Big brands can’t ignore this trend.
Businesses that view the subscription model as a fad are missing a huge opportunity. Consumers are happy to take on subscriptions if it means not having to remember to purchase wine  for the month — they’re also surprised and delighted7 by packages arriving on their doorsteps, full of new products for them to try.
Aside from creating immense value for consumers, which is in and of itself a competitive advantage, here’s why big brands should pay attention to subscription boxes:
1. They create consistent and predictable revenue. Consumers are never as predictable as businesses would like. Historic revenue offers insight into a company’s financial future, but past data can’t compete with the predictability of the subscription model. If revenue is unpredictable, it’s hard to make bets and invest in growing a business.
Establishing a subscription-pricing model allows customers to make purchase decisions regularly — without thought or effort — with a company. This level of stabilized revenue is unmatched by any one-time purchase.
2. Subscriptions have a lower cost of customer acquisition. Acquiring customers is expensive. If your brand is selling a product for $15, you probably don’t have much wiggle room in your marketing budget for paid customer acquisition. However, if you turn that $15 into a monthly subscription, the lifetime value of the customer skyrockets. The higher loan-to-value ratio opens up new marketing channels to your business that would have previously been cost-prohibitive.
3. A higher growth potential exists. By sticking to the traditional pricing model, companies are putting caps on potential growth and creating space for more innovative competitors. The razor blade industry, which has been relatively undisrupted since 19018, received a rude awakening by both Dollar Shave Club9 and Harry’s10 in 2012. The subscription-based model grabbed about 10 percent11 of the U.S. market, which finally pushed companies like Gillette12 to reconsider its pricing model.
By ignoring this trend in subscription-based services, businesses are missing out on a huge opportunity. Switching to or adding a subscription program doesn’t just provide customers with the convenience they desperately crave — it also makes sound financial sense for businesses looking to stick around for the long haul. This is more than a trend; it’s a shift to smarter pricing practices. Businesses that pay attention will reap the rewards.