“Research has found that subscription models are 217% more profitable for businesses than a one-time payment model. With subscriptions, you can provide greater efficiency, get your customer to associate with your product better, and receive a higher payoff. 70% of businesses feel that acquiring new customers is more expensive than retaining existing clients, therefore with a subscription model, you continue to make money from users after you acquire them.” – Source: Intuit, Inc.
The COVID-19 pandemic has accelerated this already prominent trend in the business world: the shift towards “everything as a service”. Tech giant Hewlett Packard, which already sells around 50% of its products through e-commerce, has committed to making its entire portfolio available on that basis by 2022. With many vendors pushing the model and an increasing number of platforms supporting subscription payments, the feeling is that demand from customers who value flexibility will continue through the year.
This approach can apply equally to products, as well as services, delivered on a continuing basis. Agreeing to provide products at a fixed, recurring price can safeguard businesses from fluctuations in purchase price costs. Payment plans also offer a continuous revenue stream that merchants can rely on.
In 2021, we can expect to see a dramatic rise in subscription services as businesses aim to reduce capital expenditure in light of reduced growth targets and profit margins due to the COVID-19 pandemic. This “new normal” will redefine how we do everything, the proliferation of “everything as a service” will require businesses to offer flexible consumption and subscription models to satisfy the 21st-century consumer.
OpenPath specializes in recurring solutions for Shopify merchants. If you are a Shopify merchant looking to increase the lifetime value of your customers, visit us to learn more at: https://openpath.io/shopifyv2