How Subscriptions May Help Companies Weather a Recession
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.
How may individuals gain exposure to companies in the subscription economy?
The Found Subscription Economy ETF (SUBS)
The Fount Subscription Economy ETF (SUBS) seeks to provide investment results that, before fees
and expenses, generally correspond to the total return performance of the Fount Subscription
Economy Index. The Index was designed to measure the performance of companies engaged in the business of providing subscription services, i.e., companies that sell products or services for recurring subscription revenue.
SUBS may present an attractive vehicle for individuals to gain exposure to companies offering subscription-based pricing models.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 855-425-7426 or visit our website at www.fountetfs.com. Read the prospectus or summary prospectus carefully before investing.
Exchange Traded Concepts, LLC. serves as the investment advisor to the Funds. The Funds are distributed by SEI Investments Distribution Co., (SIDCO) 1 Freedom Valley Drive, Oaks, PA 19456. SIDCO is not affiliated with Exchange Traded Concepts, LLC. or Fount Investment Co. Ltd.
Risk Disclosure:
Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors, as well as increased volatility and lower trading volume.
The Funds’ concentration in an industry or sector can increase the impact of, and potential losses associated with, the risks from investing in those industries/sectors. For MTVR, the Fund may be concentrated in the entertainment and interactive media & services industries. The entertainment industry is highly competitive and relies on consumer spending and the availability of disposable income for success, which may cause the prices of the securities of companies to fluctuate widely. The prices of the securities of companies in the interactive media & services industry are closely tied to the overall economy's performance. Changes in general economic growth, consumer confidence, and consumer spending may affect them. MTVR may also be subject to the specific risks associated with metaverse companies. These risks include but are not limited to small or limited markets, changes in business cycles, world economic growth, technological progress, rapid obsolescence, and government regulation. Smaller, start-up companies tend to be more volatile than securities of companies that do not rely heavily on technology. Metaverse Companies may rely on a combination of patents, copyrights, trademarks, and trade secret laws to establish and protect their proprietary rights. There can be no assurance that these steps will be adequate to prevent the misappropriation of their technology or that competitors will not develop technologies that are equivalent or superior to such companies’ technology.
For SUBS, the Fund may be concentrated in the software industry. Technological changes, pricing, retaining skilled employees, changes in demand, research & development, and product obsolescence can affect the profitability of software companies causing fluctuations in the market price of company securities.
Both Funds are subject to communication services sector risk, which can involve the same risks as being concentrated in the software industry. Network security breaches, potential proprietary or consumer information theft, or service disruption can negatively affect companies’ stock prices.
The Funds are non-diversified. The Funds are new and have limited operating histories for investors to evaluate. New and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. In addition to the normal risks associated with investing, investments in smaller companies typically exhibit higher volatility.
