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Subscription Business: From Beginning to End

by Jonathan Kennedy November 03, 2017

A guest article written by Paul RajotteGrowth Specialist at Bold Commerce, avid beard grower, and President of the Mikey "Two Scoops" Fan Club.

It’s definitely not a new business model, but one thing is for sure: subscriptions as a business don’t show any signs of slowing down. This chart from Hitwise shows the amount of traffic the top subscription based companies are still generating on a monthly basis.

(website visitors from April 2017)

So if you’re on the fence about starting a subscription based business, or are thinking of offering subscriptions as a part of your current business plan, it’s still a great idea to jump on if you think it’s a good fit for your business.

Are subscriptions right for your business?

Do you have the right products to offer a subscription to your customers? How do you know if they’ll want to opt-in to a subscription service? These questions will most likely pop into your head if you’re thinking about offering subscriptions, and a good place to start looking for answers is with this infographic about how to do start doing the research.

Most subscription businesses fill a need for their customers by offering them a product that they need fulfilled on a monthly (or other applicable time frame) basis. Now, if you don’t think your products are something that customers might want to receive as a subscription, then take a look at this list of more unusual subscription services to get some ideas.

(Vinyl Me Please - LPs, Art Prints & Cocktail Recipes)

I think any product can be offered on subscription, it’s just a matter of finding the right audience and making sure you ace your marketing for that audience, like Birchbox. They provided samples of the best brands in cosmetics to women aged 25-45 that liked to spend on certain brands, and then killed it with their marketing and branding.

Why you should offer subscriptions

Like I mentioned above, subscription services show no signs of slowing down in 2018, and on top of that, there are some other awesome benefits as well.

Having monthly recurring revenue is good for your business, it helps with company valuation, calculating your customer lifetime value (LTV) and helps improve revenue forecasting.

Need more convincing?

Here is some data on sites that are built using flash sales vs. subscription based offers.

  • Percentage of customers that sign up for emails
    • Subscriptions - 92.82%
    • Flash Sales - 61.19%
  • Average orders per customer over 12 months
    • Subscriptions - 7.68
    • Flash Sales - 1.41
  • Customers who don’t purchase again within 6 months
    • Subscriptions - 72%
    • Flash Sales - 93.8%

Check out even more awesome data from this comparison in the infographic below from Retention Science.

Even though the path to your first sale might take a little longer with subscriptions, the thinking here is that subscriptions provide a need or solution for your customers over the long term, while stores that run flash sales feed off the impulse purchase. Which is fine for spikes in sales, but won’t help with recurring business, and makes it more difficult to forecast for the future.

Another good reason to start is the sheer volume of apps and businesses that create products and features to help you succeed. If you’re reading this blog (thanks btw) odds are you have a business on Shopify, or are thinking of starting one. Bold Commerce (disclosure, they pay me to work for them) offers a great solution for your subscription business with the aptly titled, Bold Subscriptions app. The app is constantly being updated with new features to help you sell more subscriptions and better service your loyal customers.

Some of most recent updates include the subscription Buy Button which lets you create buy or subscribe buttons anywhere within your content. Places like emails, your blog, or even YouTube videos. Another recent update was adding dynamic discounts (offering discounted prices on your subscriptions to get your customers to convert before paying the regular monthly price) and convertible subscriptions, which allow customers to change products they subscribe to another product after the first month.

Okay… shameless product plug over.

This sounds great! I’m in for subscriptions… But how do I market them?

Great question! And there are many different ways to advertise your subscription service, with a little bit of research you can easily find what works for you. But here are some ideas that are fairly popular in the industry.

Influencers

Influencers are getting a little bit of a bad rap these days but don’t let that deter you from at least exploring this possibility. If you’re not sure how to approach this, Gary Vaynerchuk explains the best way to reach out to influencers on his personal blog.

If you do your research properly and really put in the effort, you will be able to find micro-influencers that will be able to help you skyrocket your brand for pennies on the dollar, or sometimes even just free swag.

There’s also this cold-email technique that Noah Kagan writes about: I’ve never tried this one myself but if it worked for Noah, and it should work on other busy/high profile people as well.

