Subscription business model

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The subscription business model is a business model in which a customer must pay a recurring price at regular intervals for access to a product or service. The model was pioneered by publishers of books and periodicals in the 17th century,[1] and is now used by many businesses and websites.





Types and examples[edit]

There are different categories of subscriptions:

  • A subscription for a fixed set of goods or services.
  • A subscription for unlimited use of a service or collection of services. Usage may be personal and non-transferable, for a family, or under certain circumstances, for a group utilizing a service at one time. In the publishing industry, a subscription to a bundle of several journals, at a discounted price, is known as a "big deal".[2]
  • A pay-as-you-go subscription where you subscribe to purchase a product periodically. This is also known as the convenience model because it is a convenience for the customer to not have to remember to go find their product and buy it periodically. This model has been popularized by companies like Dollar Shave Club, Birchbox, and OrderGroove. Based on their success, many other retailers have begun to offer subscription model services.[3]





From a marketing-analyst perspective, it has the added benefit that the vendor knows the number of currently active members since a subscription typically involves a contractual agreement. This so-called 'contractual' setting facilitates customer relationship management to a large extent because the analyst knows who is an active customer and who recently churned.[4]


Some software companies such as Adobe and Autodesk have moved from a perpetual licensing model to a subscription model, known as "software as a service." This move has significant implications for sales and customer support organizations. Over time, the need to close large deals decreases resulting in lower sales costs. However the size of the customer support organization increases so that the paying customers stay happy.[6]




Subscription pricing can make it easier to pay for expensive items, since it can often be paid for over a period of time and thus can make the product seem more affordable. On the other hand, most newspaper and magazine-type subscriptions are paid upfront, and this might actually prevent some customerfixed price may be an advantage for consumers using those services frequently. However, it could be a disadvantage to a customer who plans to use the service frequently, but later does not. The commitment to paying for a package may have been more expensive than a single purchase would have been. In addition, subscription models increase the possibility of vendor lock-in, which can have fatally business-critical implications for a customer if its business depends on the availability of a software: For example, without an online connection to a licensing server to verify the licensing status every once in a while, a software under a subscription-model would typically stop functioning or fall back to the functionality of a freemium version, thereby making it impossible (to continue) to use the software in remote places or in particularly secure environments without internet access, after the vendor has stopped supporting the version or software, or even has gone out of business thereby leaving the customer without a chance to renew the subscription and access his own data or designs maintained with the software (in some businesses it is important to have full access even to old files for decades). Also, consumers may find repeated payments to be onerous.






A customer who is placed in a jail or prison can be billed continuously for subscription services which may render them without funds upon release.[citation needed]



Subscription models might also create the opposite effect. This can be illustrated by subscribing to a service for mowing lawns. The effective use of a single mower increases when mowing for a collection of homes, instead of every family owning their own lawnmower which is not used as much as the service providing mower, the use of resources for producing lawnmowers, therefore, decreases while lawns stay cut.

See also[edit]


  1. ^ Clapp, Sarah L. C. (November 1931), "The Beginnings of Subscription Publication in the Seventeenth Century", Modern Philology, Chicago: The University of Chicago Press, 29 (2): 199–224, doi:10.1086/387957, JSTOR 433632
  2. ^ Sally Morris; et al. (2013). Handbook of Journal Publishing. Cambridge University Press. pp. 163–164. ISBN 978-1-107-02085-6.
  3. ^ Retail Subscription Models! Who's doing what? [EXPERT ROUND-UP
  5. ^ Best Practices for Online Business Models, retrieved 9 July 2014
  6. ^ Software Pricing Trends (PDF), retrieved 14 August 2016