What is a subscription? Introducing the advantages and disadvantages of the service!

I will explain the outline of “subscription”, which has become popular recently, and the background of its widespread recognition. In addition, we will look at the advantages and disadvantages from the perspective of the provider side and the customer side. Finally, we will introduce the representative genres of subscription-type services.

Table of contents

What is a subscription?

In recent years, many companies have begun incorporating “subscriptions” into their businesses. A subscription, whose etymology is “subscription,” which means a regular subscription to a magazine, refers to a contract that allows you to use the service for a certain period by paying a fixed fee each time. Also known as “subscription”, it has been featured in various media and has increased opportunities to see it.

With a similar meaning, there is the term “recurring” used for electricity bills, gas bills, etc., but subscriptions are different from variable-amount recurring in that the amount is fixed.

Also, “rental” and “lease” have similar meanings, but unlike those that need to be returned after a set period, subscriptions are characterized by being able to continue to be used as long as the fee is paid. there is.

In other words, subscription offerings focus on the right to use the product or service rather than the product or service itself. Subscriptions began to be adopted from services that were originally provided in the form of regular subscriptions, rentals, and leases, but eventually spread to the digital domain such as data and software, and now cars, shoes, clothes, food, etc., subscription-based services are becoming available in various industries.

Why do subscriptions matter?

So why have subscription services become so popular these days?

The first is the advancement of IT technology. In the past, software was recorded on media such as DVDs and packaged for sale. However, with the development of the Internet environment, it became possible to send and receive large amounts of data smoothly, and a change occurred. It became possible to download and use constantly update software  from the Internet. It can be said that a business model has been created that benefits both parties, leading to cost reductions for the companies that provide them and for users to be able to use the latest software in a more timely manner.

Another factor is changes in consumer awareness and lifestyles. In Japan, where the birthrate is declining and the population is aging, the number of people who have no desire to own “things” due to vague anxiety about the future is increasing. Instead, there is certainly a trend toward finding value in invisible things such as “flexible services,” “free experiences,” and “human relationships.”

For this reason, it can be said that consumers have smoothly accepted the concept of subscriptions, in which users do not “own” and “use only as long as they want”.

Advantages of subscription services

Subscriptions have spread rapidly, but what are the benefits? Here are some examples, one for the business side and the other for the consumer side.

Benefits for companies

First of all, it makes it easier to calculate sales, and you can get recurring revenue. In addition to applying to a wide range of services, there is no initial cost to introduce it, which lowers the hurdles and makes it easier to acquire new customers. In addition, since it is possible to continuously collect usage data from customers, it is also effective in cases where marketing strategies are used to improve products and services.

Benefits for consumers

On the other hand, consumers also have a sense of security that it is easy to use as a trial because there is no large initial cost. When you need something, you usually have to go through the purchase procedure, secure a place to store and manage it, and the costs associated with it are burdensome. However, with a subscription, strictly speaking, it is not your property, so you can say that you can reduce the hassle of managing it.

Disadvantages of subscription services

Subscriptions have many advantages, but they also have disadvantages, so it is important to understand them before using them. Again, we will introduce the business side and the consumer side separately.

Disadvantages for companies

Immediately after the release of a subscription-type service, it may be difficult to attract customers and it may take time to generate revenue. Due to its nature, it must be adopted after understanding that there is no immediate effect on sales. In addition, subscription services differ from simple flat-rate services in that it is necessary to continuously improve, update, and add content to meet the needs of customers and the market as long as the fee is paid. I have.

Also, when introducing a subscription model, it is necessary to prepare know-how and tools, and to allocate a certain amount of resources from the beginning. These can also be seen as disadvantages.

Disadvantages for consumers

Consumers also have the following disadvantages: First of all, paying a fixed usage fee every time means that the same cost will be incurred even if there is a period of not using it. It may also come with content or features that you are not interested in or need. It should be noted that there are a certain number of people who feel that the money they paid is a waste. They will not be able to use the service later because they will not have anything left after canceling the service.

Examples of subscription service types

From here, we will introduce representative examples of genres and business models to help you better understand subscription services.

IT (software) services

The first is a service that allows you to pay a certain usage fee and obtain the right to use the software. An example is Microsoft’s “Microsoft 365”. In the past, the mainstream method was to purchase a packaged product and install it on a computer. However, with a subscription, you can not only use it but also receive version upgrades and user support. Microsoft 365 is also attractive because you can always use the latest versions of familiar apps such as Excel and Word when you sign up. In addition, since it is provided as a SaaS from the cloud, the introduction cost can be kept down, and it is used by many companies and individuals in a wide range of countries and regions.

Services for the transportation industry

A major tire manufacturer provides total support for tire-related operations for a fixed monthly fee as a subscription service for the transportation industry. The burden of replacing deteriorated tires with new ones and maintenance is a thorny problem for the management team of transportation companies, but it has the advantage of smooth budget management because it can be done with a fixed monthly budget.

Music system

Services that allow you to listen to music as much as you want for a fixed fee, instead of paying a usage fee for each song, are also gaining popularity these days. Whereas until now it was necessary to purchase packages such as CDs, you can download and listen to as many songs as you like from the Internet at any time. Depending on the service, various services meet the diverse needs of consumers, such as free plans and student discount plans, which can be said to be the reason why they are gaining support.

Video system

Services that allow you to watch TV dramas, movies, animations, sports videos, etc. for a fixed price are also a genre that has been growing in demand in recent years. The content provided to users varies greatly depending on the service, even though the point of unlimited viewing is the same for a fixed price. In addition, it is also characterized by many strategies not only for acquiring new users but also for retaining existing users, such as offering services that can be freely trialed for free and providing original content.

Summary

A subscription is one form of contract that meets the needs of the times. In the future, the world of subscriptions will continue to expand in various fields. In response to IT and consumer needs, Microsoft also offers “Microsoft 365” as a software subscription. Since the latest version can always be used via the cloud, it is highly convenient and useful in business settings.