The subscription business model is gaining increased currency in current business environment and has been successfully used in concerns like book club, mobile phone companies, magazines, cable TV companies and internet providers.
In this model a customer is required to pay well in advance subscription money to use the service or the product that the company provides. For example rather than selling a product individually, week by week or monthly ,the company subscribes a customer for a given period which could range from a few months to a couple of years. Some subscriptions can last for life time also.
Initially this business model was used by newspapers and magazine companies only.
The purpose of this process is to build brand loyalty and to ensure recurring sale.
There are three kinds of subscriptions
Unlimited Subscription: In this a customer pays one time for unlimited access to product or service for a fixed period of time.
Limited Subscription: In this form a fixed set of service or product is available to customer for a fixed period of time.
Basic Subscription: In this customer, on initial subscription is provided with some basic services with additional services delivered on pay as you use basis.
This model has both advantages and disadvantages for both the customer and the vendor.
For Vendors : The vendor gets revenue well in advance and does not need to worry weather the next edition of the product or service would be able to generate the same curiosity amongst customer as the current one or not. Through advance subscription, the vendor also succeeds in building brand loyalty amongst customer.
It in a way also increases the sales, as the customer cannot say no to any specific issue of the service.
For Customers: the customer is saved from repetitive trips to the vendor to buy the service and a consumer may find subscriptions convenient as they save time and energy.
However a customer should be careful and should subscribe only if he or she intends to use the service for a long time. The reason for this is that once subscribed for a service, he is bound by the agreement to continue with it for a specified period of time. Also the onetime cost of subscription can be quite high if a customer who plans to use the service frequently, but later does not.
Also it is felt that “one-time-purchase" model does not give vendors incentive to maintain relationships with their customers.
However it’s good to remember that a vendor only succeeds when the customer subscribes again, so customer and vendor should work to align their goal for mutual benefit for this business model to succeed.
Open business models, like the name suggests are business models that are open to change. They invite new ideas and concepts and continue to grow all the time. All companies wish to keep their internal information within themselves. But some companies decide to involve their employees, suppliers as well as customers to participate in deciding how the business takes place. This business model is a new trend and is working well for many companies.
These days when the market fluctuates more than ever before, it is a good idea to keep changing with the demands of time. Many businesses have suffered losses because their business model became outdated for the current scenario. Numerous businesses still are. It is not only about switching to a new technology but much more. It is how you go about doing your business.
Since early on, there are research and development departments within most companies that would do their research internally, with hardly any inputs from the people involved. Generally, the people who are connected to the business in any way seem to have good practical knowledge about the business, its strengths and weaknesses and areas of improvement. The idea is to utilize this knowledge which the customers, suppliers and employees would be happy to share. This is not to say that the research and study groups are no good. They are. Their perspective and vision is worth appreciation but their findings can sometimes be incomplete.
Even competitors are welcome. Many companies have found that they hold patents that they never use. Procter and Gamble surveyed their patents and found out that only 10% of them were actually useful to the company. In instances like this, it is a good idea to sell away the technology to somebody who needs it. Everyone doing their own research is no good. It is like reinventing the wheel. Getting maximum number of patents is like a rat race. It would never end and it would never be the solution. The solution is to join hands. Even if the research is done independently, sharing it would be mutually beneficial.
There is no point in being too possessive about intellectual property. Like any other property, say a piece of land, even IPs should be sold away if not being used. Imagine people holding big areas on land and not letting others live! Take what you need and leave the rest for the others. This model has been suggested by Henry Chesbrough who is the director of the Center for Open Innovation at the University of California, Berkeley. His books are available for those who want to know more.
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