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Pattern description
Pattern description
The customer pays a regular fee, typically on a monthly or an annual basis, in order to gain access to a product or service. While customers mostly benefit from lower usage costs and general service availability, the company generates a more steady income stream.
Inventive problems
Inventive problems
It is necessary to get payment for the product in advance in order to have the funds to produce this product.
It is necessary to get payment after the product is delivered to the customer, so that the customer could make payment in the usual way.
The company should produce a large number of product units (the large production) to meet the needs of as many customers as possible.
The company should produce a small number of product units (the low production) in order to reduce the frozen funds.
The produce suppliers should build relationship with individual customer, so as to best meet his/her needs.
The produce suppliers should build relationships with large groups of customers in order to reduce costs.
Application examples
Application examples
An example of the model application is the cloud computing company Salesforce, whose customer relationship management (CRM) software is available as a series of products within a centralised cloud. Salesforce introduced subscriptions to the software industry over ten years ago: customers pay a monthly fee to access the company’s software and all updates online. Rather than uploading an expensive customised solution to the customer, individual components of the software are made available via Subscription packages according to customers’ needs. Furthermore, regular upgrades to these components are available immediately after release. Salesforce is now one of the ten fastest growing companies in the world.
Switzerland-based Blacksocks has also discovered the potential of Subscription, using the byline Sockscription: There is no easier way to deal with your sock sorrows. Customers receive between three to six new pairs of socks at specified intervals each year in return for regular payments. Other garments such as underwear and shirts can be ordered in the same way. The company was founded in 1999 and has been doing very well with its business model. Over 50,000 customers in 75 countries have bought more than a million pairs of socks. One of its keys to success has been to emotionalise a simple product – black socks. Sock deliveries are accompanied by inspirational quotes, letters and goodies. This has led to a high rate of customer retention and steady growth of the business in a number of countries.
A company that has brought Subscription to razors is Dollar Shave Club: customers purchase a subscription for new razors which are sent to them for as little as a US $1 a month. No more forgetting to buy blades!
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