So now let's understand about the advantage and disadvantage of using subscription business model.
Let's talk about few advantage or benefits of using subscription business.
The number one advantage is predictable cash flow.
If people have taken subscription of a specific product or service, you can at least predict how much
revenue will be there in the coming quarter or in the coming month.
Because those people have to keep buying the product if they really want to enjoy the service or a product.
And this will lead to recurring profit and you can predict your cash flow in a much better way.
So you have a predictable cash flow if you're using subscription business model.
Because even if some people will stop using your product, you will still have a certain amount of churn
and revenue in the next quarter.
The second advantage is goods upselling and cross-selling opportunity.
And if I take Dollar Shave Club as an example.
Dollar Shave Club started by selling good quality Razor, but now they are also selling a couple of
other products like shaving cream after shave gel on their platform.
And that's why subscription gives you a really good opportunity so that you can upsell and cross-sell
different product.
So now Dollar Shave Club is selling their razor, their shaving cream after shave gel and a couple of
other products as well.
And they are sending all these products in the same subscription box.
The third benefit is higher margin.
So all these subscription brands have a hero product and they always sell their hero product at a loss,
but they generate more money or revenue by selling high margin product in case of Dollar Shave Club.
Their hero product is their razor.
They sell all of these razor at loss, but they end up generating more revenue and profit from these
other products like your shaving cream after gel.
So they have a cheap hit product and they generate their profit from these add ons or other product.
Now, if you wanted to implement a subscription business model in your brand, then you have to understand
about subscription revenue cycle.
So subscription revenue cycle is made up of these five steps.
And if you follow these five steps, you can build this subscription revenue cycle for your business
as well.
The first part of this subscription revenue cycle is acquiring new customer.
So you have to acquire a new customer from your inbound marketing effort.
Paid Advertisement.
Maybe you will do some influencer marketing or rank your brand in the Google search so that people can
know about your brand or product.
That's the first part of subscription revenue cycle.
Then we have to deliver a consistent, high quality product or service.
So you constantly have to speak with all of your customer.
You have to solve their problem and that's how you're able to deliver a high quality service or product.
Third is you have to look out for all these different opportunities of upselling and cross-selling.
So in case if you don't know, the acquisition in a business is four times more expensive than upselling.
So just like Dollar Shave Club, you have to find all the products that you can sell with the primary
product.
And the primary product is your hero product.
So you have to sell some, add on some services, some other product, so that you can increase the
overall ticket size, also known as your average revenue per user.
The fourth step to this revenue cycle is retaining these user.
The biggest problem with the subscription business model is that they have the highest amount of churn.
That means people will use the product for a month or two and then they will cancel their subscription.
So you have to battle with this churn every single month.
You have to find different ways by which you can control this churn, give some benefit to the end user
and give some cash back into their wallet every time they purchase some product.
And they can use that cashback or let's say, credit in the next order.
And there are multiple ways to control the churn, and we'll talk about that in the coming videos.
So we have a dedicated section on these different metrics in the fourth section of this course.
In the end, we have to repeat the complete process so that our subscription can compound and we can
achieve a flywheel where we are generating huge amount of revenue and everything is so well connected
to each other.
So these are the five steps in a subscription revenue cycle.
You first have to acquire some customer, then you have to deliver consistent, high quality experience
with your product or service.
Then you have to look out for upselling and cross-selling opportunities.
And finally, you have to control your churn with different ways, like introducing cashback credits
that you can use in the next order, giving some offers, doing some influencer marketing.
And finally, you have to repeat the whole process over and over again.