Coupons or Discounts

When first starting out it might be worth it to offer a discounted rate or free trial to help you acquire those early adopters. Once they have tried your product and get hooked on how great it is, they’ll be less likely to have the price be a deciding factor in their purchase.

Another thing to consider when marketing your subscription is the pricing. Make the pricing as simple as possible for your customers so there is no confusion on what they get and how much they’ll pay to get it.

Chris Bumgardner, CTO at UrbanSitter said: “Keep pricing simple. At first, our subscription pricing structure was $25 for the first month, then $10 for each additional month,” he adds. “Customers found this to be confusing, so we simplified to $15 per month and saw an increase in subscription rates.”

Facebook Ads

Facebook advertising is a great way to target your desired audience for your subscription service. If you already have customers, you can import their emails into your Facebook Advertising account and create audiences to advertise to, and make lookalike audiences based off their characteristics. You can also set up Facebook’s pixel to retarget customers that have visited your site, viewed certain products, and even left items in their cart.

And if you don’t have experience with Facebook ads, here’s a great place to start.

Email Marketing

If you already have a list of customers then email marketing is the best place to start. For the simple fact that those customers have already purchased from you and are more likely to purchase again, and they don’t cost you any money in order to market to them. The only cost is your time to write the emails. And of course, our good friends at Shopify have a guide for all your email marketing needs!

Going Viral

If all else fails and you think you’ve got the chops, or the budget to make a potentially viral video, take a crack at it. I mean, if Dollar Shave Club can make this video and then get purchased for one billion dollars or Poo-Pourri can make 30 million in sales after their viral hit, then why can’t you?

Keeping Customers

So you figured out what your subscription product is, or how to convert your current offering into a subscription. You’ve identified your target market, been convinced that this service is a good way to increase monthly recurring revenue, and you’ve figured out the best way to market to your audience. Now you might be asking yourself: How do I keep those customers from leaving?

We’ll dive into a few different ways to prevent customer churn, but the one thing that will keep customers subscribed to your service is your BRAND. If you can create a sense of loyalty to your brand and product, then you’ll have a following of advocates that will help you market and sell your products for you.

Add value outside the Box

Since you’ve already done your customer research and know what your customers like and where they hangout (online at least) you can provide content, or something else they value, to them at no extra charge. Birchbox for example offers great news, style tips, and even ideas on products outside their offering on their online magazine, and Dollar Shave Club curates funny content to their subscribers through their email newsletter.

In both instances, these brands showed that they know what their customers want and provided it to them as a thank you for their recurring business.

Packaging IS Important

(Blue Apron subscription box)

You might not think it matters but these days, packaging is part of the whole experience. Don’t believe me? There’s a whole lot of people that make a living unboxing companies packages and rating them on YouTube. But besides that, packaging is part of your brand and it affects how customers perceive your business. It helps build anticipation for your product every month, and can also work as a marketing tactic. If your packaging is really good, odds are that your customers are going to share their experience on social media.

Try Packlane or Boxup if you’re interested in custom boxes.

Customer Service

Let’s be honest, you always remember bad customer service and always tell your friends about it when it happens. So don’t even think about skimping on serving your own customers. If you’re not sure how to approach customer service check out this article about eCommerce giants Zappos who are constantly talked about for their insanely great customer service. Their CEO has even gone as far as calling them a “Customer Service Business” instead of an e-Commerce business.

(This billionaire provides great customer service, so you should too!)

Closing up

Still skeptical about subscriptions? Then check out these case studies on how Pura Vida bracelets turned a trip to Costa Rica into one of the biggest subscription businesses on Shopify Plus. Or how Fresh Patch became a multi-million dollar business selling patches of grass to dog owners that live in condos and apartments.

The point is, there are a lot of different ways to win at the subscription service game. And if you haven’t started already, there’s no better time than now. And when you’re ready to start give the Bold Subscriptions app a try. It’s free for 90 days, so you’ll have plenty of time to setup your subscriptions and start making sales before you even have to pay!

 



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