When you think of subscription services, Amazon Prime, Netflix, and Spotify may come to mind immediately, but this model is no longer unique or unique. Every company appears to be jumping on the subscription bandwagon, whether HP ink, Harry’s razors, Pret A Manger coffee or Bloom & Wildflowers. Volvo has also recently launched its new Care By Volvo service, allowing customers to subscribe to a vehicle.
There is no surprise that the subscription model is being adopted by famous names and helping smaller firms get recognised faster than previously, with the UK subscription sector reaching £323 million annually and increasing exponentially. We live in a world where facility reigns supreme, and the subscription model – when executed correctly – can be a win-win for both customers and businesses.
While the subscription model is more appealing to consumers because it has a lower price point, the benefits to company owners are even more significant. Subscriptions not only ensure consistent revenue and access to massive amounts of marketing data, but they also have the potential to turn one-time consumers into loyal clients.
How can small businesses profit from this latest corporate trend?
Detecting the possibility of a subscription
Many early subscription services revolve around the experience rather than the convenience, and this strategy was nothing short of brilliant at the time. Up and coming enterprises, such as chocolate or spirit manufacturers, would send out free sample products as loss leads to subscription organisations hoping that their clients would be captivated by the development and place an order.
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While these “experience” models still exist, today’s actual success centres on single-branded products or services that meet a specific need or want. The key for any company, regardless of industry, is to determine whether their product or service is something their customers want or need regularly. If they only wish to the product once or want one-time access to a service, very few people will sign up for a subscription model.
Get intimately familiar with your market and comprehend the demand for your product and the lifetime value of your customer. Investigate your core demographic in depth. What drives them to buy, what drives them to stay, what inspires them to return, and most importantly, what motivates them to leave? You can’t identify the subscription opportunity and implement an effective customer retention strategy unless you first understand their motivations.
Introducing a subscription model
Once you’ve identified the opportunity, you can base your service on one of several subscription models. As an example:
They are curate – sending out a ‘luxury’ item, or a selection of curated articles, regularly to customers to encourage them to try something new. Replenishment is the automatic delivery of essential items to a customer, often at a discount. Allowing subscribers access to membership or service that offers curated perks. The best subscription model for your product or service will entirely depend on it. However, regardless of which path you take, some key considerations to keep in mind when launching a subscription model.
Starting a subscription model can be costly in terms of cash flow. Your customer acquisition costs will be high for what is typically a low-cost product, so it will take time to break even. Many businesses launch their new subscription service with an introductory offer to encourage people to sign up, with costs “front-loaded.” However, you must develop a pricing strategy that your company can afford and that will not put a strain on your cash flow. If you give clients a free one-month trial, for example, you face the risk of them cancelling before it ends. Instead, consider giving them a three-month free trial if they sign up for a six-month subscription right away. Alternatively, to appeal to a broader population, try giving various pricing options.
The debut of your new item, like any other business, requires marketing. While consistent branding, consumer promotions, and establishing a social media presence are all critical, the work doesn’t end there. Your new customer has gone to the trouble of purchasing your goods and deserves to be dazzled, so simply placing it in a jiffy bag with a compliments slip is no longer acceptable when it arrives on their doorstep. Because your packaging is an essential element of the customer experience, it should reflect the quality of your organisation and the product within. It should express your thanks for your consumers’ business and mirror the image you wish to project.
Finally, knowing your client churn rate is critical.
While it is essential to expand your customer base, you must also maintain a high level of customer retention. Although this is a time-consuming procedure, lowering your churn rate is the most critical factor in the success of a subscription business. Loyalty will reward in a big way. Offer a discount code every six months, for example, to keep repeat customers feeling valued. Customising these offers will help to increase customer loyalty and keep your subscriber base engaged for longer. BGB (buyer get buyer) schemes can also be encouraged by paying existing subscribers to promote items or services to prospective consumers for a promotional reward. Customers have high expectations for subscription services, and if they feel a service or product falls short, they will swiftly cancel or transfer to a rival.
When you pick the right subscription model
It may generate unequalled brand loyalty and open up new and exciting revenue streams for a firm, but don’t be tricked into thinking it’s the answer to every problem. If you can’t offer a one-of-a-kind product or a customised experience, you risk becoming repetitive or uninteresting, limiting the possibilities of your current business model.