Marketing • Business
The Power of Subscription Business Models - turn your one time customers into repeat customers
02 Dec 2020 • 4 min read
Most of us are familiar with the concept of ‘subscribing’ to newspapers and magazines and more recently to software and entertainment services like Netflix and Spotify. As consumers we’ve embraced paying monthly, quarterly and yearly for the things we use on repeat, making the subscription ecommerce business model one of the fastest growing sectors in ecommerce.
But subscriptions aren’t just for software, streaming services and magazines. Almost any ecommerce business can introduce a subscription model to its existing offering and reap the rewards including;
And Keesubscriptions makes it is for you to enjoy these benefits when you set up a subscription model in your Neto store.
Two of the most popular and low investment/high reward subscription models for ecommerce businesses are Replenishments (continuity) and Surprise Boxes.
The Replenishment or Continuity Model is perfect for frequently used products; pet food, nappies, razors, coffee and more. This model ensures that consumers receive a regular shipment of goods without having to reorder. Consumers enjoy the ease of purchasing and the benefit of researching their product choice once. If your customers need a regular supply of your product, turning them into a member/subscriber is a great option for your business.
Convenience and great customer service are key markers for the success of this model.
The Surprise Box Model is used for consumers who are passionate about a certain category of products; wine, organic fruits and vegetables, beauty products, clothing etc. This model is most successful when a consumer is loyal to your brand. As a seller your goal should be to make the consumer feel excited about receiving a curated selection of products from you, whether that be monthly, quarterly or yearly.
The experience you create for your members receiving this surprise box is almost as important as what’s inside the box.
Now let’s take a closer look at some of the advantages of the subscription model for your business.
The standard way of selling to a customer is via a conversion-based model. You get the customer, sell to them once and you then must keep working hard to get that one customer to buy from you again. Customer Acquisition Costs under this model are high.
With the subscription model, the customer’s repeat business is implied at the point of sale – when they subscribe to receive a product or service from you on a regular basis. If you keep your customer happy, they will keep buying, which means a better ROI for your customer acquisition efforts.
The Dollar Shave Club is famous for making it easy for their first time customer to continually purchase from them. Subscribers receive a regular supply of new razors, shaving cream, and lotion delivered right to their door and without them ever having to go to the store. Customers consistently let their subscriptions roll-over because the service is convenient and backed up with clever branding, pricing and great customer service.
One of the key points of stress for a business operating a conversion-based model is knowing how much product to order to satisfy demand and maximise profit. The subscription-based ecommerce model makes it much easier for you to forecast demand for your products.
When you have subscribers, you can more accurately anticipate the demand for your product over a set period which enables you to better meet demand without waste or over-capitalising on products consumers aren’t buying.
With a subscription-based business model, customers make payments to you on a regular basis – known as recurring payments. Because the amount of the recurring payment is set at the point of sale, you are in a better position to predict your revenue each month. When recurring payments are automated and customers are happy with the experience of purchasing from you, they are more likely to enjoy receiving their box on repeat without paying attention to the recurring charge on their bank statement.
Profitability is also improved under a subscription model because it enables you to more accurately plan for the costs of producing and supplying your product/service.
A subscription business model makes sense for any business that sells a product or service customers would enjoy buying repeatedly. Not only do subscriptions drive your revenue up, but they strengthen ties with your customers, giving you the opportunity to build long-term relationships that benefit you and your customer into the future.
