The membership vs subscription has long been a hot topic, and it’s time to put an end to it!
The e-commerce industry is booming, and with it, so are membership and subscription businesses. Membership-based services are currently generating over $15 billion in revenue and are expected to grow at a compound annual growth rate of 14%. Similarly, the subscription market value is forecasted to grow to US$2419.69 billion by 2028. The market is anticipated to grow at a CAGR of approx. 71% during the forecasted period of 2023-2028.
Quite impressive, isn’t it?
It’s a winning playground and it is nothing but sensible for you to join the party.
However, it is important for eCommerce brand owners-such as yourself- to understand the differences between the subscription and membership business models and choose wisely, because each model comes with a set of advantages and disadvantages that must be carefully considered.
To help lead you in the right direction, we’ve created a comprehensive membership vs subscription comparison. Sit tight and tune in!
Weight the Pros & Cons
When deciding which service option to choose, it’s important to weigh the pros and cons of both membership and subscriptions. Here are 7 factors to keep in mind:
Pro 1: Price
Subscriptions are typically more affordable than memberships. Subscriptions offer a lower price point for customers and the ability to pay on a month-to-month basis. This makes them a great option for customers looking for a low-cost, short-term solution. Memberships, on the other hand, usually require an upfront payment and are more expensive in the long run.
Con 1: Commitment
Subscriptions tend to require less of a commitment than memberships do. Customers can cancel their subscriptions whenever they want, so there is no long-term commitment. However, in a membership vs subscription comparison, it is quite obvious that membership models often require a longer commitment and customers are typically charged a fee if they cancel before the end of their contract.
Pro 2: Variety
Subscriptions can offer a wide variety of services and products, from monthly boxes to streaming services. This makes them a great option for customers looking for something different every month. Memberships, however, often offer a more limited selection of services and products, making them less suitable for customers who are looking for variety.
Con 2: Accessibility
Subscriptions can be difficult to access for some customers. Many subscription services require customers to have a credit card or PayPal account in order to sign up, which can be a barrier to entry for some. Memberships, on the other hand, are usually more accessible, as they do not require a credit card or PayPal account to sign up.
Pro 3: Convenience
Subscriptions can be extremely convenient for customers. Customers can set up their subscriptions and forget about it, as the service will automatically renew each month. This means that customers don’t have to worry about having to remember to renew their subscription every month. As for convenience, the difference between membership vs subscription models is that memberships require more effort from customers, as they have to manually renew their membership each month.
Con 3: Flexibility
Subscriptions tend to be less flexible than memberships. Subscriptions are usually set up on a month-to-month basis, which means customers can’t customize their subscriptions to their needs. Memberships, however, can be customized to fit a customer’s needs, making them more flexible than subscriptions.
(Keep in mind, however, that with Subify, you and your customers will have the option to update, pause, or skip the orders if you want.)
Pro 4: Loyalty
Subscriptions are a great way to reward customer loyalty. Many subscription services offer discounts and other incentives to customers who sign up for a long-term subscription. Memberships, on the other hand, typically don’t offer these kinds of rewards.
Con 4: Lack of Engagement
Subscriptions can be a great way to keep customers engaged with a service or product, but they can also be a hindrance. If customers don’t use their subscription, they may end up paying for a service they don’t use. Memberships, however, often provide more of an incentive for customers to use the service, as they are typically required to renew their membership each month.
Pro 5: Additional Benefits
Subscriptions often come with additional benefits, such as access to exclusive content or discounts on products. This can be a great way to incentivize customers to sign up for a subscription. However, comparing the benefits between membership vs subscription models, turns out memberships typically don’t have these kinds of benefits.
Con 5: Limited Services
Subscriptions can be limited in terms of the services and products they offer. Most subscription boxes have predetermined products and services, and customers usually aren’t able to customize their subscription boxes.
Memberships, however, can be customized to fit a customer’s needs, making them more suitable for customers looking for diverse or changeable services and products.
