What is subscription pricing?
Subscription pricing models generate recurring revenue at predictable intervals in exchange for access to a good or service for a specific billable time period—monthly, quarterly, half-yearly, or annually.
Traditional pricing models usually rely on a single transaction with a one-time payment for ownership rights, service, and maintenance responsibility (if applicable). On the other hand, subscription pricing models offer businesses and their customers the chance to develop more dynamic and fluid relationships.
Unlike fee-for-service models, which might require payment for each maintenance, service, and support interaction, subscription pricing adds additional value by bundling technical services, repairs, and maintenance to the advertised price. With subscription pricing, customers have access to a broad range of offerings.
Why is subscription pricing important?
Subscription pricing models can take various forms and have taken root in both B2B and B2C sales environments.
Subscription pricing has lowered the barriers customers have faced when trying to access products and services that may otherwise be too costly to own and maintain outright. As a result, these pay-as-you-go models can expand a company’s total addressable market for a given product or service and can create new revenue opportunities by bundling products and services together.
Businesses that offer subscription pricing experience greater revenue predictability thanks to the recurring relationships formed with their customers. Regardless of the interval at which customers are charged, revenues are normalized to a monthly value that can then be used to forecast financial performance and labor required for the included services.