Do you have shoppers that buy often from you? Are these shoppers loyal, or there’s a chance you might run into them at the store recharging with a product you sold them through your online store? Heartbroken sniffs*
Shoppers know they need to replenish certain products for certain time frames but they are not thinking about it so they forget. If they happen to hit the local store and find it there, they will remember and buy it right on the spot.
So, don’t be heartbroken.
Instead, be smart and cue in a subscription business model that will help you build your foundation for success! As a result, your customers will get more effective and seamless service, and you will get a more stable income from your business venture.
Want to hear all about it? Read on then because we will show you how to harness this increasingly growing trend among merchants. We will also tell you how Recharge, our app of choice, leverages this system to guarantee a successful outcome.
If you want to skip our awesome description of the subscription model, just go straight to our take on Recharge and how it can help you make a smooth transition.
What is a Subscription Model?
Let’s get started with Subscription Business Model 101 and explain what it is.
A business based on subscriptions charges a recurring fee to customers to access a product or service. This could be a SaaS company, a streaming service, or a subscription box. In the case of physical goods, clients commit to a recurring service and receive products to their doorsteps on a monthly (or weekly, or bi-monthly) basis.
Your business might not be completely subscription-based (like Netflix or Spotify), but you can set up subscriptions to your products so that your customers get automatically replenished with goods without having to think about it. This benefits you and your customers.
Let’s dig deeper into some of the reasons why subscriptions services became a trend many years ago, and why they continue to grow today.
Builds brand loyalty
Brands that create subscription plans must go through the pains of building value for the service clients subscribe to. Customers will stay loyal only if they see an extra worth on what they are recurringly paying for.
Remove pain points and unnecessary friction, and customers will develop loyalty to the brand. If a client gets premium treatment, they will more likely be willing to stick to paying for the subscription.
Increases customer lifetime value
Subscriptions business models are a great way to extend the relationship with your customers for years to come. Subscriptions generate constant and predictable revenue and help retain customers long enough to increase the value of their loyalty.
More value at the same price ensures customer retention. Upsells and cross-sells are a great way to show subscribers a way to improve the value they receive.
Offers customers convenience
If you are offered a product that you like to get delivered when you need it, and with minimal effort on your side, you probably will readily ask where to sign up. That is the type of convenience the subscription model offers its customers.
Not to mention that customers no longer have to research new products online or at stores. If merchants can create this seamless experience, their clients will become loyal ones.
Advantages of the Subscription Business Model
We have indeed pointed out why you should start your business on the subscription model right away. Let us point out some other advantages that explain why this model became increasingly popular back then and is still thriving today.
Improves customer relationships
We have always mentioned here in Contra Collective that your main job as a merchant should be to build relationships with people, and we stand by it. Subscriptions are a great way of achieving this by providing your customer the convenience of customization.
For an optimal experience, clients should have the option to customize their plans and product. Provide the option to upgrade so that clients can sense the flexibility of getting more value from your product.
Subscriptions come and go, but they usually keep the revenue line flat. You, therefore, have a predictable revenue stream. This allows better planning to keep your operations running. In addition, this constant revenue stream ensures that your boat stays afloat in times of financial storms.
Lower retention budget
Once you have a sustainable number of subscribers, you can drop those marketing dollars and focus on other ventures. If subscribers are already used to the convenience you offer, they will not be churning, reducing the time and money expense on retaining them.
Better inventory management
Depending on what percent of your operations come from subscriptions, you can more easily manage inventory without overcrowding your warehouse. This also helps focus on updated products and to always offer your customers new stock.
Opportunities for revenue expansion
A subscribed customer is an opportunity for merchants to prove their value and have them want more. As mentioned earlier, up-selling and cross-selling new features and additional products to loyal customers are a chance to expand revenue without the additional costs of acquiring new clients.
Businesses that can benefit from Subscription Business Models
The subscription model is suitable for two main types of businesses. Recharge combined with our superpowers here at Contra Collective will supercharge your repeat service and product business. Stay with us as we unravel all the fantastic benefits that your business can achieve with the service.
