amazon Prime, and Hotstar offered consumers a convenient and affordable way to access a vast library of content, setting the way for other industries to adopt the subscription model.

Beyond entertainment: Subscriptions seep into daily life

The success of M&E encouraged businesses across sectors to explore this new avenue. From e-commerce giants offering monthly grocery deliveries to FMCG companies providing clothing subscription boxes, the subscription model has successfully penetrated various aspects of daily life. Even sectors like education, healthcare, and fitness witnessed the emergence of subscription services catering to the evolving needs of consumers.

What does it mean for businesses?

While the subscription model offers convenience and value to Indian consumers, it also presents significant opportunities for businesses.

Positive Cash Flow Management

Because of its consistency, subscription models offer predictability in terms of revenue streams. Unlike traditional models with fluctuating sales, they give businesses a clearer picture of recurring income, allowing for better cash flow management. This predictability allows businesses to effectively plan resource allocation, investments, and overall financial strategies.

Double-Edged Sword: Customer Loyalty and Churn Rates

Customers are lazy but want an uninterrupted experience, which the subscription model can effectively provide. By opting for a subscription, customers can promptly access your service by making a monthly payment, saving them valuable time. Moreover, should they wish to adjust their service level, they can do so with ease. With just a few clicks. This streamlined approach not only enhances customer convenience but also fosters loyalty to your brand.

However, this ease of access also presents a risk of increased churn rates. Retaining subscribers requires more proactive efforts to deliver personalized experiences and value-added services that address their evolving needs and exceed expectations.

Streamlined Operations and Standardized Offerings

Subscription business models can lead to standardized offerings, simplifying inventory management and production processes for product businesses and reducing customization headaches for SaaS businesses. This streamlining can result in increased efficiency and cost savings for businesses. Additionally, it eliminates the need for complex negotiations and customization of individual purchases, leading to a win-win for companies, for once!

Shreya Mehra