Subscription

Subscription services, such as Spotify Premium or Amazon Prime, are a relatively new business model. In this case, the service supplier (i.e. the company) and the customer enter into a contract in which the customer agrees to make recurring payments to the supplier (weekly, monthly, quarterly, annually, etc.) in exchange for recurring benefits and services.

This business model is becoming increasingly popular, particularly in the e-commerce sector. This is because it enables businesses to generate a consistent, recurring, and predictable income by retaining existing customers rather than incurring marketing costs to attract new ones after each sale.

When you subscribe to a Spotify Premium subscription plan, for example, you are purchasing the benefit of listening to ad-free music. In this case, the ads are a type of customer pain point that Spotify intentionally creates in order to persuade its FREE users to upgrade to the paid version.