The IT industry has seen a meteoric shift in the consumer buying behavior as preference towards simple and hassle-free purchases grows. Also, the fact that the IT industry is intensely competitive due to low barriers to entry profoundly decreases the consumer’s propensity to take risks; thereby, making it favorable for companies to opt for subscription business model. The subscription business model allows a customer to pay a reasonable price for the product and also profits the company with a constant stream of revenue. The IT industry, in particular, has witnessed many vendors opting for a subscription-based model like Netflix, Dropbox, Salesforce, and many other cloud-based services. So why are businesses shifting towards subscription economy?
Increased Customer Base
A subscription business model allows the price of the product or service to be divided along its usage period. For customers, it’s almost like paying for the product in small installments. Additionally, customers are more likely to opt for suppliers employing subscription model as they can opt out of a service if they feel it as inadequate or subsequently scale the level of service as per their need. The popularity of subscription business model is evident as the majority of SMEs are opting for services from cloud-based ERP systems as it breaks the cost and implementation barriers posed by traditional systems.
Convenience
The subscription business model offers several convenience benefits to the clients as they can access up-to-date products without waiting for updates resulting in zero downtime. The reason behind the success of SaaS products is their flexibility, which allows the users access to data from any device that uses the latest version of the software.
Increases Customer Retention
In the pay-per-use business model, the biggest hassle for the sales team is to track down new clients and convince them to buy. With a subscription business model, customers are more likely to stick to a single provider if they are satisfied with their service; thereby, increasing the customer lifetime value (CLV).
A majority of businesses in the IT industry have reported a multi-fold increase in revenue after shifting to a subscription business model. The subscription economy has repeatedly been taunted as the future of pricing model in the IT industry.
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