Businesses who offer access to content
This refers to virtual content in the form of blogs, videos, papers, audios, etc., that provide value to dedicated subscribers. They include courses, workshops, articles, or episodes. The purpose of these types of services is to help, inform, engage, or entertain an audience.
In exchange for a monthly fee, users get access to premium content that they would not be able to get otherwise.
Businesses that offer a repeat service or product
If you are a business that offers a physical product, subscriptions help turn your product into a service. Not only do you provide quality products, but you provide consistent stocking to your customers without them even having to think about it.
Popular Subscription Business models
From coffee to video streaming services, there are subscription offers everywhere for a lot of products and services. Recharge provides a service that specializes in the delivery of physical goods. However, we will mention the most popular subscription business models to level up our knowledge of how the model works across all spheres.
We have to start with one of the most popular subscriptions services, and that is, shrewdly named, the Subscription as a Service or SaaS. In this model, specific software is centralized in servers and hosted in the cloud. It is then licensed through a monthly subscription.
There are many SaaS businesses out there like Shopify, Dropbox, Klaviyo, and Adobe, just to mention a few. What do we love about SaaS? The fact that you do not have to worry about on-site maintenance thanks to their cloud infrastructure.
The membership model allows you to build a community by bringing together people fond of a particular niche and those who are experts on it. Subscribers pay a monthly fee to access gated content that will turn them into the knowledgeable and expert portion.
You can think of this model as a gym or a Cineworld membership. That fee gives you certain benefits and privileges. This model relies a lot on the fact that people value things more if they pay for them.
We have noticed that most membership websites involve topics related to health, fitness, yoga, magic, coding, etc.
A subscription box delivers products inside a box to subscribers’ doorstep. They allow a lot of customization and are super convenient and fun. They used to be the hype several years ago, and they still represent an appealing model for specific audiences.
In this model, customers subscribe to periodically receive a box containing items related to the topic or theme of the shopping website. There are usually three different categories:
Retail boxes refer to those where the customer has pre-selected the products that this will contain and the periodicity with which they will be delivered.
The customer knows a couple of products included in this type of box, but the rest will be curated by the box creator. It adds to the surprise factor.
For this box, the customer has not pre-selected any of the products they will be receiving. They usually come at a fixed price, and the customer never knows what they will be getting.
Media subscription model
In this model, creators can produce high-quality videos and make them available in exchange for a monthly fee. Essentially, the provider is the Netflix of this operation and creates on-demand videos that people will pay to access.
Topics such as yoga, fitness, eLearning, and, of course, entertainment are the businesses that better fit with this model.
The mastermind model is aimed towards an audience that is prepared to create dramatic changes in their lives. These could be financial, health, relationships, etc. A website that offers transformation for these becomes a mastermind.
In essence, a mastermind is a coach who gives therapy and guidance to a person as an individual and even has regular check-ins with such person. This subscription model offers group and individual benefits and provides a high level of accountability.
An example of this would be a site committed to take you out of debt or to change your relationship with alcohol or smoking.
Subscribers only model
Offering people free access to some content is an excellent way to attract them to a paid premium access. Creators offer most of their content for free but set apart their best content only for paying subscribers. This works well with bloggers who create posts for free but offer access to more personalized content or a service or product related to their topic.
How to succeed in the Subscription Model
Some essentials will get you into a successful model for your business. We will break them down and briefly describe each.
Match the offer with the market
Figuring out the product-market fit is still essential to any successful business. First, you find the right target customers, and then you serve them with the product that will solve their problems and meet their needs.
Not only must you know your target market and understand their pain points, but you should also be able to evolve with their needs.
Even if your customers love your product and the subscription offer, you will not find them at the bottom of the funnel if you do not price it right. You can decide on pricing based on some factors:
- Consider your profit margin and, if possible, consider your competition.
- Decide pricing based on how valuable you believe customers will find the product.
- Make prices competitive.
- Gauge the demand of your product and price accordingly.
World-class customer service
Amazon’s customer service like to consider itself as the best in the world. They certainly go to lengths to make sure customers are satisfied. We cannot stress enough the importance of being there for your customers, especially since you have to win them at every pay cycle. Exceptional customer service will help you find your clients’ grief points and work strategically to improve them.
