In subscription sales models, customers are charged on a regular basis for a product or service of their choosing. They choose when and how they wish to receive each offer, and most subscriptions provide the option to cancel or adapt the delivery method at any time. A subscription is a form of contract between a business and its customer. The customer agrees to pay for a product or service for a period and at a certain rate, and the business fulfils that agreement. As covered in our earlier article ‘The Smart Money is on Offering Retail Subscriptions’, the subscription trend grew exponentially during the COVID-19 pandemic. In the post-pandemic world, the challenge for businesses now is to facilitate retention.

 

The Benefits

Subscription models offer several benefits, to both businesses and customers alike. Firstly, they can offer convenience for customers. This is usually the business case for developing the business as a subscription model in the first place – to solve the problem of convenience for the end customer. Customers can also easily discover new products, through introductions by the subscription service. These may be vouchers from partner businesses, or samples of products delivered in the mail, for example. These new introductions are usually welcomed by consumers as a perk and a privilege of the subscription model. For the top 5 reasons customers use subscription services, check out ‘The Smart Money is on Offering Retail Subscriptions’.

As mentioned in our previous article, for businesses, the subscription sales model can be very useful for accurately predicting revenue and generating recurring revenue. Subscriptions can also be used as a technique to attract more customers and grow the current customer base. In doing so, the subscription model can decrease the cost per customer acquisition for new customers. To bridge the gap between business and customer, subscription models can also help to strengthen and build more enduring relationships, that foster brand loyalty in customers.

 

The Fundamentals of a Good Subscription Model

So how can businesses build a subscription sales model? Firstly, it must be determined if the business is suited to and would benefit from offering subscriptions to customers. It is easily established if a particular product or service is suited to subscriptions or not, so this is step one. Secondly, it is important to determine what the goal of the subscription service is. How does it solve a problem for your customers? What is that problem? Why should they choose your subscription service to alleviate that problem? These are some of the kinds of questions you can begin to ask.

Next, it is important to consider and set a pricing strategy. There is a possibility of adjusting these price brackets as you learn more about your customer base, but it is very helpful to get this as close to perfect as you can from the outset. This means lots of conversations with potential customers. The follow-on point from this is to continue to weave that customer experience theme through the whole customer journey. Alleviate barriers and create moments of joy. When you improve the user experience, you will make it easier to achieve new sign-ups to your subscription model.

The onboarding experience for new customers should be equally as seamless. If you don’t know how your customers experience this, make sure you are talking to them regularly to understand what their pain points and desires are. Finally, it’s important to ensure that billing and account management (including returns or cancellations) are as simple as possible. They should be polite, supportive, and positive across all customer interactions. Often it is the way negative experiences are managed that determines customer feedback, recommendations, and reviews.

 

Managing the Moving Parts for Your Customers

It’s important first to understand what stage your business is at before you identify the best solutions for your operations, logistics, and fulfilment. For example, if you are a brand-new subscription business, you need to focus on quality assurance with your packaging and materials to ensure a quality experience for your newly acquired customers. It’s essential to focus on maintaining a connection to your product and customer as you establish market fit. New businesses are usually best left handling things in-house.

Expansion-stage businesses that have established product and market fit, will likely focus on establishing relationships with third-party logistics partners to optimise their operations to handle their rapid growth. If you’re shipping hundreds of boxes a month, the benefits of using these partnerships start to outweigh the costs. Finally, a large and mature-sized company will likely focus on improving visibility into their shipping and logistics. An emphasis for companies at this stage is to refine their analytics tools so they can prioritise optimisations that will help scale the business, improve their profit margins, and leverage economies of scale.

 

Fostering Loyalty

Building a sense of community within your subscription base can be far easier to achieve than in traditional business models. This is because subscribers tend to be connected in some way to the topic or theme of the subscription itself. There is a common interest – whether it is health, entertainment, or a hobby, for example. By nurturing and growing this community, not only is it possible to grow your subscriber base, but to foster loyalty among those followers to your business.

Creating these communities gives your customers something positive to remember and share with others – making the growth of the community more organic. The natural progression from this stage is to make the subscriber community as personal to them as possible. Make your followers feel connected to this group that has a life and soul of its own. It’s also an amazing platform from which to engage with your customers. Not to upsell, but to understand their struggles, frictions, and barriers, to better serve them. Finally, through subscription models, it’s easy to provide tiered levels of membership or elite status to certain customers. This can help to further garner loyalty and commitment to the brand and the subscription itself.

Subscription models offer so much flexibility and control to customers, but also provide stability and forecasting transparency to businesses. Although not all businesses are suited to a subscription sales model, for those that are, not all of them apply the model in an effective way. This article covered the fundamentals of subscription sales and how the benefits of implementing such a model can benefit businesses and customers alike, particularly if executed to its maximum effect.

 

Further Reading

https://blog.hubspot.com/service/subscription-business-model

https://www.the-future-of-commerce.com/2022/08/15/subscription-loyalty-tips/

https://rechargepayments.com/blog/lets-talk-subscription-fulfillment-and-shipping/