How to Make a Fortune with Subscription-Based Apps – Pros and Cons

By Matt Watson

August 10, 2021

How to Make a Fortune with Subscription-Based Apps – Pros and Cons

This is a crucial question that all business owners must ask. Any business’s mobile strategy must include applications. Aside from communicating with customers, an app allows business owners to learn about their demographics. This is significant because it allows businesses to better engage with their customers and provide services that meet their needs. Today, there are numerous businesses. The availability of information is the difference between a successful business and one that isn’t. When it comes to accessing information, customers demand convenience.

They can use the information to investigate their options and make decisions. So, if you want to expand your brand, you must be aware of the overhead costs of building an app. Therefore, to save you some time, we over here present you with a subscription-based model. 

Subscription models are now used in almost every industry, and fast-growing companies such as Netflix, Dollar Shave Club, and Microsoft have been doing so for years. Many organizations benefit from subscription business models because they encourage customer success and improve buyer retention.

Let’s talk about what a subscription business model is, how it works, and the benefits of subscription app models in this post. 

What is a Subscription Business Model, and How Does It Work?

A subscription business model is a recurring revenue model that allows you to create a steady stream of income by leveraging your customer relationships. Customers are charged for a product or service on a monthly or annual basis, and they can renew their subscription after a certain period of time has passed.

You have the option of automatically repurchasing a product or service that you know you’ll need in the future as a customer. You keep customers for future sales rather than re-engaging them on a more frequent basis as a business. The subscription model can be a very effective and lucrative way to run your business if you have the right product, brand, and industry.

We’ll get to the benefits and drawbacks of the subscription model in a minute, but first…

A brief history lesson

Subscription models were a little different in 1960. You could time-share an IBM mainframe, grabbing processor cycles and storage, for those businesses that needed it – primarily banks and other large corporations. It was the equivalent of cloud computing in the 1960s for those who couldn’t afford a house-sized computer. That was the case until the desktop PC era when every business suddenly had its own computer. Subscriptions were to ASPs (Application Service Providers) at the time, which were specialized companies that ran complex specialist business programs for you, either on your premises or in a data center.

Then came SaaS, which was tied to the ever-expanding internet and delivered applications through the web browser. For the first time, a company with a single location could deliver applications to a company anywhere in the world without having to install and maintain a subscription-based apps locally. The future had arrived.

Of course, the history of subscription-only tells half the story; just because something is possible does not mean it should be done. The rise of the subscription model can be attributed to three factors.

#1 – Cloud computing

Without the basic underlying technology stack of cloud computing, the subscription-based model would be impossible to implement. With its associated fluctuations in processing and storage needs, delivering applications over the cloud necessitates the ability to scale seamlessly with demand. Virtual machines and advanced storage solutions have made this flexibility available to any business or individual who desires it. Today’s SaaS providers don’t even need to invest in infrastructure; all they need is a product. They will be able to rent infrastructure as they require it.

#2 – Outsourcing

Nike’s evolution from a shoe company to a marketing company (they’ve since evolved again, this time into a health-related tech and data company) marked a significant shift in the business world. It was no longer an issue to outsource your core business. After all, why invest in the cost and risk of setting up factories when we can hire people to do it for us at a lower cost and at their own risk, Nike reasoned? Since then, many businesses have legitimately outsourced large portions of their work to other businesses, whether it’s HR, IT, hosting, manufacturing, or finance.

#3 – iTunes

Not just iTunes, but digital music in general. Subscription necessitates a shift in consumer perception, which iTunes accomplished by legitimizing digital music services. Within a few years, the concept of ownership shifted from physical to digital, from something you could hold to something that only exists as digital data. It’s a massive shift in the way people think about money. Today’s consumer has arguably progressed a step further, with services like Spotify and Rdio removing even the bare minimum of ownership requirements. For a monthly fee, you can simply have everything.

How Does It Work?                            

Consider a subscription to be a contract between you and your client. The customer agrees to pay for a product or service over a set period of time and the business hours that offer as long as the customer makes their recurring payments on time. The customer has the option to renew or cancel their subscription when their contract expires.

Your local newspaper is an excellent example. While newspapers can be purchased individually, most people who read them do so as part of a subscription. Instead of having to go to the store to buy a newspaper, you can have it delivered to your front door every day for a set price.

In the following section, we’ll look at some more advantages of subscription models.

Benefits of Subscription App Models

People, on the whole, don’t buy into a new model or product unless there’s something to gain from it. The advantages of subscription-based apps have attracted a large number of users. Let us have a look at a few of them.

Lower upfront costs and a more straightforward cash flow

Investing all your hard-earned money at once is similar to a nightmare only. The reduction in large upfront capital expenses is one of the main reasons why businesses are moving away from purchases and toward rentals, whether it’s for hardware or subscription-based app. Replacing these payments with a steady drip of smaller payments gives a business a more reliable cash flow forecast and allows it to scale without needing additional large capital injections.

