Question

what is the economy impact of high subscription rate.

Answer 1

Subscription economics idea is based on charging customers continously as long as they are using it. Subscription economics is now widely used by major IT services and entairtainment applications and indeed news magazines.

Subscription price a firm sets is not based on single factor, it is based on various factors like competing firms prices and as well by analyzing a large data on how consumers will like it.

Subsciption rate effect on not attracting new customers but also this strategy effect the existing customers. Thus effecting firms profits and thus economy.

We need to first see what are pricing strategies availaible to decide what happens if prices are high. The four basic models of pricing are flat rate model, tiered pricing model, usage model and per unit or user model.

If you firms are following a flate rate model and rates are set too high well above prior average in that segment than these firms well might loose out existing customers as well as will not add new customers to its base.

If firms following tiered pricing model , different prices for different packages. Here new customers can be attracted by adjusting prices of higher package and keeping same or reducing lower package such that firms will not loose profits.

If firms try to price based on per unit or user model, they can charge higher price as customers base increases but firms ensure it should not increase to a level where new customers face financial constraint to subscribe.

Usage model is very tricky a higher pricing model will always cost dearly and customers may well not use that service or change to other cheaper alternative.

As in total if all subscription rates increases, the effect varies to segment to segment in the market. In certain markets it might cause firms dearly and they might book losses ahead. So, higher rates be charged strategically if not economy will be vastly effected.