Online giants invest heavily in amplifying their business with experience and variety, and enticing users to buy subscription models at low prices.
E-commerce giants today boast millions of followers and equivalent product inventories. And many of these millions end up as loyal followers take to their subscriber models. Online giants base their market penetration, success stats and future projections based on similar subscription models.
The subscriber customers are enticed by aggressive strategies like attractive discounts, exclusive offers, products or content and immensely attractive pricing. Online service providers compete in a market where the quality isn’t the biggest priority, but quantity is immense – decent household incomes and billions of target customers.
This makes them invest heavily in amplifying their experience and variety, and enticing users to buy subscription models at low prices. Some are already reaping whopping profits while others are waiting for their turn.
Shift and Evolution of Online Business Model
Online business around the globe has seen a shift in their business model in the last decade. From sole dependency on ad-based revenue to exclusivity model, the online market has come a long way. Initially, the sources of income from e-commerce sites were advertisements, endorsements, and traditional buying and selling.
One of the main reasons for the success of this business model was that people love exclusive privileges, even though it comes at some cost. The idea of being an exclusive user intrigue them and make the product looks more premium. Companies have used this strategy over the years to lure customers that just want to stand out from the crowd.
Customer pain-points that subscriptions tap
If we talk about online business like streaming services, ads can be highly annoying. To get rid of ads alone people are ready to pay the service providers. Maybe this is how companies started providing more and more services in exchange for money to the customers. Perhaps, the biggest reason why people opt for membership is to have an ad-free experience and get some more services along with it.
On the positive side, it may act as a sign of quality when compared to the same service at no cost. Some brands use this to provide high-quality content with a free version to attract leads. Others use this strategy to provide more comfort and a privileged feeling to their loyal customer base.
The Business Side of Subscription Model
From the business side, this strategy is used keeping in mind both the pros and cons. This may result in losing many potential customers and a heavy risk of losing existing ones too. The whole idea of introducing premier service at extra cost may lead users to search for alternatives.
The pricing of the service in a market like India where piracy is a major headache for the entertainment industry is also a deciding factor for customers who can have access to the content for free.
When it comes to selling these memberships, the companies are often engaged in a battle to provide more and more additional benefits to the user, which may help them stand out from their competitors.
Different businesses online provide premier membership to their users accordingly to the services they provide. The basic idea what we have seen from almost everyone is to first make a large user base by providing services for free or negligible cost, then introduce the premier memberships.
If a small fraction is appealed by the premium features, the business usually makes a ton of money. Here are a few examples of how companies from various industries are dominating when it comes to exclusivity business:
When we talk about premium membership with a great ecosystem, Amazon is hands down the leader. With a single membership, you can have access to Amazon’s fast delivery, early access to sales, music streaming, movies and shows, unlimited photo storage, free groceries delivery and twitch subscription.
Amazon started this service at a price of Rs. 599 in India and the response made Amazon raise its price to Rs. 999.
Netflix’s direct competitor in India is Amazon Prime and Hotstar. Prime has a variety of other services to attract customers while Hotstar, with most of its content available for free, puts high bets on cricket. This has made Netflix, the global leader, to focus more on producing local content.
However, the company which releases more than 2000 movies in a year is still trying to please the Indian users where online streaming services is seen as a luxury in most part of the country.
The PC game which stormed the world with its mobile debut is still talk of the town. The gameplay is still free with no advantage to users in exchange for money. What PUBG has done is sell season passes, which allows the buyers to earn some in-game stuff.
Consequently, the major part of its revenue comes from player skins and other in-game accessories. This is a way to support the freeware developers, as a token of appreciation; or just a small price to make their gameplay look more attractive or maybe to show their premium badge to other gamers. Whatever the reason is, this has made PUBG the highest grossing mobile game with monthly revenue of over $140 million.
Therefore, businesses such as digital media, food delivery, telecom, etc., make a fortune with these exclusive customer base. With people changing their perspective on exclusivity from luxury to basic conveniences, the Indian market may turn out to be the gold mine for these companies.
By: Chitresh Sehgal, Senior Editor, Dkoding Media