These days, you would notice that along with the rise of eCommerce or online stores is also the constant increase of subscription-based business models. As a matter of fact, there are plenty of organizations that previously used a “use-forever, pay-once” model that is now transitioning to a subscription-based service. This is due to the reason that there are numerous benefits of doing recurring billing to clients.
Appeals more Customers
To consumers, charging them a small fee of like, $25 a month is a lot more appealing than having them charged a one-time fee of $500. This is due to the reason that there’s a high price barrier they need to break down before using your products and/or services. Of course, there are exceptions but generally speaking, the more costly the product is, the fewer consumers you are going to have.
Through subscription payments, it is lowering the barrier of entry for using those services and/or products and let more people to try it out. While they might have to pay a bigger sum in the long run, it would not intimidate them at all. Still, they would think that they are already using the product.
Due to the reason that you’re not impacted by the shipping cost of the items and possibly, the versatility of accepting all sorts of payments, targeting a global audience is a lot easier. All of this will contribute to the growth of your business’ MRR or Monthly Recurring Revenue.
When your business is operating in a pay-once model, it forces you to attract new markets and convert them into customers before earning revenue. This part could be expensive on your end. If you have a poor performance for a given month, that might set you back and be more difficult to recover your capital.
Unlike with a subscription-based model, customers are making payments to your business regularly. Because the amount of the recurring payments has been decided already on the initial time of the sale, it lets you foresee your monthly revenue. This guarantees that you will only order the supply you need or not worry whether you have enough stock in your inventory or not.