Learn why subscription businesses are worth a try and how to start your own with our easy guide.
Learn why subscription businesses are worth a try and how to start your own with our easy guide.
Any area of people’s lives that can be made easier is a business opportunity – subscription services are proof.
Subscriptions are so convenient that we often forget how much we depend on them. We don’t have to set a reminder to pay for our streaming apps every month, and recurring orders magically show up on our doorsteps right when we need them.
So how do you follow in the footsteps of your favorite streaming platforms and subscription boxes to make your own money with this popular model? Read on to find out.
At the most basic level, a subscription business offers products and services at recurring intervals, whether it’s a monthly pet-food delivery, a yearly software renewal or a printer-ink refill that’s triggered by a sensor when the customer runs low.
Since these businesses rely on repeat charges, keeping existing users happy is just as important as finding new customers
Traditional sales models focus on one-time sales, counting on customers to initiate the buying process when they need a new item. But subscription businesses enjoy a higher customer lifetime value. These companies don’t just interact with a client for a single purchase – as long as they’re providing a good product or service at a price the customer can live with, the business will keep earning recurring revenue.
The subscription model may have started with magazines and newspapers, but it’s grown to include a wide range of products. Customers like getting the products and services they want without a lifetime commitment. They like the convenience of getting their essentials refilled automatically. And they can make paying for a product or service more manageable for people who don’t have the funds to cover the full cost upfront. This model’s popularity with consumers makes jumping on the subscription service trend a lucrative move for business owners.
Subscription businesses usually keep a customer’s credit card or banking information on file and charge them at preset intervals. Think of that monthly Netflix charge on your credit card statement or the Stitch Fix box you’re billed for every six weeks – chances are you’ve got some subscriptions of your own.
With the subscription industry projected to reach a market value of $1.5 trillion or more by 2025, there’s no arguing with the profitability of subscription businesses – and that’s on top of the 400%+ growth rate these businesses enjoyed in less than a decade. To give you an idea of just how staggering these figures are, subscription businesses have grown five to eight times faster than regular companies.
And these sales aren’t just coming from dedicated subscription lovers. Eight out of 10 Gen Zers report dropping money on four or more subscription services every month, and three quarters of American households subscribe to at least one streaming video service.
What do these facts and figures boil down to? There’s a sea of eager potential customers out there. Now all you have to do is establish a niche business to tap into it.
As enticing as it is, the idea of starting a subscription service might overwhelm you. You may be thinking you’ll need a massive warehouse for your products or a team of developers to help you build the next big app. But remember, Gmail was invitation-only when it got its start, and even Amazon was just an unknown online bookseller before it became the tech and retail giant we know today
If you’re wondering how to start a subscription box business or recurring service all you need to do is take the products and services you already plan to offer and set up a convenient subscription plan that gives them what they want when they want it. Many ecommerce platforms even have a built-in function to automate subscriptions and streamline shipping.
Here are some keys to success:
You don’t need to worry about how to set up a subscription service until you have a product or service customers can’t currently get. That doesn’t mean you need an all-new invention, but what you’re offering needs to fill a gap for consumers so you can set yourself apart from the competition.
If you haven’t yet launched your sales or ecommerce business, you’ll first have to establish your target market. And if you plan to dive headfirst into a subscription model business, this means researching holes in the marketplace. For example, you may decide to build a subscription box around a unique type of sustainable skincare other vendors aren’t hip to yet. It’s all about finding a product or service people need and don’t have easy access to.
If you have a business, you’ve likely already done your market research, and you know who your target audience is. Your task now will be to curate your products or services into packages customers want to order on a recurring basis.
Even if you already sell products and know how to price them well, you’ll have to consider the logistics of your new subscription model. And if you’re just starting out, you’ll want to carefully price the items or services you’re selling.
First, consider overhead costs like website hosting and warehouse space. Factor in the salaries of any employees you’ll need to help pack and ship items or provide customer service. Now, take a look at what your competitors are doing to get an idea of what the market will tolerate. Once you determine your costs and a target price point, you can project your profit margins to make sure your business venture will pay off.
Finally, don’t forget to make a plan for shipping costs. Decide whether you or the customer will cover them.
Social media isn’t just a place to share your latest puppy pics – it’s also a seriously powerful marketing platform.
Make accounts for your business on all major social media platforms, and create pages and profiles that fit with your branding and vibe. Build an audience that might respond well to what you’re offering by following other accounts in your niche and teaming up with influencers who can reach your target customers.
And create a social media strategy that goes beyond curating an aesthetically pleasing account. Make a consistent calendar for posts and promotions that will keep your viewers engaged.
Then, leverage your social media engagement by using your account bios to link out to your ecommerce page, where people can sign up for your new subscription service or box. Use a Linktree URL to make it easy for your followers to visit all your pages from a single starting point
Once orders start pouring in, the name of the game is customer retention. A subscription service is a commitment for customers. They’re signing up to receive products or services on a recurring basis with regular charges to their credit card. So don’t be too hard on yourself if customer acquisition takes time to ramp up.
Once you’ve locked in your initial customers, do everything you can to keep them – your business model depends on it. Successful subscription businesses offer an excellent customer experience, loyalty benefits, special perks and personalized communication.
Determine your churn rate – the rate people are leaving at. There are two types of churn: voluntary and involuntary. Voluntary churn refers to customers who opt to cancel their subscriptions. If you can get data on why they left, assess whether it’s because they couldn’t afford it, had a bad experience or just lost interest. These insights are valuable – knowing what’s driving your customers’ decisions will help you improve your model.
Involuntary churn refers to customers who stop receiving a service due to logistical failures like incorrect addresses or expired credit cards.
Anyone with a great business idea and an understanding of their target market can create a subscription service. Start slow, keeping your overhead costs low and a manageable selection of targeted products, and work your way up from there. And focus on hanging onto your clients. Loyal customers may be hard to find, but if you keep offering stellar service and well-priced, high-quality items, buyers will renew their subscriptions – and spread the word to their friends.