Scalability 

The ability for businesses to meet their needs as they grow is one of the most appealing aspects of using a subscription model. If a company hires ten or fifteen new employees who require access to a program, it simply contacts the company to adjust its subscription. Because the cost of starting a subscription is much lower than the cost of purchasing a perpetual license, it isn’t a significant drain on company resources.

And the other way around. If a company is having financial difficulties and needs to cut costs, a smaller subscription agreement may be possible. The subscription can easily be reduced in the unfortunate event of layoffs. Some subscription models do not even require you to change your subscription if you grow. The basic plan of a visitor registration app, for example, includes unlimited users and usage, but more advanced features are more expensive. While these features may be beneficial depending on your size, it is ultimately your decision.

Customer-oriented

Customers who can easily switch vendors and who regularly hand over their hard-earned money have high expectations. They might be more open to new product offerings with more features. They may decide that the recurring cost of the current product is insufficient for the service provided.

You’ve been enslaved by subscription-based app companies for a long time. It’s not dissimilar to a car salesman. Once you drive off the lot, you have the car, whether it is right for you or not, and they have their commission. A subscription service, on the other hand, needs to keep you as a customer. For the good ones, it will be a top priority.

  • Many companies will go above and beyond to ensure that their service is available at all times.
  • You can expect a quick response from customer service when you contact them.
  • They won’t just throw problems at you; instead, they’ll start a conversation about what’s wrong and how to fix it. While there’s a chance it’s your fault, they’ll do everything they can to figure it out and offer solutions.
  • They’ll pay attention to feature requests and provide appropriate upgrades and updates in response.

To put it another way, they will go out of their way to make sure the service is worthwhile. They’re well aware that you’re not required to stay. They are aware that you can cancel your subscription at any time. It’s something you’re not supposed to do.

Security

Perpetual license subscription-based model simply cannot compete with a subscription-based app in terms of security. Hackers are astute individuals. They are resourceful. They’re also constantly looking for security flaws in systems that could contain sensitive data. They create new viruses to take advantage of them and cause havoc in our increasingly technologically reliant world. (They also do it for fun at times.)Security professionals do the same thing all the time, but with the opposite motivation. They’re on the lookout for any holes that need to be patched or repaired. When hackers come across a threat, they respond by blocking or neutralizing it in some way. To thwart those hackers, patches, and fixes for subscription-based apps are released right away. Updates to subscription-based apps deployed in the cloud, in particular, happen automatically and without your knowledge. If you have an on-premise subscription, you may be notified before a computer shuts down that an update is coming up.

Keeping up with these updates is one of the most effective ways to protect your data. Out-of-date subscription-based apps are vulnerable to attacks in ways that new subscription-based apps aren’t. It’s likely that if you’re still using an email program from 2012, it hasn’t been patched in a long time. Almost all of the new security features that have become commonplace are likely to be missing.

No costs associated with maintenance

All of these real-time updates and cloud computing come with a cost-cutting benefit: maintenance is drastically reduced. Maintenance does not need to be scheduled into the rotation any longer. Upgrades can be applied without requiring employees to move from one computer to another. It’s possible that there will be less demand for computer hardware. Central servers and storage are no longer required when a subscription-based app is outsourced to the cloud and accessed via the web – at least not to the extent that they were previously. This has the added benefit of providing the flexibility that top employees require.

All of this may result in a reduction in technical personnel. While IT professionals will be required to ensure that all subscription-based app systems work together properly, it is possible that basic maintenance will be handled directly by the subscription-based app companies, reducing the need for “boots on the ground.”

Transparent pricing

Because subscription-based app companies are frequently cloud-based, they are well aware that the majority of their sales are made online. On their websites, a price list is usually only a few clicks away. In a matter of seconds, you’ll have all the information you need to determine whether the price is within your budget.

The majority of plans will be priced according to the number of users. Some will charge based on the number of users (1-10, 10-50, 50-150, and 150+), while others will charge a flat rate per user. Some businesses bill on a weekly basis, while others bill on a monthly, quarterly, or annual basis. By doing some quick multiplication, you’ll know exactly what the costs will be, and you’ll even be able to predict costs as your business grows.

You’ll be able to tell which package you’ll need and how much it’ll cost at a glance, regardless of the pricing plans.

Conclusion

Subscriptions are the way of the future, and they’re already here.

To summarize:

  • Simpler accounting and lower upfront costs
  • The ability to easily scale up or down
  • Low cost and short time commitment make it simple to try out new applications.
  • Companies that are more focused on their customers and eager to please them
  • Never be behind again with the instant deployment of new features.
  • Enhanced security
  • Maintenance costs are reduced.
  • The ability to keep costs under control using transparent pricing models

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