how to sell subscriptions

Our world is changing. So is the way we do business and consume products and services. Customers value convenience and are increasingly seeking subscription services to meet them where they are.

Previously, subscription services have been an afterthought – something ‘tacked on’ to the online store after the main business has already been established. However, subscription-first models and dedicated subscription stores are growing in popularity.

Many businesses are adopting subscription services and quickly realizing the benefits: they generate recurring revenue and bring in predictable cash flow while increasing the value of the business.

How to sell subscriptions

Our world is changing. So is the way we do business and consume products and services. Customers value convenience and are increasingly seeking subscription services to meet them where they are.

Previously, subscription services have been an afterthought – something ‘tacked on’ to the online store after the main business has already been established. However, subscription-first models and dedicated subscription stores are growing in popularity.

Many businesses are adopting subscription services and quickly realizing the benefits: they generate recurring revenue and bring in predictable cash flow while increasing the value of the business.

What you can sell as subscriptions?

While the possibilities for subscription products and services are virtually limitless, they usually fall into four main categories:

  1. Essential consumables: Products that people can’t live without (or don’t want to). Examples include coffee subscriptions or toilet paper.
  2. Systems: Certain proprietary products that require very specific refills. Gillette razors, for instance, require Gillette replacement heads.
  3. Collectibles, passions and hobbies: – These products fall within niche consumer markets or “fandoms”. Movie buffs, for example, might enjoy having the latest releases delivered to their door.
  4. Memberships, services, and access – These types of subscription business usually sell a lifestyle, a time-saving service, or paid access to a ‘members only’ area, such as a content library, instructional videos, or even an exclusive shop.

Benefits of selling subscriptions

The subscription ecommerce market is booming and offers tangible benefits for businesses and customers alike, whether you’re selling subscriptions to physical products or are trying to figure out how to start selling an online membership.

Here are a few of the top reasons you should consider adding subscriptions to your new online store or existing website:

More predictable revenue

A traditional business model requires constant effort in attracting, acquiring and converting customers. This results in fluctuating revenue which makes revenue forecasting difficult.

A subscription-based business model involves customers making payments to you on a predetermined basis. As these agreements are often long-term and ongoing, forecasting monthly (or even quarterly or yearly) income is much easier.

Easier inventory management

As with predictable revenue, having visibility into your customer orders means it’s also easier to forecast required inventory.

While other businesses are forced to make an educated guess on product demand, subscription business owners have the upper hand.

More consistent demand with less fluctuation in order volume makes it easier to forecast inventory requirements.

Better customer retention

Customer acquisition is one of the biggest challenges facing one-time purchase-only businesses. It’s a huge advantage of subscription models to be able to lock in repeat businesses and guarantee long-term customer retention.

A subscription business model naturally entails your customers ‘buying in’ to your product or service, which means they require less ongoing marketing. That being said, regular, personalized communication alongside monthly deliveries definitely helps foster strong customer relationships. On the whole, subscription boxes and services foster customer loyalty, unlike one-time purchases where customers are more likely to try alternatives.

How to start selling subscriptions online

With the many evident benefits to subscription-based businesses, you’re likely considering adding a subscription service to your online store. Here’s how to start selling subscription products online:

Decide what kind of subscription you want to sell

The first step in adding a subscription service to your business is deciding what kind of subscription you want to sell. As mentioned earlier, the possibilities are virtually limitless, which can be a bit overwhelming.

If you’re already a business owner, consider what kind of subscription service would be complementary to your online store. Your subscription service could even involve your existing products or services. For example, you might specialize in fun stationery and could offer a monthly subscription box for arts and craft lovers.

If you’re starting a new subscription business, consider choosing a niche you’re passionate about. You’re going to be spending a lot of time thinking about it, after all, and will definitely find it easier to sell subscriptions through your online business if it’s a niche you’re interested in.

Source your products

Once you’ve identified your subscription niche and products, you need to decide how you’ll source your products and package them. Are you selling handmade goodies, manufactured from scratch, or are you purchasing them from a wholesale supplier?

While the quality of your product is important, so is the way it’s presented. Your product presentation links directly with the customer experience, and the unboxing experience is one of the most crucial parts. If you want to guarantee return customers and recurring payments, it’s important to consider how your item is sent and received.

Choose a subscription platform wisely

Having the right subscription platform to support your business is crucial to ensuring your success. When deciding which platform is the right fit for your subscription business, consider those which offer more advanced subscription capabilities, like customisable billing and shipping cycles, the ability to take online payments through a seamless payment gateway, customer free trial periods and loyalty programs, as well as one that integrates with your existing website.

Look for a platform that offers upsell or cross-sell funnel capabilities. These are a great way of maximizing customer lifetime value, no matter where the customer is in the buying process.

While you may not use every feature initially, you almost certainly will as your subscription business and online store grow. Having the flexibility to access the features you need, exactly when you need them will underpin the long-term success of your subscription business.

Price your subscription right

Subscription box prices vary based on the product, niche and industry. There are, however, a few factors to help you determine the right sales price for your subscription offering:

  1. Product purchase price: the average cost of the items comprising your subscription box
  2. Packaging and box materials: the cost of all materials associated with the presentation of your subscription products
  3. Shipping, delivery and fulfillment costs: you may choose to charge a separate fee for shipping or factor it into the price of your box
  4. Customer acquisition and marketing: how much it costs you, on average, to acquire a new customer
  5. Industry average: how the price of your subscription box or service compares to other similar industry offerings.