Pro 6: Cancellation
Subscriptions are usually easy to cancel, as customers can usually do it online or over the phone. This makes them a great option for customers who don’t want to be tied down to a long-term commitment. Memberships, however, typically require customers to cancel in person or over the phone, making them less convenient for customers who want to cancel.
Con 6: Establishing a Value
With a membership model, customers are typically required to pay a one-time fee for access to goods or services. This means that the business must be able to establish the value of the goods or services they are providing in order for customers to be willing to pay for a membership. In the membership vs subscription comparison, this can be more challenging to membership models, as it requires the business to accurately assess the value of the goods or services they are providing in order to set a price that is attractive to customers.
Pro 7: Low Upfront Costs
Another advantage of the subscription model is that it typically requires lower upfront costs for customers. This can make it easier for businesses to acquire new customers, as they don’t have to worry about customers shying away from large upfront fees.
Con 7: Difficulty in Upselling
With a membership model, customers are typically paying a one-time fee for access to goods or services. This means that the business will not be able to increase the amount of revenue they generate from that customer by selling additional products or services, as the customer has already paid a one-time fee for access.
Overall, it’s important to weigh the pros and cons of membership vs subscription models to decide which one is the best fit for your needs. Subscriptions can be a great option for customers looking for a low-cost, short-term solution, while memberships are more suitable for customers looking for a longer commitment and more control over the services and products they receive.
Still Confused? Answer these 5 Questions!
It is only you who knows what works best for you. Get a clear picture of the model you are looking for by asking yourself these five questions.
1. What type of customers do I have?
Answering this question will help you determine whether the membership or subscription model is best suited for your business. If you have a customer base that is likely to be loyal and engaged with your company, then a membership model may be the best choice. It will allow you to reward customers for their loyalty and create a community of users that can interact and provide feedback. On the other hand, if you have a customer base that is more likely to be transient and not as engaged, then a subscription model may be the best option. With this model, customers pay a fee to access certain services or products and can unsubscribe at any time.
2. What type of products or services are being offered?
If you offer products or services that customers need to access on an ongoing basis, then a subscription model may be the best option. This will allow customers to pay a fee each month or year, and access the services or products without needing to make multiple purchases. On the other hand, if you have products or services that are more of a one-time purchase, then a membership model may be the better choice. With this model, customers pay a fee to join and receive access to exclusive deals and offers.
3. How often will customers need to access my products or services?
This is another important question to consider when deciding between a membership vs subscription model. If customers will need to access your products or services on a regular basis, then a subscription model may be the best choice. With this model, customers will pay a fee each month or year to access the products or services. On the other hand, if customers will need to access your products or services on an infrequent or one-time basis, then a membership model may be the better option. With this model, customers pay a fee to join and receive access to exclusive deals and offers.
4. How much time and money am I willing to invest in this business model?
Both the membership and subscription models require time and money to implement. With the subscription model, you will need to invest time and money into building a platform to manage subscriptions, as well as creating a customer rewards program. With the membership model, you will need to invest time and money into developing a community of users and creating exclusive discounts and offers. You should consider how much time and money you are willing to invest in either model before deciding which is the best option for your business.
5. What are my long-term goals?
It is important to consider your long-term goals when deciding between a membership vs subscription model. If you are looking to build a loyal customer base and create an engaged community of users, then a membership model may be the better choice. On the other hand, if you are looking to generate more revenue through recurring payments, then a subscription model may be the best option. Consider your long-term goals when deciding which model is best for your business.
Conclusion
The membership vs subscription models are two distinct approaches to e-commerce and each can offer unique value to customers.
Understanding the differences between the two models helps business owners make an informed decision on which model best suits their business needs and goals. It’s an important step in running a business because while the right decision can result in big sales, the wrong one can cause customer frustration and loss of profits. By understanding the differences between the two models and choosing the right one, business owners can ensure they are offering their customers the best experience possible and maximizing their profits.
We are only at the beginning of your journey; join Subify today and let us worry about the rest for you!