A Guide to Subscription Businesses. Subscription businesses are growing in popularity, and this business model is here to stay. It is one of the predominant business models for selling modern software; however, you would struggle to find any industry that has not had some success with subscription business models over the past few years. This business strategy is very appealing for many entrepreneurs since when it is done right, it provides a huge opportunity for growth.
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Is a Subscription Box Business Profitable?
Today, there are hundreds of subscription box businesses out there. From makeup and personal care products sent through the post every month to all the ingredients that you need to make dinner for the entire week, it’s clear to see that people love subscription boxes.
The subscription business model is a strategy that charges customers a weekly, monthly or yearly fee to access a product or service. This model is useful for helping you capitalise on the value of customer relationships, meaning that as long as your customers continue to see the value that your business is providing to them, they will continue to pay for it on a regular basis. This type of recurring revenue business model will typically lead to higher overall revenues and stronger customer relationships over time. Customers are your most powerful asset in this type of business, with their value growing over time the longer they use your product or service.
Subscription business models continue to grow in popularity. According to research, around 50% of customers are paying for subscriptions like online streaming services, and 15-20% of customers subscribe to an eCommerce service.
How to Value a Subscription Business
Valuing your subscription business will depend on a number of factors including the product or service that you provide your customers with, the cost of providing it, and the value that you offer. Some of the most popular options for subscription businesses include:
Content streaming services like Spotify and Netflix are some of the most well-known companies using this model. They achieve this by monetising online content and providing a valuable entertainment experience to customers.
Monthly Subscription Boxes:
Monthly subscription boxes are another example of a subscription-based business model that is doing seriously well right now. Dollar Shave Club, for example, is an ideal box that sends shaving products directly to the customer’s door each month, or Glossybox, that provides personal care and makeup items. One of the main appealing qualities of these boxes is that some months, they will include high-end items that cost a lot more than the box itself, which encourages customers to continue subscribing. This model of subscription business tends to work well because it offers convenience to customers.
Food subscription businesses like Gousto, HelloFresh and SimplyCook are big business right now. With people living increasingly busier lives and finding less and less time to think up meal ideas and cook, it makes sense that many customers would jump at the change to have ingredients, recipes and meal kits sent to their door on a weekly basis. Gousto and HelloFresh are some of the most popular options for their high convenience, sending customers a box filled with fresh ingredients to make a certain number of meals for the week. On the other hand, SimpyCook provides spices and sauces to add to fresh ingredients that the customer purchases themselves to create the meals that arrive on the recipe card.
How to Run a Subscription Box Business
If you want to run a successful subscription box business, it is important to make sure that you find the right strategies and tools. No matter what products or services you are offering to customers, the following tips will help you run a successful subscription model company.
Define Goals Early:
Consider what you would like to achieve through offering a subscription service. Perhaps you are looking for faster growth, more revenue, or better customer relationships. Adopting this business model means that you need to determine your goals as early as possible. This will help you make sure that you are putting together a pricing strategy that will work. Long-term, strategic thinking is crucial in a situation where your recurring revenue comes directly in monthly or annual fees.
Provide a Great Customer Experience:
The more customers that subscribe to your business, the more revenue you will earn. Because of this, it’s important to make sure that it is as easy as possible for your customers to sign up to your subscription service and that they have a great customer experience, which will encourage them to continue subscribing and recommend you to others. The option to sign up should be available in every channel that you use, and customers should have a range of easy options to sign up.
Develop Strong Customer Relationships:
A subscription business that is successful will depend on strong, lasting customer relationships. If your customers are not satisfied or do not feel that they are getting much value from your service, they are likely to cancel their subscription. Because of this, it’s important to take the time to get to know your buyers and find out more about what they are looking to gain. Involving your customers in any changes that you make to the service will ensure that you make the right decisions and encourage customers to continue subscribing.
Finally, make sure that you are not losing out on revenue with an unreliable billing system. Your customers are unlikely to put up with a complicated billing process for very long. Ideally, you should offer the option for customers to set up easy recurring payments via their card or direct debit so that payments are hassle-free and automatic.
How to Scale a Subscription Business
Scaling a subscription business will go far beyond cutting expenses and budgeting. There needs to be strategies in place to attract more customers and help your business grow in the future. Some of the best ways to scale your business include:
Offer a Free Trial:
Often, customers are more willing to subscribe to something that they have had the opportunity to get a taste of. Offering a free trial, a free first box, or a box for half price may encourage more customers to sign up to your subscription service since there is less for them to lose initially. In addition, this strategy can help you weed out customers that would have been unlikely to stick around and subscribe for a long time in the future.
Offer Referral Rewards:
One of the best ways for subscription-based businesses to gain more customers is through their existing subscribers. Asking your current customers to recommend your business to their friends and family is easy enough, but often, customers need more than a simple thank you. Offering a reward to anybody who signs up through a customer referral link, such as a discounted or free month to both your existing and new customer, is a great way to reward loyalty and word-of-mouth marketing while scaling your business at the same time.
How to Start a Monthly Subscription Business
First of all, it’s important to come up with an idea for your monthly subscription box. You could provide anything from food items to books, toys, pet supplies, household supplies, personal care items and more – anything that people buy on a regular basis can easily be turned into a subscription business. When starting a monthly subscription box business, consider the following:
Your Niche: Try to get as specific as possible when settling on your niche. For example, you could break down a niche like beauty into a sub-niche like vegan beauty products, or focus on the fitness sub-niche of running. The more specialised your box is, the easier it will be for you to put together products for a specific audience.
Your Competitors: The subscription box business model is growing massively, but the good news is that this does not mean that there isn’t going to be demand for your box. It’s important to figure out who you are up against by searching for competitors and seeing what’s out there. What can you offer to customers that is better?
Your Customers: Once you have determined your niche and where you fit in the market, it’s important to consider who your potential ideal customer is. This could mean researching your competitors’ customers or spending time on market research to find out about the type of people that would be willing to subscribe to your box. Think about factors such as how old they are, how much they earn, which social platforms they use, and where they shop.
How to Start a Subscription Box Business – What Customers Want
Finding out what your customers want is crucial regardless of the products that you’re selling in subscription boxes. Conducting market research to find out more about your ideal customer, what they are looking for, how much they are willing to pay, and the kind of experience that will excite them is crucial for building a subscription box model that works well. Many customers choose to subscribe to boxes for the convenience, but also like to have some element of control over what they receive in each box, for example.
How to Start a Flower Subscription Business
Most people love flowers, and getting a weekly or monthly delivery can bring a smile to anybody’s face. Flower subscriptions also make excellent gifts. If you want to start this type of business, it’s important to first find a supplier, unless you have the facilities and knowledge to grow your own flowers. You will also need to set up a website where customers can subscribe to your flowers and choose what they would prefer to receive at each delivery. You might want to consider encouraging more customers to sign up by offering a free bouquet to any customers that refer their friends and family successfully.
Subscription businesses can be a convenient and fun way for customers to get what they need or try something new, so it’s no surprise that this business model is booming.