Entrepreneurs browsing the internet will come across two questions: “What is a SaaS subscription model?” and “What is the difference between SaaS and a subscription website?”
If you’re looking to start a new business, and you’re either a great project manager or you have some serious coding skills, it’ll be very helpful to know the difference between the two so you can better plan your site and your marketing strategy.
What Is A SaaS Subscription Model?
As a business model, SaaS (Software as a Service) is an arrangement between the company and the consumer who pays for your software application on a subscription basis.
Examples of SaaS products are Microsoft 365, Adobe Creative Cloud, and Salesforce. Each of these software offerings is provided as a subscription service, so the firms offering them collect an ongoing revenue stream from users.
Now that we’ve answered the headline question of “What is a SaaS subscription model?” some of you might need clarification between SaaS and the usual subscription service model.
What Is (The) Difference Between Saas And Subscription Model?
The difference between SaaS and the subscription model is the latter applies to a broader scope of products and services for a monthly fee.
SaaS’ key differentiator is focusing on a specific subset of the subscription model, only delivering access to software online. A subscription model can encompass a broader range of online and offline products, such as video content, website access, subscription boxes, etc.
What Are The Benefits of the SaaS Subscription Model?
The SaaS subscription models have several significant benefits for providers and users:
Cost Predictability And Accessibility
In the past, when purchasing software, consumers had to pay a hefty software licensing fee. This high price point would drive away potential new clients. But now, with a smaller monthly payment, more clients can access the product, and developers have a predictable income.
With a regular monthly income to the company, businesses can now employ programmers to push the boundaries of their products.
The company can also manage software maintenance, updates, and security patches, ensuring users have access to the latest features and a secure environment without the hassle of manual updates.
Scalability For Clients
With the SaaS model, providers can offer their clients real-time product scalability monthly. This allows business owners to adjust their SaaS package depending on usage level. Businesses can offer startups a lower cost option but then can charge more for more data or features as the startup grows. This ultimately increases profitability for the provider.
Lowering Costs Associated With Software And Hardware
In the past, for companies to access a shared digital storage device required buying servers, employing staff to maintain them, and ensuring that a security specialist secured these systems.
However, SaaSs provide secure cloud storage solutions and are contractually responsible for their security.
While having an IT security specialist on standby is essential, you can now downgrade the need for a day-to-day contract.
While it’s not guaranteed that anybody will buy your software, if you do have a hit, you get users into the habit of using your software and therefore increase stickiness. If a customer already has a solution, they’re typically not thinking of other providers unless there is an issue with usability, or not having the right features.
And, if you can make your software a key requirement for achieving your customer’s goals, you significantly increase switching costs and lifetime customer value.
Read next: How Do Subscription Sites Work?