How to Maximize Subscription Revenue

subscription business modelsSubscription-based business model best practices that maximize revenue

Bose may become the latest company to enter the thriving music subscription service market, TechnoBuffalo speculated in December, commenting on the company’s recent quest for a user experience designer familiar with Pandora, Spotify, or Google Play. This development follows on the heels of Bose partner Apple’s acquisition of Beats for $3 billion, a move AppleInsider reports is being followed up by negotiations for exclusive album releases.

These developments illustrate the vitality of the subscription-based business model, and the case studies they provide exemplify some best practices businesses both inside and outside the music industry that offer subscription services can emulate to maximize revenue.

Attracting More Prospects by Promoting Premium Content

Apple’s acquisition of Beats was encouraged by the international chart-topping success of Beyonce’s surprise December 2013 exclusive iTunes release, which sold 800,000 albums in one weekend without any advance promotion. As Forbes noted, despite the appearance of no pre-publicity, the album’s success was built on the solid platform formed by Beyonce’s social media fan base, encompassing 13 million Twitter followers and 54 million Facebook likes, including 1.1 million likes added the week of the launch.

This illustrates one winning marketing formula subscription-based services can employ: promoting exclusive premium content to a socially-engaged following. Making this formula work requires laying some groundwork. Building a following generally requires providing a steady stream of free content over time to set the stage for a premium product launch. Exclusive promotional events such as contests and sweepstakes can also attract audiences.

Finding the Right Price and Package

Over the course of 2014 Pandora experimented with different pricing models for its subscription service. In spring, citing rising costs such as higher royalty payments to performers, the service raised its monthly subscription fee for new subscribers from $3.99 to $4.99 and eliminated its long-standing $36 annual payment option. Consumers balked more over the elimination of the annual option than the price hike, with the result that Pandora eventually reinstated the yearly payment option for an increased price of $55.

This shows how both price and payment options can factor into the appeal of a product or service to subscribers. Similarly, other elements of your offer, such as which features you include, can affect your sales appeal. Paying attention to what your market wants and what they’re willing to pay for it can simplify your company’s sales job.

Handling Billing Automatically

Cherie Nelson of Music Think Tank emphasizes that one of the keys to running a subscription service successfully is avoiding complications when managing the billing process. Your billing software should be equipped to handle a range of customer behavior, including payments, upgrades, downgrades, cancellations, and changing of billing information.

An online billing software tool such as Chargify can help you simplify these activities while giving you additional options, such as the ability to extend your customers a flexible range of payment plans.

Generating Repeat Business

Repeat business is the lifeblood of subscription services, and you can help ensure that subscribers keep coming back by taking steps to increase user engagement. For example, analytics provider KISSmetrics describes how Netflix can analyze customer data in order to keep providing appealing content and keep viewers watching and thus reduce cancellation rates.

Email newsletters, seasonal sales, discount offers for upgrades, and referral rewards are other ways to generate repeat business.

Online retailers like Amazon realize that membership (subscription programs) can create very valuable and loyal repeat customers. That’s one of the reasons why they have built so many extra perks into their Amazon Prime program.

Prime members get free shipping with no minimum order size, instant streaming of videos and music and free borrowing of Kindle books. With a 30 day free trial they get people to try it out and become hooked on all the perks. Its really hard to resist the membership – and if you buy frequently throughout the year it more than pays for itself in the free shipping.

Membership programs can be a win-win – creating extra value for customers while creating a dedicated, loyal repeat customer.

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Roy Rasmussen

Roy Rasmussen, co-author of "Publishing for Publicity," is a freelance copywriter who helps small businesses get more customers and make more sales. His specialty is helping experts reach their target market with a focused sales message. His most recent projects include books on cloud computing, small business management, sales, and business coaching.