Why add a subscription model to your business?
There’s a host of reasons you’d want to add one of the many existing subscription business models to your business. On the whole, subscription businesses:
- Unlock more data which can be used to improve decision making and understanding of their existing customers
- Have more predictable revenue, which can lead to higher valuations
- Build stronger customer relationships
- Can more easily create communities around their products
- Are easier to run and manage due to their integrated business model
- Delight their customers with an incredible experience more frequently
- Find it easier to improve their customer lifetime value
What type of subscription product should you pick?
The landscape of subscription business models is always changing, with new subscription business ideas appearing every other day, but here’s 4 of the main product types you’ll encounter while you’re in the planning phase. Not everything is a subscription box – the world of subscription services is a super diverse field!
Essential Consumables: Products that people use on a regular basis and often can’t do without if they run out, like coffee or toilet paper. These are a hugely popular choice for a potential subscription box business owner.
Systems: Think Nespresso and Gillette razors: proprietary pieces of hardware that only supports certain types of refills — ideally the ones you produce!
Collectibles, Passions, and Hobbies: From baseball card fans to watch collectors, enthusiasts of all persuasions all love the dopamine hit of a regular shipment of their favorite things. These lend themselves particularly well to subscription boxes.
Memberships: Are you an expert in a particular field who wants to share their knowledge, or do you have a concept around which you could rally a community of like-minded people? A membership subscription business might be the model for you.
When is the right time to build your subscription strategy?
For New Businesses
The first answer for a new subscription business owner is: before you start your business.
Choosing a subscription model as your starting point for a new business makes you a subscription-first entrepreneur.
This allows you as an entrepreneur to build recurring revenue into your subscription business from day one, which means your growth will compound — when you get your first customers, they will still be there when you get more customers the next month, and so on. Plus, both your inventory levels and your cash flow will be more predictable. But there’s a deeper reason to start with a subscription model.
A subscription-first business starts with the purpose of servicing customers on an ongoing basis, which aligns the business and customer for the long term instead of speeding through a one-and-done transactional relationship.
As long as a subscription business keeps their customers happy (good products, fair prices, great service), they’ll stick around for a long time. Ultimately, subscription-first businesses will spend less time chasing new customers and more time delighting their existing ones.
However, just because you’ve started with a subscription model doesn’t mean that you can’t integrate transactional commerce too.
Just as Allbirds didn’t limit themselves to being an online shop, subscription companies can also branch out of the subscription market too. For example, while Dollar Shave Club famously started with a subscription model, they now also boost sales by upselling customers with one-time products and stocking their products in physical retail stores.
Many entrepreneurs are busy right now building a future in which their online coffee subscription can grow so much that it can scale into a nationwide coffee chain.
Another entrepreneur is probably building an online meal prep subscription that will one day turn into its own physical restaurant.
Someone else is likely running a pet food ecommerce platform with a subscription business model that will eventually be sold in Costco and other large brick and mortar retailers.
Although their product offerings are different, there’s one thing that’s consistent with all of these subscription based businesses – they simply start with subscriptions and layer everything else on top.
For Existing Businesses
It’s one thing to implement a subscription model when you’re building from the ground up and it can guide your early growth, but what if you’re an existing business?
If your business is already up and running, the best time to add a subscription offering is… right now.
Developing a subscription strategy has obvious benefits like increasing your revenue , growing the value of your business, making your metrics more predictable, and so on.
To build a subscription strategy, you should first develop your model around a product (or line of products) that customers actually need and want on an ongoing basis.
If your product isn’t naturally well suited for subscription, try searching for complimentary products that customers should always have. Subscription boxes are only one option – remember the examples above!
For example, a shoe brand might create a subscription for shoe cleaner, polish, and shoelaces sold with each pair of shoes.
A tennis pro shop, on the other hand, might sell a seasonal racket restringing subscription, while a wine shop might offer virtual tasting sessions for recipients of regular shipments paying a monthly fee.
Selecting a product is the easy part. The real challenge for an existing business is deciding whether you want to simply bolt the subscription onto your existing business OR prioritize subscription and make it the focus of your business model.
Take for example Raw Generation, a juice cleanse brand. They started selling juice cleanses online using a transactional model (one-time purchases), and later added a subscription model.
Now, when online shoppers add a cleanse to their shopping cart, the subscription option is preselected on a quarterly cadence (every 3 months). Shoppers who wish to make a one-time purchase have to explicitly change the order before checking out.
It’s clear that by preselecting subscriptions, Raw Generation prioritizes (and values!) their subscription sales more than their transactional sales, especially with regard to they market it to their potential customers. Plus, their subscription model is integrated into their business model and user experience. But is Raw Generation subscription-first?
Well, customers have a very easy time deselecting the subscription and don’t receive any real compelling reason to subscribe; the subscription offer is simply preselected.
