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Why does the monthly payment model rule?

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Why does the monthly payment model rule?

Today’s economy changes very quickly, sometimes unpredictably. And amidst this speed, the monthly payment model has found its throne.

Consumers kneel down to the accessibility it provides and don’t have to engage as owners either. Everything is available with just one click, without long-term obligations or impossible payments.

This model impresses with its flexibility, whether it is music, series or software. Paying monthly produces a feeling of control over what is consumed and companies know this, which is why they offer it.

The rise of the subscription model

Businesses have found something of a goldmine in monthly payments. This business model reached a valuation of around €1,000 billion in 2020 and is experiencing annual growth of 200%, with each consumer spending around €220 per month.

In the United States, 74% of people have at least one subscription and the average customer subscribes to 12 services. The biggest advantage of this model is its predictability, because everything works better when finances are not dependent on a one-time purchase.

Financial predictability and customer loyalty

With monthly payments, businesses can forecast revenue more accurately. An example: between 60 and 70% of customers are still there after the first year.

However, according to an ExpressVPN study, 40% of users suffer from subscription fatigue. Even so, retention remains high, but this is a fact that will need to be taken into account for the future.

Unsubscription and retention, the challenges of the subscription economy

Despite this success, churn remains a concern as businesses struggle with churn rates between 5-7%. Some found a solution in personalized offers, with cases where 72% of at-risk subscribers continued to pay for the service.

The value of personalization

Personalization allows us to satisfy the desire of consumers, who want services that adapt to them. 71% expect to be offered personalized services and 76% feel frustrated if this doesn’t happen.

In turn, 63% of companies consider personalization essential, and this has several advantages for them:

  • Increased customer satisfaction
  • Increased customer loyalty
  • Increase in sales
  • Resource optimization.

Maximize the value of subscriptions

Many companies that succeed with the subscription model implement free trials, which attract many users. They also use artificial intelligence to personalize the customer experience, as it helps analyze every data and preference to provide a better experience.

The reign of renewal

The monthly payment model has transformed the way businesses and consumers interact. Its accessibility, flexibility and customization have won billions over.

However, there are challenges: you have to know how to adapt, listen to the customer and innovate to offer unique experiences. Retention is the soul of this model, and companies that master it not only have a business in their hands, but also lasting relationships.

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