Will the Federal Reserve’s policy of raising interest rates to combat inflation push the economy into a recession?  We do not pretend to know the answer.  However, recession fears are valid.  Instituting subscription pricing plans may help companies weather a recession. How?

Subscription-based pricing platforms may help companies weather a recession in the following ways:

Help Build Predictable Monthly Revenue

Subscriptions may provide companies with a steady, predictable revenue stream during a recession.  This may come in handy as consumers often reduce spending during difficult economic times. 

Companies that offer subscriptions may be able to better forecast revenues and expenses and pinpoint growth opportunities. 

Subscription pricing plans may be structured different ways, each with its advantages.  For example, a pay-as-you-go model may require monthly payments, which provide companies with a recurring revenue stream.  Conversely, some plans may be structured so that the entire subscription amount must be paid up-front.  This provides a larger immediate surge of revenue which may be helpful during a downturn.

Attract Price-Conscious Consumers

Consumers often look for ways to save money, especially during a recession. Subscriptions may offer them such an option.  Often, subscription-based pricing plans provide some type of discount as part of their offering.  Some examples include:

• Outright lower pricing on items purchased in a subscription program
• Free shipping
• Subscribe and save – Offer a discount on replenishable items purchased regularly
• One-time discount to entice subscribers
• Buy one, get one free

Give Customers and Businesses Flexibility

Consumers want flexibility in managing their subscription plans, including the option to cancel their subscription at any time without a penalty.  Additionally, customers may want or need to pause payments when facing a difficult financial situation. This desire for flexibility becomes more acute during economic downturns.  Extending this flexibility may help to retain customers through a downturn. 

Current customers are often your best customers.  It is more cost-effective to retain a customer than to prospect for a new one.  Offering them flexibility during a rough patch may help to build goodwill and extend the life of the business relationship.

Adapting to the Economic Environment

Companies often have no control over external factors, such as the economic environment.  However, companies can control how they adapt and respond to changing financial conditions. 

Subscription-based pricing models may help companies weather a recession.