Subscription-based Model

3 min readApr 17, 2021

-Powerful Tool For Growth

By Anoushka Das

The subscription-based business model is a business model that charges customers a recurring fee — typically monthly or yearly — to access a product or service. It helps you capitalize on the compounding value of customer relationships. That means that as long as your customers continually see the value your company provides for them, they’ll continue to pay you for it. Through subscription, customers become more valuable the longer they use your product.

Understanding Subscription-based Model through the example of Netflix

Types: Subscription business models can include a variety of companies and industries. Those industries include cable television, satellite radio, websites, gyms, lawn care, storage units, and many more. Also, there are newer-aged businesses that operate subscription models, such as subscription boxes. Subscription box businesses include meal delivery services and meal delivery kits. As well, there are subscription business models for accessing online storage for documents and photos, such as the Apple iCloud.

Popular subscription-based businesses:

Streaming services: Content streaming services are probably the most well-known examples of the subscription business model. Companies like Netflix and Spotify have built incredibly successful businesses by leveraging the growth potential of subscription. They do this by monetizing content and showcasing their value through the entertainment experience they provide. Both are great examples of value-based pricing.

Monthly subscription boxes: Subscription boxes like Stitch Fix and Dollar Shave Club built their businesses by streamlining the process of shopping for consumer goods, like clothing and personal hygiene products. Their subscription pricing works because it monetizes convenience for their customers. Their subscription pricing is combined with the strategic use of data and personalization to develop strong customer relationships that drive their growth.

Food services: Meal-kit services, like Blue Apron and HelloFresh, are another example of companies that use a convenience-based subscription model. They’re similar to the subscription boxes in this way, but add value by providing access to niche products like selections catered toward different types of diets.

Key to Success:

  • Determining the goals early-These goals will then help you define how you build your buyer personas and structure your pricing tiers. Matching the features included in your tiers with the needs of different target customers helps you craft a better overall strategy
  • Boost acquisition with a better experience- It’s a simple equation: more customers = more revenue. A great customer experience will improve your acquisition numbers over time.
  • Streamline the billing process- Most modern software services have several complex processes involved in account billing. The customers shouldn’t suffer a complicated billing process for very long. The customers must realize the value of your product or service every step of the way.
  • Plan for growth before it happens- A good subscription business model helps you scale. This steady stream of predictable income, evaluated against churn rates and operating costs, ensures the growth you project is sustainable.
  • Change pricing often as you refine your product- Create a process for re-evaluating your pricing every six months. While updates and improvements to your product usually necessitate an update to your pricing structure as well.
  • Always give customers a choice- A one-size-fits-all price doesn’t work for subscription businesses. Give customers the choice of a specific pricing tier based on their individual needs. This also appeals to more buyers, which can drive more customer acquisition.

This is the subscription economy — and the sector is growing fast. Revenue among subscription businesses grew roughly 5x faster than both the retail sector and the S&P 500 from January 2012 through June 2019, according to data from Zuora.

Several factors are driving this growth, including advances in the tech infrastructure that supports it. Perhaps more importantly, the subscription model aligns incentives on both sides of the equation, offering stability for businesses and affordability and convenience for consumers.

The article is written for 180 Degrees Consulting, Delhi Technological University, under the campaign #DemystifyingBizModels. To read more content shared by our other consultants, please check out our LinkedIn page-




The DTU branch of world’s largest university-based consulting firm, 180 Degrees Consulting.