What are Subscription Services and How Can They Help Your Business Grow?
by Julie Weishaar
March 8, 2021
What are Subscription Services and How Can They Help Your Business Grow

Are you looking for cost-effective and efficient ways to solve customer problems and boost revenue?

Have you considered offering subscription services as different ways of marketing your products?

What are Subscription Services?

Subscription services function by offering access or providing products to a customer for a specific period and paid at regular intervals.

Payments differ from service to service and can be quarterly, monthly, or yearly. They also help improve brand loyalty and customer retention.

There are three general types of subscription-based business models:

Digital subscriptions refer to eCommerce services that are only available digitally via an online platform.

Examples include digital video services and digital music subscriptions, such as Amazon Prime Video, YouTube Premium, and Netflix.

YouTube Subscription Services

Source

eCommerce subscriptions are often a hybrid of memberships and digital subscriptions.

For example, Target’s Circle Loyalty program is the same as a membership subscription.

Benefits that come along with a Target account include:

  • 1% earnings to redeem at Target or continue saving
  • Access to hundreds of deals
  • A birthday gift
  • Community support
target

Why Should You Add Subscriptions to Your Business?

By adding subscriptions to your business, you are better able to predict how much revenue and sales you will bring in.

Look at how many active subscribers you have rather than relying on estimates or projections of future sales.

Regular recurring income from subscribers helps your business cash flow. It also makes it easier to budget investments and expenses.

As long as you continue to meet or exceed customer expectations, you will reap the rewards by increasing repeat business.

Take the time to build relationships with current subscribers,

Customize or personalize offerings based on feedback and purchase history.

When you know what your customers want or need, it is easier to up-sell or cross-sell your products or services to them.

Subscriptions increase customer lifetime value when compared to one-off purchases.

How to Set up a Subscription Service for Your Business

Subscription models appeal to customers on many levels, including increased convenience, reduced costs, and personalization.

Below are tips for setting up your own subscription service.

  1. Determine first if a subscription model is well-suited to your business. For example, if you sell prom dresses, it is not a good fit for a subscription model. Why? Because customers are not likely to collect or replenish prom dresses. However, if you sell coffee, it is an ideal niche for a subscription-based marketing strategy.
  2. Decide how much you will charge for a subscription. Do not forget to account for:
    1. Your costs for each product.
    2. Shipping materials, as well as product shipping costs.
    3. Marketing and advertising costs.
  3. Ensure that you are bringing in more revenue than is going out in expenses to maintain a sustainable profit margin.
  4. Use a tiered pricing structure for customers to choose which best suits them.
  5. Offer discounts for longer time commitments.
  6. Grandfather in current customers to any price increases.
  7. Give customers a preview by offering a freemium offer with limited access to some of your products and services.
  8. Set up terms and conditions that clearly outline how your subscription model works and how to cancel a subscription.
  9. Pay attention to federal and state consumer protection laws that cover cancellations and auto-renewals.

Once you have completed the steps above and your foundation is in place, it is time to get your inventory ready.

Will you use outside vendors or create your products in-house?

If using external vendors, make sure they are reliable and provide quality products for your company.

Examples of Effective Subscription Service Marketing

A great example of an industry that knows how to market its subscriptions effectively is Cable Television.

Most service providers do not let customers decide which channels they want to include in their subscription package.

Instead, consumers look for the channels they want to watch, pick the package containing them, and decide if they want Internet and land-line phone services.

optimum subscription services

Source

It could mean increased revenue for the service provider. Many consumers will pay more for some channels that they are not interested in to get access to the ones they want to watch.

Let us say that you love older movies of the type found on Turner Classic Movies (TCM), and your service provider is Optimum.

Notice that TCM is not included in the Core TV bundle. If you want to watch TCM, you will need to choose Select TV or Premier TV.

You should also check what is offered in your area as channels may differ according to location. And Optimum might be offering a special deal.

There are also bundles you can customize according to the services you want to include.

optimum bundles

Source

So, what can you do to let potential customers know about your subscription services? Below are several marketing tips to consider and get you started.

Offer Subscriptions for What Customers are Already Buying or Consider Essential

Many niches using a subscription business model rely on the logic that customers will be open to subscribing to products they already purchase regularly and consider essential.

Examples include regular coffee drinkers who benefit from having their coffee delivered to their front door on a recurring schedule. Below are a few example brands.

mistobox
atlas
trade subscription

Source

Offer Free Trials or Samples

Many brands discover that giving their customers a free trial period is a good marketing practice.

It increases the likelihood of customers continuing past the free trial period and paying for future subscriptions.

Streaming music subscriptions have jumped onto this trend and seem to be doing pretty well.

By giving customers a test run, they can evaluate the value of the service before paying for it.

If a customer likes a service, he will continue to pay for further access.

For example, Spotify has a free version. It also offers premium upgrades to those users who do not want to see annoying popup ads.

And they offer a free month of their premium service.

spotify subscription services

Source

There are other benefits with upgrading to Premium, including downloading any song and browsing the Discover Weekly playlist.

Amazon Prime Video is another example of how to increase revenue by offering a free trial.

People who have not been a member of Amazon Prime in the last year are offered a free 30-day trial.

amazon

Source

As streaming has become so popular, many customers will choose to pay for their subscription after the 30-day free trial to watch originals, popular movies, and live events.

Adds Convenience

What is most people’s most valuable asset besides their health? It is time.

When a brand makes its products or services convenient for its customers, it makes their lives easier.

By utilizing subscription services, many companies are automating parts of the consumers’ buying journey.

For example, the coffee companies discussed above make it convenient for their subscribers by shipping out a new supply every month.

The customers do not need to keep track of how much coffee they have left or remember to buy some when they go to the store.

Provide Recommendations

Tap into the convenience benefit by providing personalized recommendations for new products based on customer data.

The company Stitch Fix is an excellent example of how a brand can boost customer engagement with relevant and customized recommendations.

stitch subscription services

What About Subscription Pricing?

Subscription services pricing is usually based on the length of the subscription. Many companies choose to offer a discounted rate for longer times.

Consider the following points when deciding how much to charge your customers:

  • Be sure to consider all your expenses, including product development, fulfillment, and outsourced vendors.
  • Use a CRM or other system to collect customer data to learn about customer behaviors, feedback, and buying patterns.
  • Leverage the data you collect to help price your subscription.  Analyze the data to determine customers’ willingness to pay and how they value your products or services.
  • Data should be the focal point of every pricing decision you make. It helps you to understand what customers value in your product.

Leverage the Power of Subscription Services for Your Business

Learn as much as you can about the subscription-based economy to grow your business as this market continues to expand.

When customers buy a subscription service from your company, they are developing a relationship with your brand.

As you market your services, be sure to let potential customers know how your subscription will enrich their lives.

Nurture a long-term client relationship by staying in touch with current subscribers.

Offer VIP special services, loyalty benefits, and early access to new products.

Remember, it costs five times more money to get a new customer than retaining a current one.

Engage with and reward your existing customer base to ensure a positive customer experience.

In turn, you will be rewarded with recurring revenue and increased profits.

What are Subscription Services and How Can They Help Your Business Grow?

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2 Comments

  1. Lisa Sicard

    Hi Julie, I love the subscription service of Hello Fresh. I can change the schedule and meals at the few clicks of a button 🙂 It saves time at the market and you get delicious food.
    I love the suggestion of adding that to a business – you got me thinking. Thank you!

    Reply
  2. Julie Weishaar

    Hi Lisa, I love the thought of not having to shop or cook. Thanks for that idea 🙂

    Reply

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