Why Do Technology Companies Favor Subscription Models?

by   |  July 30, 2014

165Technology companies are favoring online subscription models at increasing rates.   In 2013, Adobe switched its one-time purchase model to that of a monthly subscription.   Customers no longer pay hundreds of dollars upfront for Adobe products, but rather pay smaller fees overtime to maintain usage privileges.

Other technology companies are following suit.   LinkedIn, Netflix, and Amazon Prime all offer monthly subscriptions to customers.   Startups such as Workfolio, InternMatch and Intern Sushi also include subscription models as part of their fundamental business strategy.

What are the motivations behind this trend?

There are a number of reasons that subscription models make sense for tech companies these days.   Among them are the following:

  • Lower up-front costs are attractive to consumers
  • Subscription models encourage brand loyalty overtime
  • Subscription models bring greater long-term gains for technology companies

My speculation is that the technology industry is taking cues from the consumer packaged goods industry.   Since consumer products run out regularly, the very nature of CPG mandates that these consumers buy the products on a regular basis.   As such, establishing habits and loyalty toward brands is of the utmost importance to the CPG companies who issue those brands.

More on: Business, Industry Review, Technology
About the Author:

Mimi West is a consummate entrepreneur, brand and marketing expert. This retired opera singer and Founder of My Dream Teacher is now pursuing her MBA at the University of Virginia Darden School of Business Administration. You can follower her on Twitter: @MimiGuynnWest.
Publshed: July 30, 2014  | 
You might also enjoy...
How Does Impact Investing Work? Insights from Darden's Impact Investing Conference
5 Survival Tips for MBA Moms and Families
What Keeps You Going? Insights from Darden's Global Conference