What Key Technical Solutions Does Your Subscription Business Model Require?

Merchants who transition to subscription business models always face the same two questions. For one, which type of subscription model will the business center around? Second, which technology solutions will help the business function most efficiently?

PowerSync is a trusted technology consultant that can steer you in the right direction when it comes to creating and implementing your subscription technology checklist. If you are curious which solutions can save you time and money in your eCommerce business, we encourage you to schedule a risk-free discovery call with one of our experts. 

In this blog post, we’re breaking down the different types of subscription business models and the technology that’s needed to succeed in each. 

What is subscription business model?

Subscription business models are those that provide products or services at regular intervals. Unlike traditional one-time purchases, subscriptions provide an opportunity for you to build long-term relationships with customers. 

But is this model really as great as it seems? Perhaps there are pitfalls you should keep in mind.

Advantages of a recurring revenue model subscription businesses 

• Predictable revenue
  Sales fluctuate in traditional business models, but subscription business model companies enjoy reliable recurring revenue streams. 
• Customer retention
  Subscriptions allow you to foster long-term relationships with customers, providing you the opportunity to build a loyal customer base. Through ongoing subscriptions, there is a greater opportunity to extend the customer lifetime value (CLV).
• Growth potential
  Subscription businesses offer greater potential for scalability than those that center around one-time purchases. With a solid subscription base, businesses can focus more time on their customer experience and continually enhancing products and services. 
• Customer convenience
  Subscription business models allow customers to “set it and forget it” when it comes to recurring purchases. This level of convenience creates loyalists out of many subscription customers — so much so that 30% of subscribers generate 79% of total revenue for retail subscription providers.  

Problems with subscription business models

Knowing the challenges that may emerge can help you refine your subscription model business plans. Here are a few to watch out for. 

• Market saturation
  Competitors are always scouring the market for subscription-based business model ideas. If you come up with something great, prepare for copycats to emerge.
• Order fulfillment
  While growth is a good thing, you must ensure you can effectively fulfill increased demand while maintaining quality standards. Failure to manage scalability can lead to customer complaints and a damaged brand reputation.
• Customer churn
  While your subscription business model primes you to build long-term customer relationships, retaining subscribers can be challenging. Customers cancel subscriptions for a multitude of reasons, including financial constraints and fluctuating needs. As a result, you must make ongoing efforts to acquire new subscribers to offset lost revenue.

Keep reading to learn about six popular subscription service business models, as well as the top three technology must-haves that help them thrive.

6 subscription models and tech solutions for each them

You may be asking yourself, “Exactly how does a subscription business model function?” 

The answer varies depending on the specific type of subscription-based business model you are operating. Below are detailed descriptions of some of the most popular recurring revenue models. If you’re looking for business ideas, this list is a great place to start. 

The Subscription Box

From personal hygiene and dog treats to indoor plants and meal kits — who hasn’t tried a subscription box? 

If you’re new to the subscription box business model, businesses in this arena offer a curated selection of products that are often tailored to the customer’s preferences. This monthly subscription business model revolves around surprise and delight, where customers eagerly anticipate each shipment. 

eCommerce platform

The key to choosing the right platform for your business comes down to truly understanding your target audience and projected growth.

Enterprise-level solutions like Adobe Commerce and Salesforce Commerce are popular choices because they allow you to seamlessly grow. They eliminate the need for an expensive and time-consuming re-platforming process as you grow.

In addition, both eCommerce platforms offer the option for a headless infrastructure, so merchants are not constrained to the functionality of a template. This allows your products to display on a multitude of devices without issue, so you can reach more people.

Subscription management platform

It lies at the center of the financial model for subscription businesses. Among the many features, they provide seamless payment processing, as this class of software is built to handle the complexities of recurring billing.

Oftentimes, subscription management technology is not built into eCommerce platforms, so you must find a third-party solution that meets you needs.

mPower for Adobe Commerce or Salesforce Payment Platform are great examples of this. Both include many useful features — like automatic payment capturing logic, customer notifications, tools and templates, and more. 

Customer relationship management (CRM) system

Salesforce or HubSpot allows you to manage customer interactions, which empowers you to maintain strong relationships with patrons.

CRM technology allows you to track customer preferences, gather insights and personalize communication. CRMs also offer subscription business model metrics by capturing customer data, analyzing buying patterns and segmenting customers for targeted marketing campaigns. 

Memberships

What do membership vs. subscription business models offer? Membership businesses offer access to their services for a recurring fee. A few examples include fitness companies, Amazon Prime, clothing rental companies and Costco.

These companies tell consumers that — for a fixed price — they can work out at a certain facility, qualify for free two-day shipping on products or acquire bulk goods at a much lower price per unit.

Customer relationship management (CRM) system

Like with subscription boxes, it is an essential piece of technology for membership-based businesses. For this use case, they are especially useful for re-engaging lost customers.

With membership-based subscription models, it’s common for subscribers to come and go. For example, in the case of a gym membership, many people may feel motivated when they sign up but cancel after realizing they are not using the service as much as they thought they would.

However, that doesn’t change the fact that there could be a desire in the future to rejoin. With CRMs, you can segment lost customers into a list and build a strategy to re-engage them.

Mobile app or member portal

In addition to a CRM, it’s important for membership businesses to offer an app for subscribers. This technology enhances their experience and engagement with your brand.

With CRMs, you can easily communicate special mobile promotions and events through HubSpot Marketing Hub or Salesforce Marketing Cloud solutions. You can also provide functionality like scheduling and managing a user’s profile.

Integrations to sync data between eCommerce platform and CRM

It can save you a significant amount of time. This type of software eliminates the need for platform hopping and hours of manual data entry. Additionally, these integrations help keep records error-free and consistent between systems. 

