4 reasons why subscription startups are gaining traction
Venture capitalists have steadily increased the amount of startup financing they're pouring into companies that deliver products straight to customers. The subscription model is an area poised for even more growth.
There's truly a service for just about anything and there are four reasons why startups are following a subscription model:
1. They can attract customers
The internet allows subscription services to attract new customers with ease. Strong marketing efforts that include social media utilization also go a long way toward building a customer base.
According to Inc.com, social media is helpful because it means startups don't have to focus as much on marketing costs. For example, a video from Dollar Shave Club went viral when the company first launched in 2011. They experienced immediate success and were later acquired by Unilever for $1 billion in 2016.
What's the lesson? Subscription services can focus on making an appealing product or service while building a strong brand online where their potential customers are congregating.
2. Startups can scale with ease
Startups face a delicate task of increasing revenue without increasing incremental costs. Inc.com stated in order to increase revenue, subscription startups have to retain customers on a fixed monthly interval. This recurring revenue helps increase the startup's value because investors see fixed income as reliable.
With more confidence, a startup is able to then set more realistic and reliable expectations for the future.
3. Customers like simplicity
Most subscription services follow a "set it and forget it mindset" so customers don't have to reorder every month. Subscribers want items to arrive at their door hassle free.
According to Entrepreneur, customers also enjoy a subscription model because they know exactly what they're getting and for how much. These details allow them to stay on budget because for many people, subscriptions provide valuable items at a reasonable cost.
4. Global growth
Startups can reach a global audience by implementing a subscription model. If a business is successful in the U.S., a company can consider overseas expansion. Inc.com said this type of growth is attainable for subscription services.
Startups must be on the lookout for the next big trend, and right now, subscription services are it. Consumers increasingly prefer to subscribe to products, and startups would be wise to take advantage of this mindset.
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