Subscription Model Profitability

Requirements Clarification & Assessment

1. Objective: Determine the retention rate necessary for a subscription model to outperform the current non-subscription model in terms of revenue.

2. Current Model Details:

   • Product Price: $29
   • Profit Margin: 50%
   • Profit per Unit: $29 * 50$14.50

3. Proposed Subscription Model:

   • Discount: 20% off the regular price
   • Subscription Price: $29 - ($29 * 20%) = $23.20
   • Profit per Subscription Unit: $23.20 -$14.50 = $8.70

4. Key Metric: Subscription retention rate required to exceed current model revenue.

5. Assumptions:

   • The cost per unit remains constant at $14.50.
   • The customer base and market demand remain stable.
   • All other operational costs are negligible or constant across models.