Subscriptions vs Memberships: Understanding the Difference

Find out the difference to keep your customers hooked and your revenue flowing

A steady and predictable income is every business’s dream, right? That’s why subscriptions and memberships have gained immense popularity, as they provide a consistent source of recurring revenue.

And we all know how obsessed we are with subscription boxes – one in four Brits can’t get enough of them!

But what’s the difference? While subscriptions and memberships may seem interchangeable at first glance, it’s easy to see why people often mistake one for the other. For businesses, it’s essential to recognise the key differences between the two models.

What is a subscription?

Essentially, a subscription is an arrangement where a customer pays a recurring fee to access a product or service on an ongoing basis. This could be anything from Netflix to receiving a monthly package of your favourite haircare.

Additionally, an example of a subscription service could be to provide customers with regular delivery of a physical product. 

What is a membership?

Memberships, on the other hand, are slightly different. A membership is an arrangement where a customer joins an organisation or program to gain access to certain benefits.

A type of membership is a frequent buyer programme which rewards customers for making regular purchases. This could be offering discounts or incentives after a certain amount of purchases.

Why you need to know the difference

The fundamental difference between subscriptions and memberships is the nature of the ongoing relationship between the customer and the business. A membership has a greater sense of belonging, whereas a subscription focuses on the financial transaction in place.

Understanding the difference between subscriptions and memberships can be important for businesses looking to build customer loyalty and generate recurring revenue. 

Depending on the type of business, one approach may be more effective than the other. For example, a company that sells a physical product may find a subscription-based model is more effective. Contrarily, businesses that provide different services may find a membership program more appealing to customers.

In conclusion

Although they may seem similar from the offset, businesses should consider these distinctions to build a loyal customer base and generate recurring revenue. By choosing the suited model and offering personalised experiences, companies can keep their customers happy and engaged for the long haul!