A subscription is a consumer or business agreement to pay a specific amount of money every month to receive a product or service. Utilities such as electricity, water, and sewer, could all be considered subscription services. Internet and trash are two more monthly payments deemed essential for both businesses and homes.
Other non-essential subscriptions have always existed. For example, magazines and newspapers have run on a hybrid of subscriptions and advertising revenue since their inception. But few would consider either product necessary to standard survival. The same could be said for Netflix, Hulu, Spotify, and other video and music streaming services.
And subscriptions did not stop there. Industries saw considerable opportunities in using the internet to create accounts that could deliver or provide access and monitor use. Building on the success of Netflix, online gaming, and other consumer platforms, a template was created, and now Software as a Service (SaaS) has hit the mainstream. Services like Zoom, Docusign, and even the Adobe Creative Suite are standard SaaS.
In recent years, however, it seems like just about everything has changed to a subscription-based model. As a result, you can purchase pretty much anything, including toothpaste, shampoo, razors, or even underwear, to be delivered monthly, bi-monthly, or every 90 days. But why?
Financial Benefits Of Subscriptions
One of the most prominent arguments for taking a business to a subscription model is revenue. Standard printing services either wait for client contact or check in regularly with their customers to determine paper, ink, and toner orders. Some Managed Print Services (MPS) providers have implemented the technology required to track ink and toner levels to assist with the timing of contact for order placement. Unfortunately, this process often leads to large fluctuations in monthly revenues for the MPS. For the client, it can create large jumps in outgoing expenses.
Subscriptions offer an opportunity for MPS companies to customize billing for individual business clients even further. Right now, MPS typically charges monthly service costs and runs with a pay-as-you-go for materials. Under a subscription platform, they could package those consumables costs with the monthly service charge. Or they could choose to offer consumables subscriptions as an add-on option. Either scenario helps the customer and the MPS move those “unpredictable” costs into a standard, trackable, and budget-friendly number.
Consistent Non-Fluctuating Cost
But converting those fluctuating dollar amounts for ink, toner, and paper into a subscription has an added benefit. Customers don’t have to hunt for lower prices through questionable and potentially lower quality options to reduce the sudden uptick in expense. Instead, they have already budgeted their consumables expenses monthly with their preferred printing services provider.
And, with clients less likely to go “shopping” elsewhere without good reason, MPS businesses can enjoy additional guaranteed monthly revenue seeing “churn” rates, or loss of customers, drop even further. Average churn rates for B2C subscription services are a surprisingly low 6.25%. Any voluntary drop-off or “voluntary churn” typically occurs within the first few months of any initial sign-on. Voluntary churn accounts for the majority of lost, around 5.07% of subscribers. The other 1.18% is considered involuntary and is typically incurred by payment issues.
For MPS providers who need even more incentive to consider subscription services for their consumables, it is essential to remember that recurring revenues make businesses more valuable. If both services and products are wrapped up in monthly payment contracts, the entire company becomes an even more solid investment.
Meeting Customer Demand
But it is far more than money that is helping drive MPS providers to subscription models. It is also the expanded ability to meet partner demands. For example, most MPS already monitor ink and toner levels across machines. Many can also keep track of the number of prints and how much paper has been consumed. When this information is paired with the ongoing product purchase information, it is even easier to make predictive subscription and delivery suggestions and have deeper conversations with clients.
Has a partner seen a steady increase or decrease in print use? Maybe client services or sales representatives should contact them about adjusting their subscription. Has a particular machine seen an uptick in use? Perhaps a different model would serve that particular location better. More data means being able to serve customers better. In today’s economy, that type of service can make a huge difference.
How to Get Started
Most companies who jump into the world of subscriptions create one or more “levels” of subscription groupings and consider it done. But we don’t live in a one-size-fits-all world anymore. Clients expect more.
While two or three entry-level or example subscriptions may set the general tone, the printing industry requires a more customized approach. In the same way, they approach printer placements and configurations, MPS businesses creating consumables subscriptions should focus on specialized pricing that caters specifically to each partner’s needs.
MPS companies who work with PowerMPS already have the tools they need to make subscription-based consumables a reality in their business. Custom price levels let MPS set their standard package settings as well as their al-a-carte options. However, customer-level coupons and custom pricing options allow MPS providers to create the pricing and package options needed to cater specifically to each customer’s needs. The universal price levels are for everyone. Yet when customers log in to their particular account, they have complete access to their special pricing and subscription options, including wish lists and shipping preferences.
There is a reason you can purchase pet supplies for monthly delivery. Monthly recurring income is the business model of the future. For MPS providers, updating to a subscription plan for products as well as services is a surefire way to gather essential data, build better relationships, and increase customer retention into the future.
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