05

Question 1

What is a subscription model?

Answer 1

Customer pays a recurring price at regular intervals for access to a product. Customer relationship is central to this business model.

Question 2

What is the origin of subscription models?

Answer 2

Pioneered by publishers in the 17th century to finance costly multi-volume productions like encyclopedias. Also linked to the insurance industry (“underwrite”).

Question 3

What are some examples of subscription categories?

Answer 3

• Energy
• Communications
• Mobility
• Insurance
• Health
• Entertainment
• News
• Productivity

Question 4

What are the key patterns of subscription models?

Answer 4

• Fixed goods or services
• Unlimited use of a service
• Limited use plus usage-based charges (Freemium models)
• PaaS models

Question 5

What are the benefits of subscription models for customers?

Answer 5

• Predictable costs
• Low upfront cost
• Costs are spread
• Seller is motivated to listen

Question 6

What are the benefits of subscription models for vendors?

Answer 6

• Stable and predictable revenue
• Cash flow
• Incremental sales
• Customer retention
• Business insights

Question 7

What are the downsides of subscription models for customers?

Answer 7

• Tracking many subscriptions can be costly
• Risk of paying for unused services

Question 8

What are the downsides of subscription models for vendors?

Answer 8

• Cost of change (fish model)
• New, dynamic business model
• Payment failure risk

Question 9

What is the ‘leaky bucket’ revenue model?

Answer 9

Customer churn drains revenue, requiring constant acquisition of new customers to maintain growth.

Question 10

What are key SaaS KPIs?

Answer 10

• LTV/CAC ratio > 3x is good
• Payback period < 12 months
• Churn rate: 10-20%
• Revenue growth per marketing dollar