Exploring the Growth and Success Factors of Subscription-based Business Models
March 28th, 2023
The rise of subscription-based businesses has been significant in recent years, and it's easy to understand why. Convenience is a major factor, as busy individuals appreciate having products or services delivered to their doorstep on a regular basis.
Personalization also plays a key role, as companies like Netflix and Spotify offer customized experiences tailored to each customer's needs. This trend is not limited to the entertainment industry, as subscription-based services have also made their way into the beauty, car, and food sectors.
The recurring purchase model is becoming more common, leading to sustainability in these industries. For example, the meal kit delivery service market is projected to reach a staggering $49.9 billion by 2027.
In this article, we will explore the continued growth of subscription-based businesses and the factors driving their success.
The Global Appetite for Convenience
In today's fast-paced world, convenience has become a major driving force behind the success of subscription-based businesses.
The ability to have products or services delivered to your doorstep on a regular basis can be a major time-saver and has led to the explosion of popularity of subscription-based models, particularly in the food industry.
With the growing trend of healthy eating, many meal delivery services offer options that cater to specific dietary needs, such as vegetarian or gluten-free. This allows consumers to have pre-made meals delivered to their door, saving them time and effort.
But meal delivery is just one example of the convenience offered by subscription-based businesses. Streaming services like Netflix and Hulu have become popular due to the convenience of being able to watch TV shows and movies on demand, rather than having to remember to tune in at a specific time. This has led to the success of streaming subscriptions and has forced companies like Disney to start their own streaming service. The beauty industry has also benefited from the convenience factor, with companies like Birchbox and Ipsy offering monthly boxes of personalized makeup and skincare products, delivered right to the consumer's door.
Let’s Get “Personal”
Personalization has also played a major role in the growth of subscription businesses, which have grown by over 437% in the last decade.
Consumers are shifting from an ownership mindset to a "user"-ship mindset, meaning they are craving personalized service. By giving each individual customer a personalized experience tailored to their specific needs and interests, businesses can turn a one-time purchase into a recurring one.
Companies like Stitch Fix or BarkBox have reported strong customer retention rates with their personalized approach, and personalized nutrition plans are also a huge opportunity for subscription-based businesses.
Companies like PlateJoy have recognized the potential of this approach by offering customized meal plans that cater to the specific nutritional needs and goals of each individual customer. These plans take into account factors such as age, weight, and dietary restrictions, and provide customers with a tailored meal plan and shopping list each week.
This personalized approach not only helps customers achieve their health goals but also leads to higher customer retention rates as it satisfies the customers' individual needs and preferences.
Additionally, by offering personalized experiences, businesses are able to differentiate themselves from traditional one-size-fits-all models and increase customer satisfaction and loyalty.
Customers Care About Sustainability
Sustainability is another important factor to be considered by subscription-based businesses. A focus on sustainability has resonated with consumers, with a study finding that 65% of people are willing to pay more for sustainable products.
Zero-waste grocery delivery services, like Loop, offers delivery of groceries in reusable containers, eliminating the need for single-use plastic packaging. This not only reduces waste but also saves customers the hassle of having to make multiple trips to the grocery store.
Eco-friendly cleaning product subscriptions, like Green Clean, offers delivery of environmentally-friendly cleaning products on a regular basis, allowing customers to reduce their use of plastic bottles and support sustainable practices.
The subscription-based business model continues to thrive due to its convenience, personalization, and sustainability. The convenience of having products and services delivered regularly is a major selling point for many subscription-based businesses.
Additionally, these businesses can differentiate themselves by offering personalized experiences tailored to each individual customer.
Sustainability is also becoming an important factor as more consumers look to support environmentally-conscious companies and reduce waste.
With no signs of slowing down, it will be interesting to see how the subscription-based industry continues to evolve in the future.