Subscriptions are a way for companies to allow customers to pay a recurring charge, whether it is monthly or annually to receive products or services. This type of business model has evolved over the years, and is applied to a range of products and services from streaming media to buying personal hygiene products, and more.


How Subscriptions Work

The way subscriptions work is customers pay a recurring charge based on a prearranged payment schedule to receive a product or service. This charge can be applied on a weekly, monthly, semi monthly, biweekly, semi annual, or annual basis. When the payment is due the money is deducted from a payment method that the company has on file for the customer.

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Types of Subscriptions

There are different types of subscription models that companies use to attract you and obtain your business. These subscriptions include membership, digital, and e-commerce subscriptions. Each type of subscription offers different benefits for both businesses and customers.

The most common form of subscription service is the eCommerce subscription service. This type of service is inclusive of streaming memberships, shopping services, replenishment, and access to products and services. Examples of this would be Amazon Subscribe and Save, Netflix, Amazon Prime, and/or subscription boxes.

Subscription boxes give you the option to pay a flat amount for a box of customized product samples and/or full-sized products each month. The most common types of boxes are beauty boxes. An example of this would be paying $25 per month and receiving $50 worth of products such as lipstick, nail polish, razors, and other types of beauty products.

Membership services such as Netflix, Amazon, or Hulu may entice you by offering a free trial or discounted membership fees if you signup for a paid membership subscription. By agreeing to a paid subscription service, you are able to access additional products or services that the company provides at a discounted rate.

Digital services can be offered in the form of memberships or eCommerce services, however, the products or services are strictly digital. Examples would be signing up for a streaming media service or an online platform for creating websites or blogs.


How Businesses Setup Subscriptions and Recurring Payments

Before a business is able to set up recurring payments, a customer would need to give the company permission to do so. The permission can be obtained verbally, electronically, or through written authorization. The authorization would need to include the method of payment that will be used, the agreed-upon payment schedule, and the goods and services that are covered under the payment agreement.

Once the recurring payment is set up, the payment information for the customer is stored in the customer’s account for the company. The customer should be able to access this information in the event they wish to change the payment method that is on file.


Why Customers Choose Subscriptions

There are a number of reasons that a customer would choose to signup for a subscription for a product or service. These reasons include the following:

  • The customer is looking for convenience in receiving services and making payments.
  • A customer wants to receive products or services on a regular basis
  • Customers are given the flexibility to choose when and how to pay for goods and services
  • Customers receive bonuses for signing up for subscriptions or using automatic or recurring payments
  • Consumers prefer to have a customized shopping experience which is offered through this type of service model
  • The offer is enticing and appears to be a good deal
  • Customers can gain access to special events or promotions through subscriptions


There are a number of pros for both businesses and consumers when it comes to choosing to pay businesses in recurring payments. Here are the benefits that customers receive when choosing this option:

  • The flexibility of paying for goods and services
  • It’s easier to budget your bills
  • It is convenient and reliable
  • Access to exclusive perks and offers
  • You don’t have to worry about late payments
  • Oftentimes, you are first in line to access the latest products or services that are offered by a business.
  • There is a potential for saving money when using subscription services.
  • You may find deals on products or services that you didn’t know about.
  • You can find out about new products or services before the general public.


Along with the advantages that are received with subscriptions and recurring payments, there are also disadvantages. Here are some cons that you can expect from this business model:

  • You could be paying for services or goods that you may not need. An example would be if you pay for unlimited usage through your wireless or internet service provider and it’s not beneficial to you.
  • You may not always get what you would want. If you receive a subscription box you don’t choose what you get each month and you may not like what is chosen for you.
  • You can wind up purchasing more than what you need.
  • Canceling your service can be a hassle. Some subscriptions require you to contact a customer service number or require that you submit a request to cancel services in writing, which can be an inconvenience.
  •  Returning items can be problematic with some boxed services.


Final Thought

Deciding whether to sign up for a subscription service depends on what you are signing up for and how often you would use the service. Sometimes the initial offer may seem appealing and in the end you wind up spending more money than what you bargained for. If you are thinking about using a subscription service you need to weigh your options, understand what the service provides, and how you will benefit from the service.

Think about what you can budget each month, and compare that with the benefits of the service, the ease of using the service, how hard it is to cancel, and who is benefiting more, you or the company. This will help you decide if it is worth signing up for a service or finding alternative ways to enjoy the perks of the subscriptions.


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