planning a subscription based business model

Moving to a Subscription Based Business Model

Subscription based businesses are on the rise. We live in an age where buying online is the norm, and almost everyone has a subscription to something, whether it’s for movies, music, or canned fish (yes, that’s a thing). The average American pays for 12 entertainment-related subscriptions every month. The average millennial pays for 17! The market for subscription services is expanding all the time, so it might be a good idea to find ways to start incorporating it into your own business.

If you already have an e-commerce business, moving to a subscription-based model may be an excellent strategy to generate more revenue. Utilizing the customers you already have is highly efficient, and a subscription model can help you do that. Buyers will automatically receive installments (usually monthly) of your products, allowing you to receive a recurring revenue.

The Purpose of Subscriptions

The subscription business model creates a mutually beneficial relationship between the buyer and the business. Convenience plays a big part in why the subscription model works so well. Some subscriptions offer the buyer the convenience of not having to frequently buy items they would regularly buy anyway (such as deodorant, beard oil, or even toilet paper). These are typically in the subscription box category and are automatically shipped to customers’ doors on a pre-determined basis. Other models, such as streaming services, give the consumer access to an array of digital “products” to use as long as they’re subscribed (such as Netflix, Spotify, and the Adobe suite).

From the business’s perspective, the subscription model is helpful because rather than trying to convince a buyer to keep buying your products, you only need to convince them once. After the initial purchase, the “orders” will be automatic. This makes for more stable revenue.

Benefits of the Subscription Business Model

One of the benefits of the subscription model is accelerated revenue. The growth will be exponential as you gain more subscribers contributing to the recurring revenue. Revenue is more easily predictable with the subscription model. When you can predict your revenue, you can scale your business more efficiently. Predictability allows you to see the growth rate of your business. Knowing that will help you to make wise decisions when adjusting and developing your business. The subscription model also offers business agility. When customers subscribe to a service, they become loyal customers you will have over a long period of time. Having these types of customers is helpful when gathering data. You can track their behavior and learn from them. This will help you figure out what your customers want and how to implement it into your business to offer the best quality you can. The subscription box model specifically also keeps you at the top of your customers’ minds. When they receive their box, they think about your business, and it might make them want to go to your website (or brick-and-mortar store if you have one) and buy more of your products.

Implementing a Subscription Model

Make It Easy for Subscribers

In order to implement the subscription model, you need to give your customers a variety of ways to “reach” you. It would be best if you allowed your customers to buy from you by any channel they prefer. This helps you to be more easily accessible. If they are a millennial or a Gen Z-er and want to pay over an app, they should have that option. If they are a baby boomer and would rather purchase and pay over the telephone, it might be a good idea to have that option too. In order to cater to as many demographics as possible, you had better make it easy for as many demographics as possible to purchase and subscribe (age and the technology gap being the primary demographic barrier in this case).

Consumers like an easy shopping experience. That’s why subscription models work so well in the first place. So, if your customer is struggling to sign up for a subscription, it defeats the purpose of the subscription. They should be able to buy on an app, on a website, via phone call—whatever is easiest for them. The more channels you provide, the more consumers you will be able to attract to your business.

Develop a Value Proposition

Your subscription offer must have a value proposition. Why would a consumer want to subscribe? It’s true that a big part of the reason for subscribing is convenience, but that’s not the case for every subscription. Just joining a club to get $1 or $2 off a product every month is not convincing enough for most consumers. The customer has to have an emotional or philosophical reason to subscribe to your product. It must be valuable to them—more valuable than the $35 it might cost them. You must not only have their interest but their trust.

Communicate

It’s essential to reach out to your customers in the early days of your subscription model. Call or email your subscribers. Ask for feedback, and listen to their input. This will let you know what you’re doing right, what you’re doing wrong, and foster loyalty with those customers.

Ensure Quality to Foster Loyalty

Instead of focusing on a product, focus on making your brand service-oriented. Why should your customers subscribe to your product? What makes you unique? You sell a subscription box full of luxury cosmetics. Hundreds of other brands as also sell products similar to yours. So why should consumers pick your subscription box? Because you’re not only selling excellent products. Your are selling quality customer service, a comfortable online shopping experience, unboxing video-worthy packaging, reliable shipping, etc.—you’re selling your brand as a service! Doing business with your company should be a pleasant experience for your customers. This will help you to stand out above the rest.

You have to make sure that the quality of the products in your box or subscription is kept at the same high quality you started with (or better). When subscribing, customers are essentially buying one larger item in small pieces. You cannot afford to let down on what you are offering your customers. Be creative, and make the experience memorable. The goal is to instill loyalty and a relationship with your customers that will last forever. It’s important that your quality is the same or improving to keep your brand relevant.

Their subscription represents customer loyalty to your brand, and you should be loyal back. They trust you. As soon as you let them down with inferior products or service, they will start to lose trust in your brand. When that trust is gone, so is the customer and their subscription to your product. Maintaining quality is critical. Your customers have to feel like the money they are putting towards your subscription every month is still worth it.

Optimize Options

When pricing your products, give consumers options. Try not to have just one subscription option. Instead, aim to develop a few different tiers with different prices. Consumers will choose what works best for them, making customers more likely to subscribe.

For certain items, people might not automatically want to subscribe (for example, a particular type of cosmetic they’ve never tried before). Aim to be understanding with your customers. Offer discounts off the first box, a satisfaction guarantee, or other incentives to let them know that you care about them, not just their wallets.

Once you have decided to go in the subscription model direction, it’s time to decide on the nitty-gritty details of getting your products to your customers’ doors (assuming your products are physical and not streaming-based). To help you with this, take a look at these steps to starting your own subscription box business.

Smart Parcel 24/7 is here to help you through the tedious process of product fulfillment and shipping. Rather than rely on just one vendor, we will use our hybrid shipping network to find you the best possible shipping price. Simply send us your products, and we will ensure the rest—fulfillment, shipment, and on-time delivery right to your customers’ doorstep.

Contact one of our experienced team members today. ​