Jun 20, 2017

Data is the fuel of the subscription business model

In our previous blog posts, we looked at how subscription business models provide a regular incoming cash flow for businesses and how they have the potential to build fruitful customer relationships. This time, we explore how data analysis is vital for that productive relationship, and the importance of operational costs.

 

 

It’s all in the data 

We previously wrote how subscription services need to have unique qualities that appeal to each individual customer on a personal level. But how can a provider keep improving a service in such a personal and familiar fashion? This is where subscription analytics come in. Data is the gold mine of this business model. Depending on the nature of the service, it has the potential for giving an insight into customer behaviour in real-time.

By monitoring subscribers’ behaviour and the type of products they order, a subscription business owner can infer what improvements may be needed, in terms of either the service itself or by introducing new products and features.

This has the potential for not only increasing customer satisfaction, but also maintaining profitability.

Got a great idea for a new service? Don’t underestimate the economics

Whether a new business has investor backing or is self-financed, it is vital not to underestimate the running costs of the operation.

This ranges from basic operational costs such as employee salaries, software and packaging expenses, as well as marketing and advertising. Even monthly fees such as invoicing for recurring payments have to be accounted for.

Another important factor to look out for is the churn rate. This is the proportion of customers, and hence revenue, lost on a monthly basis.

In broader terms, the profits coming from customers need to outweigh the costs incurred to acquire them.

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