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The Subscription Model
July 19, 2021
The Subscription Model
July 19, 2021

What is a subscription, really?

A subscription is an agreement.

 

Any agreement you make as a consumer with a business, to charge a calculated amount of money, on a recurring basis that is predetermined between you and this business, for some purchasable goods or services. It’s likely you have anywhere from 1 to 30 subscriptions on a monthly to yearly basis.
Digital services (Netflix, HBO), utilities (power, water, insurance), and physical products (curated boxes, amazon essentials); all these are agreements, between you and a company.

So what are the benefits? Why do both parties enter into this agreement? Turns out, subscriptions are good for not only businesses and consumers, but consequently, the economy.

 

Benefits to the business.

1. Choice

In most, if not all, subscription models, the business is the party that is able to choose what products or services are included within the subscription. This makes sense, as what they usually offer in return is a discount on those products, and they have to make that cost work for their bottom line.

2. Cost

You’d think since I just mentioned that the consumer usually receives a discount for subscribing, that this would be a consumer-side benefit. It’s actually both. For most eCommerce businesses that sell physical products, one of the most important factors is the cost of manufacturing, and raw materials. If they know for sure how many units will be purchased at least one month in advance, they can work out better deals within their supply chain, driving down the overall cost. This even applies to digital eCommerce businesses as well, if they’re smart. This factor is also its own separate benefit as well.

3. Reliability

Since they can rely on mostly consistent revenue, businesses have a lot more freedom and, in most cases, more access to resources. When Churn Rate is the only thing they need to worry about, rather than less reliable predictions for individual sales, businesses can reinvest more of their profits into the company. They can also qualify for loans and attract investors more easily.

 

Benefits to the consumer.

1. Cost

As mentioned before, most subscriptions offer a discount to the consumer in exchange for permission to automatically charge them every billing cycle. This is the obvious benefit, outlined heavily during the sign-up process, and often sent to your inbox to remind you that it is an option.

2. Reliability

The less obvious benefit is that you can simplify a fair bit of your life if you use these subscriptions effectively. It’s surprisingly useful to have the best coffee beans you’ve ever tasted routinely show up on your doorstep every month. It saves a trip to the store, a visit to a web page, and the headspace it would have taken up as a task on your to-do list.

 

Drawbacks.

There’s an apparent lack on the consumer side. The lack of ‘choice’. Nearly all subscription ‘options’ work this way. Some companies offer ‘options’, but that’s not exactly the same thing. ‘Choice’ is a power, determined by who ultimately has the final say about an issue. If a company were to give you ‘choice’, it would look like this:

  • Company opens the door to their entire inventory, as well as their purchasing books so you can understand their future inventory.
  • You sift through it all, set aside exactly the products you want, before they’re even packaged.
  • Company takes note of the products, colors, sizes, quantities, and other variables and presents you with a cost.
  • You purchase these items, and tell them to send them to you, one by one, as soon as you run out.
  • You assist them with this, by giving them a calendar with products marked down as the amount of days (on average) that they last. A razor lasts you 2 weeks. A mango lasts 2 days. A baseball lasts 8 months.
  • Using this calendar, Company can see when you will be running out of each item, and make sure it will be at your door the morning after your stock of the item runs out.

Sound overly-complicated? You’re right. That’s why businesses don’t offer you ‘choice’, they offer you ‘options’.

 

Conclusion? We need to fix this.

So how can we? Something has to be done on the user’s end. That’s why Ok Inc exists. We want to start the process of solving imbalances on the user side.

Ok Subscribe is our first application, and one that does exactly that; it solves the imbalance on the user-side when it comes to the subscription model.

 


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