How To Run A Successful Subscription Business: Tips From The Pros
/There’s a reason why subscription services are on the rise: consumers are getting more discerning about what they spend their money on, and subscriptions cater to that desire for greater value for a set price. Unfortunately, not all subscription businesses succeed. In fact, if you’re just starting out, the odds are stacked against you, especially in such a saturated market environment. As the price of goods and services steadily rises on a global scale, many consumers are struggling to justify several of their monthly expenses. Non-essential subscription services now face the additional challenge of earning their place in an ever-slimming household budget.
However, with the right strategy and execution, it’s still possible for your subscription business to thrive. In this blog, we’ll share some key tips for creating a successful subscription business. Whether you’re just starting out or trying to revamp your current operation, these pointers will help you build a reliable, long-term revenue stream from your subscription service.
Know who your customers are
Before you start building your subscription business, you need to know who your customers are. Build up a detailed profile of your average customer — where do they live? Are they married? Are they old or young? Are they male or female, or is gender unimportant?
Suppose your business is already up and running: in that case, you may find it helpful to segment your customers based on their demographics (e.g., age, gender, location), their psychographics (e.g. values, attitudes, interests), or their transactional or behavioral data (e.g., the number of times they have purchased from you, their average spend, the number of referrals they have sent your way). This way, you can target each segment with personalized ad campaigns or base new product lines around emerging buying patterns.
Keep in mind that your customers don’t have to be one homogenous group. You may have several different types of customers who are all interested in your product. You just have to make sure that you provide the right value proposition for each one.
Create a great onboarding experience
The onboarding experience is crucial. It’s your first chance to make a positive impression on your new customers and get them excited about your service. If you take a look at the world’s most successful subscription businesses, you’ll notice that they all have one thing in common: they make the onboarding experience fun and engaging.
To entice new users to sign up for your service, you can use different tactics:
Offer a free trial that lets new users try your service before committing to a subscription — Spotify and Amazon Prime are two great examples of how well this tactic works!
Offer a referral bonus giving new customers the chance to extend their free trial by referring a friend to your service
Make your sign-up process as frictionless as possible by collecting minimal information up front
Make the onboarding experience interactive and fun by gamifying it or including a tutorial after signup
It’s also important that your customers have the power to make changes to their subscriptions without having to jump through hoops (or take up your support team’s valuable time). In cases where a subscription needs to be altered or payment schedules need to be adjusted, specialized subscription management software may be necessary. If you’re yet to implement a subscription management solution, a tool such as Chargebee provides sophisticated software which will empower both your customers and your team to make any necessary adjustments to their accounts.
Continuously improve your product and user experience
This might sound like a no-brainer, but not all subscription businesses put enough effort into improving their product. While it’s unfortunate, it’s also understandable — as long as your business is benefitting from a steady stream of income from these subscriptions, what’s the problem?
Here’s the thing — you must make sure that your customers are left delighted for the entire time they’re subscribed to your service. You’ve got to hold their attention. Every week that passes by is another week that your audience may decide your service just isn’t worth handing over their hard-earned cash for. To maintain a steady flow of profit, ask yourself the following questions:
How often do you review your product?
What are your plans for continuous improvement?
How often do you conduct customer interviews?
What are you doing with the insights you gather?
How often do you survey your customers to understand their pain points and make suggestions for improvement?
If you’re struggling to answer any of the questions above, this may be a sign of complacency on your part. Remember — a cancellation isn’t just a single loss, it’s the loss of the entire LTV (lifetime value) of that customer. Once you’ve hooked your customers, focus on maintaining their loyalty rather than endlessly chasing new buyers. In the subscription industry, loyalty is precious, so don’t give your customers any reason to question their allegiances!
Provide excellent customer service
As we mentioned above, in the world of subscriptions, fostering customer loyalty is crucial. The quality of your product is only part of the equation though — your customer service should also be a key area of focus.
A subscription business often feels more human than the large corporations that customers have traditionally bought their products from. If you’re running a direct-to-consumer subscription business, you’ll understand that the rush of receiving a package of personalized goodies is a huge part of the appeal. This service should always be paired with a friendly, positive customer service experience for maximum impact.
For larger businesses, a large, dedicated team of experienced support agents is a must. If you’re operating on a more modest budget, consider the use of a chatbot — it can handle the easier, repetitive requests, leaving your agents to handle any trickier tasks. As a general rule of thumb, you should aim to resolve each request within 48 hours of receiving it.
Efficient, personable, and positive customer service is essential because it costs more to acquire new customers than to retain existing ones. Deliver outstanding service and churn can be reduced, retention rates can be extended, and customers will become advocates who recommend your brand to their friends.
Experiment with promotions
If the key to a successful subscription business is to keep your customers loyal, one of the most effective ways you can achieve this is through generous promotions.
One of the most popular ways to market a subscription business is by offering a free trial for new customers, but this isn’t going to impact your existing customer base. If you’re only willing to offer freebies to newcomers, you risk alienating your existing patrons. To avoid this, you can:
Send out regular promotional emails: Keep in constant contact with your customers and make full use of marketing automation tools such as Mailchimp or ActiveCampaign. Capitalize on national holidays or seasonal events. If you haven’t already, consider offering your products via a traditional ecommerce store, too. This way, your subscribers can discover their favorite products in their regular deliveries and then stock up on them (at a discounted price) through your store. This is a tried-and-tested method favored by industry heavyweights like Beer52 and graze.
Gamify your promotions: Set up a system of ‘milestones’ that trigger discounts. For example, if a customer receives their tenth box, offer them 10% off their next delivery. Did they just send out a gift order to a new address? Send them a discount code for use on their next ecommerce purchase. Set up a page on their account where all of these possible discounts can be viewed and pair each reward with a custom badge — your dedicated customers will relish the opportunity to ‘complete’ this page.
Offer a referral bonus scheme: To prevent any feelings of resentment your current customers may harbor regarding the raft of freebies handed to newcomers, offer a referral bonus. Give each of your current subscribers a unique discount code that they can hand out to friends or family. When the code is redeemed, each customer will receive their next delivery for free.
Conclusion
One thing’s for sure — subscription-based businesses are here to stay. With the right strategy (and a little bit of luck), it’s a business model that can help you build a long-term revenue stream, allowing you to sustain your company for years to come.
Take careful note of the strategies outlined above, and above all, remember that harboring brand loyalty is crucial. Focus on delivering constant delight to your existing customer base, inspiring brand evangelism, and rewarding your long-term patrons.