Consider your revenue tech stack
The ideal revenue operations process workflow is critical to success. Recharge takes away this heavy lifting by providing effective workflows that get constantly updated. This means that if an issue arises, it is solved immediately.
Let’s now go over all the advantages we have found in the application of the Recharge app to create subscription models that thrive and evolve with customers’ needs.
The last two points above (world-class customer service and revenue tech stack) can be summarized in Recharge’s mission statement:
Once you have figured the form and price of your offers, setting up subscription options is done in minutes, and in no time, you will have the most popular payment processors at your fingertips. Their solution includes taxes, built-in discounts, and shipping engines.
With Recharge, you create a seamless and successful subscription experience for your customers while increasing your revenue.
But what does the Recharge solution offer, and why do we recommend it? It has a sweet bevy of benefits that you would not want to miss out on. Here are some of them:
With Recharge, you can easily let your customers manage and customize their subscriptions. This includes adding to their orders, updating their payment, or change their shipping information.
Recharge offers a product called RechargeSMS, where subscribers can update their orders via text message. This versatile tool allows customers to swap products, update their addresses, and many more.
Merchants can create a completely customized experience that perfectly fits their brands or select from the ones included in their customer portal.
Reduction of Customer Churn
Recharge’s core services have the mission of helping you build a sustainable business. This seamless experience is critical to building brand loyalty and increasing lifetime value. In addition to that, a highly effective and customizable process that makes it easy for clients to make changes to their subscriptions helps you as a merchant reduce customer acquisition and retention costs.
It all rounds up into a beautiful business waltz that taps on every corner and polishes any rough edges. Most of it guarantees a sustainable, lasting endeavor.
Analyzing data is pivotal to the success of any subscription business model as it provides a complete picture of the status to understand customers better and take action accordingly.
Recharge offers an elegant and intuitive analytics suite where you can measure the health of your subscriptions. You can measure churn rate, average order value, LTV, and everything you need to pivot your strategy based on what works best for your customers.
Built especially for subscription box businesses
Recharge specializes in subscription boxes. Their suite enables you as a merchant to offer the most flexible platform for subscribing to gift boxes. You get the flexibility to establish your rules, and the customer can quickly build their goods and swap products.
The app will also let them stay in the know through email or SMS notifications on order details or shipment information.
Customer support management
Along with the opportunity for customers to optimize their experience, Recharge also allows merchants to access their subscribers’ accounts and make changes on their behalf. With the possibility of offering customers the option to make changes to their subscription plans freely, there will be much fewer reasons for them to leave. This is how you build loyalty and reduce time in working on marketing and retention.
Who doesn’t love customizations and automation? Thanks to the implementation of powerful APIs, Recharge offers virtually endless possibilities for customizations.
With this option for highly customizing the customer portal, merchants can automate subscriptions with workflows that enable strategies to build and nurture effective and long-term relationships. For example, you can create workflows for discounts, free trials, or free shipping.
Building a perfect portal for your online store allows you to create a consistent user experience. Think about strategies like upselling that will foster stronger subscriber relationships.
Do you have several apps in your Shopify store? Recharge can easily integrate with your existing technology to ensure that your subscription process does not stop. Apps that you can incorporate Recharge with include Klaviyo, Yotpo, Loyalty Lion, and Attentive.
Recharge also supports all the major payment processors to make the recurring billing process a super easy one.
Move your Business to Subscription Models
Many businesses are rapidly shifting towards a subscription business model. There are two main reasons for that:
- the digital transformation moving at a faster pace among industries and,
- the high demand of customers.
But this is not a shift to be taken lightly. You should carefully consider factors such as the size of your business, your industry, the target market, and your expected customer base.
Recharge has all the features you need to get all the stages of the subscriptions model checked, and here in Contra Collective, we can’t wait to help you take all the guesswork out of managing and scaling your subscriptions. So get in touch with us, and let’s talk about how we will engineer the best subscription program for your site and your niche.