For Raw Generation to become more subscription-first, they should create more explicit marketing for the subscription and design the customer journey around it, and perhaps even remove the option to buy it once – or at least make that option harder to navigate to for potential customers.
Tips on how to set up a subscription service
Before you launch your subscription service, there’s a few things you’ll need to take into account first. Here’s a brief overview:
Get to know your potential customers and their purchasing habits
You need to understand who you’re selling to before you pull the trigger and get everything live. High-intent customers are the best for subscription businesses, but how do you find them? Try conducting research into buyer keywords and interests, as well as traffic sources using Google Analytics.
Understand the competitors in your niche
You may think your idea is the most unique one out there, but there might be another company who just happened to get there first. Competitor research is therefore key.
That being said, there might be one or two major pieces missing from their offering, which you might be able to provide before they get their first. Try using the Similarweb extension to collect some competitor data — or, if you don’t have any competitors in your region, use it to study any website related to your audience.
Develop an idea
Every business starts with an idea. Subscription boxes are among the most popular models of subscription business at the moment, but there’s so many others you can consider too.
Premium content, accessible only to subscribers?
An eCommerce store that only paying members can shop at?
A service based around a proprietary piece of hardware, such as a toothbrush, that provides a better experience than a subscriber’s current solution and delivers refills for replaceable parts on an ongoing basis?
The sky’s the limit!
Think about logistics
It’s one thing to know what you’re trying to sell, it’s another to get it where it needs to go on time. Logistics are key — often, one of the main appeals of a subscription is the guarantee of regularity, especially when customers pay for deliveries of physical products. Good logistics are thus a great way to retain customers.
Delivering meal kits? Freshness, adequate cooling, and impact-resistant packaging should be at the top of your mind. Selling beauty products or toiletries? Hygiene is super important, as is preventing spillage or leakage.
Consider the shape of your packaging too. Can it fit through a letterbox? How heavy is it?
How often is your product shipping? Is it a weekly subscription? A monthly subscription?
What’s the most cost-effective solution to get your products where they need to go?
Should you manage your fulfilment in-house or choose a trusted outsourcing partner?
Financial logistics matter too! Do your chosen payment gateways serve the needs of your target market? Is your billing process seamless? Or are you setting yourself up for problems that’ll keep coming back on a recurring basis?
Come up with a pricing strategy
Some entrepreneurs start by copying the competition. Some assign pricing at random. However, there’s tons of strategies you can use to come up with a more effective pricing strategy, which can increase your conversion and customer retention rates.
Ask yourself if the pricing tiers make sense.
Experiment with annual subscriptions.
Consider a referral bonus that drives the cost down for the referrer over time by providing them with credit.
Assemble a sample box (if relevant to your model)
Think you’re ready to start a subscription box now?
Once you’ve got all the pieces together, you need to see it all in one place. It’s time to create a prototype box. Assemble all your products, your packaging, and everything else a target customer is going to expect based on your offer.
Does it all fit together nicely?
Is the packaging the right size?
Are there any human touches, such as a handwritten thank you note inside with a different message for new or existing subscribers?
Could you include something else?
Develop a marketing plan
No business can launch without a solid marketing plan. Whatever your budget, there’s always a way for you to spread the word and optimize your customer acquisition efforts.
On the most basic level, you could start by telling your family and friends.
Perhaps you could come up with a unique hashtag and start promoting via social media platforms – maybe with the help of some influencers.
See if you can get an existing customer (or several) to post some pictures, or a video explaining why they love your product.
Invest some money into paid advertising, or get down and dirty, join some online communities, and spread the word yourself. The choice is up to you!
Conduct some post-launch analysis
You’ve launched your product! Congratulations!
Give it a few weeks now, and see how things are going.
What marketing channels are attracting the most potential customers or creating the most conversions?
What are actual customers saying about your box? Are you retaining customers, or are they dropping off?
Are all your operations running smoothly?
Anything needs to be tweaked?
Are you soliciting customer feedback?
What’s your Customer Acquisition Cost (CAC)?
The longer you keep things static, the more they become set in stone. Move nimbly, and don’t be afraid to change things based on the data you collect from your launch period.
If you’re getting started as an entrepreneur… Consider putting a subscription strategy at the core of your business from the very beginning, and grow thanks to loyal customers who aren’t afraid to commit long term, then expand from there.
If you’re already running an existing business… Consider building a subscription strategy yesterday. But be careful to not just bolt it on. It’s important to integrate and make subscription your first priority in order to be successful. If your subscription offering is simply an option, it may never reach its full potential.
In any case… it’s infinitely easier to run a subscription business with the help of a purpose-built, all-in-one platform like Subbly – try us free for 2 weeks today and see for yourself!