3 Reasons Why The Subscription-Based Business Is A Better Model Than Service-Based

ByNSE Interactive

If you noticed, many great brands are platforms. YouTube, TikTok, Airbnb, 300th, Spotify, Google, Tinder, Grab you name it. And they are doing pretty well too I must say. What is a platform? Usually, platforms are a place where sellers meet their buyers, or content creators meet their fans or readers.

Not many people realised that we are living in a platform-based economy. There are more and more companies running their businesses through the power of platforms. 

Platform economy

Did you know that we are now living in the platform economy? Yes, that is right. What is that actually? This is what platform economy means according to Wikipedia.

The platform economy is economic and social activity facilitated by platforms. Such platforms are typically online sales or technology frameworks. By far the most common type is “transaction platforms”, also known as “digital matchmakers”. A second type is the “innovation platform”, which provides a common technology framework upon which others can build. 

Thanks to the internet, this is one of many innovative ways companies can maximise their profits while minimising their efforts at the same time. This sort of business model has gained significant popularity in recent years. It offers a myriad of benefits compared to the traditional service-based approach. 

Passive income

Well, the most obvious reason is this—the subscription model allows you to generate passive income with minimal active participation. Unlike the service-based model, which often requires selling time and active involvement in each transaction, the subscription model allows you to earn income continuously, even without direct involvement in every customer interaction. It is very much an almost automated running business. This is especially beneficial for entrepreneurs like you who seek to leverage their time and resources more effectively.

For instance, let’s consider the case of a software company that offers a subscription-based product. Once customers sign up and become subscribers, they gain access to the software and its updates automatically. The company continues to generate revenue from these subscribers on a recurring basis, irrespective of whether they actively engage with customer support or require any additional assistance. This passive income stream provides a stable foundation for growth and enables entrepreneurs to focus on scaling their business or exploring new opportunities, rather than constantly trading time for money.

Global reach

The second most obvious reason is that the market coverage for the subscription model can extend worldwide, thanks to its internet-based nature. In contrast, service-based businesses often face geographical limitations. With the advent of the internet and the rise of e-commerce, the subscription model opens doors to a global customer base. Entrepreneurs can reach customers from different countries and continents, expanding their market reach exponentially.

Imagine this. You run a company that offers an online language learning platform through a subscription model. Users from various parts of the world can sign up and access your platform’s resources and lessons, regardless of their physical location. This global market coverage presents unparalleled growth opportunities for subscription-based businesses, allowing them to tap into untapped markets and cater to diverse customer segments. By eliminating geographical constraints, you can significantly boost the revenue potential and create a sustainable business with a global footprint. 

Budget-friendly price

And the third most obvious reason is that the pricing structure of the subscription model is often more pocket-friendly for customers compared to the service-based model. People just love this, really. Subscription-based businesses typically offer their products or services at a reasonable recurring fee, making them affordable and accessible to a larger customer base. On the other hand, service-based businesses often charge higher prices due to the need for personalised attention, customisation, or time-based involvement.

A fitness app, for example, offers personalised workout plans. Instead of paying a high hourly rate for a personal trainer’s services, users can subscribe to the app and gain access to a library of workout plans, video tutorials, and tracking features at a fraction of the cost. This affordability factor not only attracts more customers but also fosters customer loyalty by providing consistent value at a reasonable price.

On top of that, the subscription model’s pricing structure eliminates the need for constant approval or negotiation. Customers can easily budget for the recurring subscription fee, knowing that they will receive the product or service without any additional financial surprises. This transparent and predictable pricing structure enhances the overall customer experience and builds trust between the business and its subscribers.

To recap

We are a true believer in the superiority of the platform-based business model. 

It offers way significant advantages over the traditional service-based approach. With its ability to generate passive income, worldwide market coverage, and pocket-friendly pricing structure, you can easily leverage this model to create sustainable and scalable businesses long-term. By embracing the subscription model, you can unlock new opportunities, reach a global audience, and provide consistent value to your customers. 

Our advice is this. If you’re looking to build a business that thrives in the digital age, the subscription-based model is undoubtedly worth considering.

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