Financial Viability of Subscription Models: Consumer and Business Perspective

Abstract

This paper analyzes the financial viability of subscription based pricing strategy within the household services sector, especially to companies like Urban Company. Specifically, this paper will examine consumer preferences between subscription-based and pay per-use billing schemes and will explore whether firms in this industry can switch to subscription-based billing.Primary research was employed in the investigation, where structured questionnaires were administered on 241 respondents. Pivot analysis and chi-square tests were the tools used to determine relationships between variables (age, household type, annual spending, and frequency of service use). Based on the findings, the pay-per-use model remains the dominant model, as it is more flexible and has a higher commitment among customers. However, there seems to be some possibility of subscription plans to some groups, particularly, those who consume services regularly and who can afford to pay higher. The other criterion that is noted is pricing level with the medium range the most suitable. Further on, the study indicates that behavioural parameters, including the rate of usage and the annual cost, are crucial in shaping the propensity to subscribe but the demographic parameters, including sex, do not have much influence. Finally, the results show that subscription strategies may be effectively applied under the condition of selection. Flexible subscription pricing coupled with value based pricing is recommended.