Create a marketing plan

While all businesses should employ some form of marketing strategy, the marketing plan used by a subscription business will differ dramatically from one-time product-only businesses. These ‘traditional’ businesses use marketing to acquire customers and convert interest into individual sales, which is usually their final goal. While subscription-based businesses certainly leverage marketing for customer acquisition, there is an equal, if not greater, emphasis on marketing for customer retention.

Here are a few marketing methods that can encourage both new and existing customers to increase their spend… and your revenue in turn.

  1. Encouraging upgrades: With effective marketing, you can encourage existing customers to upgrade their service. This is particularly relevant if you offer a tiered subscription model with a more premium product or different subscription options.
  2. Pushing loyalty programs: If you want to encourage your customers to continue purchasing from you, it’s important to reward them. You might consider awarding points or credit for each consecutive month they retain their subscription plans which they can use to unlock new features or trade for a discount on their online payments.
  3. Giving free samples: If you offer multiple subscription boxes or services, including a small sample of a product found in a different or higher tier might encourage your customer to subscribe to that plan instead of (or even better, additionally to) their current one.

Invest in email marketing

Email remains one of the most efficient customer acquisition and retention methods. The average ROI of an email marketing campaign is around $38. It’s fast, effective, and easy to deliver different messages to your various audience segments.

Track important subscription metrics

In order to build and run a profitable subscription business and online store, it’s important to monitor key subscription metrics. These will allow you to identify and improve underperforming business areas. Some of the metrics you might consider tracking include:

Monthly Recurring Revenue (MRR): How much revenue you can expect each month. On a basic level, this is calculated by taking the average revenue you earn per subscriber, per month, and multiplying it by your total number of subscribers. However, for a fully accurate figure, you will also need to take into account revenue fluctuations from upgrades, downgrades, churn, and discounts.

Annual Recurring Revenue (ARR): ARR is used for long-term revenue forecasting. The easiest way to do this is to multiply your average monthly revenue per subscriber by the total number of subscribers, and multiply again by 12.

Average Revenue Per User (ARPU): This metric is helpful for subscription businesses that offer multiple tiers, as analyzing it by tier can show you which plans consume the most resources while lagging behind in value contribution. To find your ARPU, divide your MRR by the total number of subscribers. This is a useful metric to see how you compare to competitors, as you can estimate other companies’ ARPU from public data and see where you stack up.

Customer Lifetime Value (CLV): The CLV is the average worth of a customer over the period of their relationship with the business. Tracking this metric is a crucial part of any subscription business model – in summary, the higher this number, the more likely it is that your subscribers are truly perceiving the value of your offer.

How to get more subscribers

If you’ve worked through the steps above, you’re already on your way to acquiring subscribers and building a successful subscription business. Now, let’s kick it up a notch and find out how to really increase your paid subscriber count.

  1. Offer customers a deal they can’t refuse. While subscription companies offer potential subscribers joining discounts or “first box free” incentives, don’t be afraid to experiment with promotions that are outside of the box. If you’d rather not lower your price, consider throwing in something extra; a free sample, exclusive content, something that makes them feel like they’re getting more for their money.
  2. Build your social profiles. With most of us spending our lives on social media, it’s a worthwhile time investment to establish a strong social media presence and meet your customers where they are. When a business is visible and accessible, new customers are more likely to trust and engage with your brand. Plus, it gives you an automatic platform for people to spread the word through hashtags, act as brand ambassadors through unboxing videos, and engage with competitions and giveaways.
  3. Differentiate your product. What’s your subscription product or service’s Unique Selling Proposition (USP)? Why should customers choose your subscription business over another? If you can’t answer these questions, it’s time to hone in on the ways you can make your product stand out from the crowd.

Real life examples of subscription business models in action

GoPro

You’ll likely be familiar with their adventure cameras and equipment, but did you know GoPro has also added a subscription-based service to their business model? The GoPro app gives users everything they need to create short, memorable videos to share with friends and family. They’ve added GoPro Plus, a cloud-based storage system that is designed to integrate seamlessly with the subscription app. They’ve priced their offering at a low flat monthly rate, making it an attractive add-on for all types of customers.

Breo Box

Breo Box is the ultimate subscription box for people who love technology and new gadgets. Every three months, Breo Box subscribers receive a box containing five to eight name-brand tech gadgets with a combined value of more than $300. At just $159 per box, or just under $145 per box when purchased annually, this subscription box offers great value for electronics enthusiasts of all ages.

ClassPass

The self-proclaimed “one app for all things fitness, wellness & beauty”, ClassPass gives users access to over 30,000 fitness studios around the world. Members receive a certain amount of credits each month depending on their membership plan. They can then use these credits to book classes at participating gyms and studios without being locked into just one establishment.

Start selling subscriptions with Subbly

At Subbly, we’re much more than a subscription-first ecommerce platform. Our intuitive, easy-to-use platform means you can start selling in minutes, regardless of your level of expertise. We’re your business growth partner and we’re obsessed with your success. That’s why Subbly has been developed in close collaboration with industry experts.

Subbly allows you to track and manage your paid advertising, SEO and referral marketing from one portal. Collect customer data and enable your customers to customize their subscriptions, providing a tailored customer experience. You can track your social media conversions, create discount codes for individual campaigns, and take advantage of our built-in upsell tools to effortlessly increase your average order value. 

Subscription services present a great opportunity to savvy business owners and it’s time to take advantage. At Subbly, we can help you get started with a 14-day free trial. Reach out today and you can sell subscriptions online within minutes!

By Zaki Gulamani
Сontent creator at Subbly