How to Turn a Product or Service into a Subscription Model, and Why It Pays Off

Predictable revenue every month, a loyal customer, no more chasing new sales from scratch: the subscription model sounds genuinely attractive. And to a large extent it is: the subscription market is growing at a rate of well over ten percent a year, and its global value is already counted in hundreds of billions of dollars, by some methodologies even in trillions.

A business owner, however, may not be aware of the potential hidden in their own offer. More and more products and services can be "recast" into a subscription model. Read on to find out:

• how to check whether your offer is a fit for a subscription model,
• how to choose the right variant of the model and how to run the numbers,
• whether it will actually pay off,
• and how to do it fairly.

Why subscription changes the way you think about business

The subscription model changes one business question for good: instead of "how much will I sell today", what counts is "how much is a customer worth over the whole time they stay with us". To talk about this sensibly, it's worth knowing four basic terms:

• MRR (Monthly Recurring Revenue). This is a number that doesn't reset to zero on the first of the month, but builds on what came before.
• LTV (Lifetime Value). The real value of a customer over the entire relationship, not over a single transaction.
• CAC (Customer Acquisition Cost). How much it costs to acquire a given customer.
• Churn. The percentage of customers who cancel. It's the metric that quietly eats away at everything else. Even a small monthly churn compounds into a serious problem after a year.

A healthy LTV to CAC ratio is around 3:1: every unit of currency spent on acquiring a customer should come back as three units of their lifetime value.

A worked example shows the scale of the difference. A customer pays PLN 100 a month, the cost of serving them is PLN 60, and monthly churn is 3%. That customer's lifetime value is (PLN 100 − PLN 60) times an average of 33 months, so roughly PLN 1,320. One seemingly small PLN 100 transaction turns into a relationship worth more than ten times as much, provided the company is able to keep that customer.

Three subscription models, not one

"Subscription" sounds like a single mechanism, but in practice it's three quite different models, each suited to a different type of product or service:

• Replenishment: products that run out and need regular replacing: cosmetics, pet food, supplements, razor blades (the famous Dollar Shave Club example). The customer doesn't have to remember to order. The delivery simply arrives.
• Curation: a monthly surprise, an element of discovery. The customer pays not only for the product but for the experience of "what will I get this time".
• Access: a fixed fee for access to something that isn't necessarily a physical product: a tool, a service, support.

A surprisingly large share of products and services can be translated into one of these three models, even ones that at first glance look purely one-off.

Subscription isn't just for products. Services work too

The biggest shift in thinking here is simple: a subscription doesn't require shipping a parcel. It only requires recurring value. Examples from different industries show how widely this model actually works:

• IT support for small businesses: a fixed monthly fee for technical support instead of paying for each intervention separately. The customer knows what they'll pay, the company knows how much work it has in a given month.
• Car repair shops: a plan covering regular inspections, oil changes and minor repairs for a fixed monthly price, instead of a bill for every visit.
• Car washes: unlimited washes for a fixed monthly fee. A simple model, but very effective at building habit and loyalty.
• Hairdressers and barbers: a plan for an unlimited number of visits or basic services per month, popular in the US and with potential in Poland too.
• Dental or medical care: a fixed monthly fee in exchange for access to basic care, with no additional bills for each visit.

It's worth asking yourself whether, among your customers or in your own offer, there's something that could in theory be translated into such a model that nobody has thought of yet.

How to check whether your product or service is a fit for subscription

Before you start designing a price list, it's worth running your offer through a few simple questions. Each of them points towards a different one of the three models described above:

• Does the customer come back for this regularly, not just once? If so, that's already a good sign there's subscription material here, whether you sell a product or a service.
• Can you predict the rhythm in which the product runs out or the service is needed? A cosmetic runs out every month, car oil needs changing every few thousand kilometres, a website needs ongoing technical care. These are natural candidates for the replenishment model.
• Is the value for the customer access or continuity rather than a specific, one-off product? IT support, management of an advertising account, unlimited car washes: that's the domain of the access model.
• Does the element of surprise or discovery build value in itself? If customers will happily pay for "I don't know what I'll get this time", you have material for the curation model.

The next step is to work out the economics before you publish a price list: how much it really costs you to serve one customer per monthly cycle, and what level of cancellations (churn) would stop the model from adding up. Only with those two numbers in hand should you set the subscription price, not the other way round.

How to implement a subscription fairly, and why it pays off anyway

Transparent cancellation isn't a threat to the subscription model. It's its foundation. A few concrete rules worth applying from the very start:

• A visible cancel button in the customer panel. Don't hide it and don't count on the customer getting lost in the menu.
• Clear information about the price and renewal terms before sign-up, not after the fact.
• A reminder before the trial period ends, before the full fee starts being charged.
• Annual plans alongside monthly ones, where it makes sense. Data suggests they reduce cancellations by as much as 40%, because the customer makes the decision once rather than afresh every month. Besides continuity, annual plans are often cheaper than monthly ones.
• Treat low churn as a signal of service quality, not the result of a hard-to-find cancel button. These are two completely different routes to the same number, and only one of them is safe legally and for your reputation.

Summary

Subscription isn't a trick for more money in the short term. It's a change in the relationship with the customer, from a single transaction to continuity. And it only truly works long-term when that continuity is fair: easy to start, but just as easy to end when the customer wants to.

If you're wondering whether there's something in your business, a product or a service, that customers buy regularly or use continuously, you probably already have a candidate for a subscription model. We'll help you assess whether and how to implement it sensibly in your company, from the business, technical and legal side.