Many of us, if not all of us, use a subscription business. A subscription business is a product or service delivered periodically to customers and they pay you. Electricity, cellular, trash pick-up, or even lawn care are all examples of subscription businesses. More recent examples are Netflix®, Tidal®, Apple TV®, Hello Fresh, and Chewy. A quick PSA: all the afore mentioned brands have great online business names. What you name your subscription business is equally important.
3 Types of subscription business models
Curation: Curation is great if you’re an expert in your business. In this business model, you ship products to customers based on their preferences, taste, or a theme.
Replenishment: This business model has been around a long time. Cellular companies now offer unlimited voice and text, but there was a time when they did not. Their customers had to wait until the next billing cycle to have their minutes replenished. This business model is great for a restock business, such as home or pet supplies, or even office needs, such as paper and ink.
Memberships: Membership subscriptions is all the rave now. But, as you can see, the other business models have been around a lot longer. The membership model is all about giving customers exclusive pricing and special benefits.
Each of these have there own benefits and trade-offs. We recommend speaking with a business launch consultant to discover where’s your competitive advantage.
Starting your subscription business
- What’s your idea or niche?
It is always great if you have existing customers to learn where the opportunity exists for a subscription business. If this is not available, you will have to come up with your subscription idea. Here are a couple of question that will assist; what am I good at, and what products complement what I am good at?
- Research the market
Quite often businesses must pivot, change some aspect of their core products or services. Since there’s a lot of competition in the subscription business, you really need to do your homework. Checkout your competitors pricing, branding, customer segments and ask yourself this question, “what will entice the customer to choose me over a competitor”.
- Identify who are your customers
For many businesses, this is often overlooked. Create a Buyer Persona. A Buyer Persona is a semi-fictional representation your ideal customers. It paints a picture of their motivations and what their goals are.
- Produce a prototype
Developing a prototype will help identify suppliers, key partners, and have something tangible to offer up to solicit feedback from. Note your prototype should speak to your customers persona and address their emotional needs as well.
- Price your subscription box
Numerous companies have failed for two major reasons: not knowing who their ideal customer is and pricing. When consider pricing, answer the following: what is total cost to produce the product, what are the wages, how much do I need to take home, what are the merchant service fees, and advertising costs.
- Produce a customer service policy
Outline your shipping and return policy. You will have returns. Have a full step-by-step procedure, clearly illustrating the customer journey for returns. Keep this in mind, people will return to the restaurant if the food is bad. But they will not return if the customer service is bad.
- Advertise, advertise, advertise
Put in place an advertising and marketing strategy. Let us be upfront, advertising and marketing is more of an art form, than a science. Advertise where you customers are. When possible, partner with an influencer. Interact with your audience. If marketing is not your thing, outsource. Yes, there are marketing firms offering subscription services.
We know this was a light overview. This post is only meant to get your mind percolating and excited about the possibilities. Check out our advertising partner CFO Enrollment. They offer great business launch services.