Subscribe and Save

These subscription commerce business models offer discounts when the customer is enrolled in an ongoing subscription. A would-be one-time customer may be swayed into a subscription agreement if savings are offered. 

While subscribe and save businesses still offer a one-time buying option, they offer instant savings to those who sign up for ongoing product replenishments. Although the average order value may be lower, merchants still benefit because these subscribers stick around longer and spend more money over the long term. 

Subscription management solution

You should opt for a platform that offers flexible self-serve capabilities (with the option to add and change products or skip a month).

You may also need a platform that accommodates tiered subscription business models where multiple options are available. You should also pursue software that tracks and reports customer data, so you can identify trends and forecast future sales.

Email marketing platform

Keep reminding customers of the value of your subscription with email marketing. There are a multitude of options on the market, but we see the most value in a Marketing Hub by HubSpot. Be sure to choose the one that aligns with your business goals best.

Setting up an automated campaign for new customers is a great way to start a relationship with subscribers. It’s also a good idea to send additional promotions and discounts from time to time.

Inventory and order management system

It helps you keep track of inventory, monitor product availability and automate order fulfillment processes. Some examples of inventory and order management systems include Adobe Commerce and Orderhive.

Media & Streaming Subscriptions

Media and streaming subscriptions continue to gain in popularity. Consider Spotify, for example. The company has grown to hundreds of millions of subscribers who enjoy music and podcasts through the platform.

The same success has been seen with news media companies like The Times, which turned its digital-only subscription base into a $1 billion business with more than half of its revenue stemming directly from subscribers.

Then, of course, people flock to platforms like Hulu and Peacock to catch their favorite shows. These streaming giants emerged following the Netflix subscription business model.

Content delivery network (CDN)

It allows you to distribute content to a multitude of subscribers.

Effective CDNs use caching processes to ensure fast and reliable content delivery across a network of servers. They optimize streaming quality, minimize buffering and provide a polished viewing experience to subscribers. Akamai, Cloudfare and Amazon CloudFront are a few popular CDN providers.

Content management system (CMS)

Because this line of subscription businesses centers around delivering content, a strong CMS is also needed. This type of technology allows you to effectively organize and manage media files.

An important piece of functionality to look for is reputable metadata management and the ability to categorize and tag files. This enhances the user experience by allowing for easy content discovery and recommendations. 

Customer support software 

It is another important piece of the tech puzzle for media and streaming subscriptions. If an issue arises, modern subscribers expect a quick fix. Consider leveraging chatbots that integrate artificial intelligence to help streamline the customer support process.

Digital Subscriptions

There are countless examples of digital subscriptions these days. There’s Noom for weight loss, Uber for ride-sharing, LinkedIn Learning for professional development, and an assortment of fitness apps. With 3 billion people using smartphones, digital lifelines are just a download away.  

App distribution platform

This may seem obvious, but it is the best way to make your app available to a wide audience.

While you can make your app available on your website, Apple’s App Store and Google Play Store are the primary platforms to be on. They are trusted platforms and offer useful features like customer reviews and secure payment processing. 

Authentication platform

An integrated  allows merchants to securely authenticate customers. In the digital subscriptions space, this is a necessary safeguard because it helps to cut down on multiple users accessing services via a single paid subscription.

Stytch is an option that caters to eCommerce businesses by providing authentication capabilities while helping to drive conversion in the process.

In-app engagement and analytics tools

It's not only help drive user engagement, but they help you understand user behavior and preferences. Data analytics empower you to continually improve and deliver personalized experiences to users.

In-app engagement and analytics tools also enable the ability to deliver targeted notifications and provide curated content recommendations. Mixpanel and Amplitude are examples of tools you can look into.

Software-as-a-Service

Software subscription business models are referred to as SaaS, or Software-as-a-Service. When companies offer a subscription-based license to their software via a cloud network, it is known as SaaS, or Software-as-a-Service.

The example of a SaaS subscription business is the Adobe Creative Cloud. For a monthly fee, users can access more than 20 creative apps (such as PhotoShop, InDesign, Audition and Premiere Pro). One reason SaaS is of value to customers is that they can benefit from real-time updates and feature upgrades.

Cloud infrastructure and hosting services

They are essential pieces of the SaaS framework. They help ensure that the cloud-based software runs fast and without interruption.

APM tools

Application performance monitoring tools help ensure optimal reliability and performance for SaaS applications (see Atlassian StatusPage solution). They provide real-time insights into the behavior and health of applications, allowing your business to quickly resolve issues.

APM tools give you the information needed to continually optimize application performance, which helps ensure a positive user experience.

Subscription management platform

It is an area you won’t want to cut corners on as an SaaS merchant. Because many SaaS merchants offer tiered pricing options depending on customer need, it’s important to choose an option that offers this type of flexibility in addition to secure payment processing.

Data analytics tools

As as SaaS business owner, you should implement trusted data analytics tools. These solutions help identify trends, understand customer behavior and personalize offerings, enabling businesses to make data-driven decisions.

The one-size-fits-all tech solution for subscription merchants

After reading this article, it’s likely you’re inspired by the multitude of subscription business model ideas. Whether you’re interested in embarking on a food subscription business model, content subscription business model or something else, your tech stack will be central to its success.

As you can see, there are some common denominators when it comes to tech solutions for subscription businesses. For example, subscription management software and CRMs are essential for all the above-mentioned subscription business categories, even if they are not listed in this post.

Partnering with a technology expert is the single most important strategy for all subscription merchants, regardless of their industry. Check out our service page to see what’s possible when you partner with PowerSync.