Why Linkedin, Shopify and Netflix are Obsessed with Subscription Business Model?

Why Linkedin, Shopify and Netflix are Obsessed with Subscription Business Model? 1
Subscription Business Model (Credit: Business Model toolbox)
Why Linkedin, Shopify and Netflix are Obsessed with Subscription Business Model? 2
types of subscription business model
  1. Special subscription Pass — When subscription gives you the advantage of standing out from the crowd.
    Examples: — Tinder and Dash Pass
    Tinder — Recommend your profile to more girls
    Dash Pass — Faster delivery with low fees.
  2. Subscription box: When you take a subscription to a product that is delivered to your doorstep every month.
    Example
    Warby Parker sends Repeat prescriptions of Contact lenses every three months.
    MeUndies — Two pairs of cheeky underwear delivered every month.
  3. Ecosystem subscription — When companies lower the entry barrier and lock you in the ecosystem using a subscription business model.
    Example: Shopify

Pros and Cons of using the Subscription Business Model

There are several benefits to using the Subscription business model

  1. Good upselling and cross-selling opportunities:
    If dollar shave Club is selling a premium range of blades then they can also sell other products like shaving cream, aftershave, etc.
  2. Higher margins: The base product is usually sold at a loss, while the add-ons are added and are usually sold at higher margins.
  1. High Customer acquisition cost — There is a tiny fraction of people who can pay you every single month. So you need to spend a lot of money on acquiring them.
Why Linkedin, Shopify and Netflix are Obsessed with Subscription Business Model? 3

Cross Selling in Subscription Business Model

Why Linkedin, Shopify and Netflix are Obsessed with Subscription Business Model? 4
Shopify cross-selling Strategy

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