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A drop in revenue and rise in expenses might be worth it when transitioning to a subscription model because it can lead to a more sustainable and predictable revenue stream in the long run. The initial drop in revenue and rise in expenses is often due to the costs associated with restructuring the business model and investing in new systems and processes. However, once the transition is complete, the subscription model can provide ongoing value to customers, leading to increased customer loyalty and recurring revenue.
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Subscription services have grown revenues 8X faster than the S&P500 and 5X faster than US retail sales. This new business model is why Adobe, Netflix,...
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With consumers increasingly focused on access over ownership, the key is to start with the wants and needs of your particular customer base, then create a service that delivers ongoing value. This will require a new organizational structure; a shift in the focus of the sales, marketing, and finance teams; and, a new approach from IT. But, the initial drop in revenue and rise in expenses will be more than worth it.
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