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Complete Guide to Starting a Subscription Service

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By Miva | March 5, 2019
Ecommerce subscription services

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The explosive popularity and continued growth of the subscription revenue model has prompted many online merchants to consider offering a subscription service. A monthly subscription business strategy can skyrocket customer lifetime value by turning one-time or occasional buyers into subscribers. But getting one off the ground comes with a unique set of challenges.  

 In this article, we discuss what it takes for your brand to stand out and dominate the competitive subscription economy and what you should think about before starting a subscription service. 

What is a Subscription? 

A subscription is an online business model that allows customers to buy products on a recurring basis. On top of a more convenient and personalized buying experience, subscriptions often provide customers with cost savings. 

For sellers, subscriptions provide a predictable recurring revenue that they can use to scale their business and build a loyal base of returning customers. 

Why Should Your Business Start a Subscription Service? 

There’s a reason why subscriptions have taken the ecommerce world by storm. Launching a subscription service can offer the following benefits: 

Consistent Revenue  

Because they are paid for on a regular basis, subscriptions provide your business with a recurring stream of revenue, which can help you plan inventory, predict sales, and streamline your operations. 

Higher Customer Lifetime Value 

A monthly subscription business strategy can skyrocket customer lifetime value by turning one-time or occasional buyers into subscribers.  

Lower Acquisition Costs 

Since you’ll be getting repeat purchases from customers, you won’t have to spend as much on acquiring and retaining new customers to keep your business going. 

Boost customer life value

How do Subscription Services Increase Loyalty? 

Subscriptions boost customer loyalty by providing value and engaging customers. The service offers convenience and personalization—two qualities that modern shoppers value in an online buying experience. 

Regular subscription purchases also offer insights into customer preferences, interests, and habits. You can use these insights to optimize your marketing efforts and enhance your path to purchase. This will allow you to better engage customers and keep them coming back to your business, which goes a long way toward building loyalty and creating sustainable success. 

In addition, subscriptions can open up opportunities for you to upsell and cross-sell products. Because they already have an existing relationship with you, your subscribers are more likely to buy additional products or services that you offer. This is another way for your business to drive sales and increase revenue.  

Types of Subscription Services  

To make subscriptions profitable for your business, the first step is to choose the right subscription model. This will depend on the type of products you sell, your costs, fulfillment capabilities, and your business objectives. 

The following are examples of subscription services: 

  • Digital products. This involves distributing an intangible good or service to a shopper. Since you are providing a digital product, your business does not need to replenish inventory.  
  • Curated boxes. Curated boxes are well known subscription offerings (think prominent brands like Blue Apron, Birchbox, and Stitch Fix). Curated boxes give customers a set of personalized items on a repeat basis. They can generate a lot of profit for a wide range of industries, but they also require higher operating costs.  
  • “Subscribe and save”. This model allows customers to automate purchases of their essential and/or frequently-purchased products at a special or discounted price. While effective at converting and retaining shoppers, this subscription model needs to be priced correctly to turn a profit for your business. 

What are your goals?

Before you set up a subscription service, you should define your objectives and motivations for doing so. Do you want to attract a new market? Looking to add a new revenue stream? Are you hoping to reduce purchase friction by automating the reorder process? Your goals will help determine how you design, promote, and measure the success of a new subscription program.

What customer needs are you addressing?

Ask yourself why a customer would want to become a subscriber. Would they be motivated by convenience, reduced cost, or both? Are they signing up to “set it and forget it” or for a curated product experience? Knowing what your customers need is crucial to the subscription creation process and can assist you in deciding which products, services, and solutions you focus on.

How are you going to market it?

Once you know what your customers need, how will you let them know you have the solution? Will you use your current channels to announce the subscription option or branch out to attract new markets? Subscription models tend to be popular among Millennials, so you might need to change up your current marketing strategy to focus on their preferred media and watering holes. A good value statement for your subscription service will provide an excellent starting point for your marketing efforts.

Can your processes scale to handle it?

Do you plan to offer unique, curated boxes each month? You’ll need to reallocate time to accommodate this or hire additional personnel. Is your inventory management process ready to handle automatic reordering? Automatic reordering can put significant strain on a fulfillment structure designed for irregular orders. Launching a new subscription service can take up a lot of time and strain your existing resources. Before you can start offering subscription options, take stock of your resources and processes. Some adjustments may need to be necessary to ensure scalability.

Can your ecommerce platform handle it?

If your ecommerce platform doesn’t come equipped with the ability to offer a subscription option on every product, you might hit a few snags when it comes to launching a new service. A subscription-enabling plugin might suffice, but these can come with a host of stability and reliability issues and end up being more trouble than they’re worth. Make sure your platform is robust enough to handle your new subscription service…and any others you hope to launch down the line.

How Do I Build a Subscription Service Business? 

An effective subscription service engages customers, offers value, and delivers an experience that keeps them around. Here are the steps you need to take to build a successful subscription offering. 

Pick a Great Product and Niche 

Some product categories are more competitive and saturated than others. Before starting your subscription service, evaluate your product offering and your target market. Make sure your product stands out in the industry and offers a unique value to customers. 

Personalize Your Offer 

When it comes to online shopping, customers want personalized experiences. Take some time to refine your messaging, understand your buyers, and leverage data to create highly tailored experiences based on their interests and preferences. 

Focus on Retention  

Once you’ve acquired a solid subscriber base, you’ll want to turn your efforts to customer retention. Give customers a reason to come back with an experience that extends the subscription—think of ways to dazzle customers, provide them with support, and treat them like a valued part of your online community. 

Invest in Dynamic Marketing 

A subscription service cannot succeed without proper marketing. Leverage your marketing channels to promote the benefits and value of your subscription. Consider promoting your service through emails, social, paid ads, affiliate marketing, and influencers to attract new customers and engage with existing subscribers. 

Turn Buyers into Subscribers

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Author's Bio

Miva

Miva offers a flexible and adaptable ecommerce platform that evolves with businesses and allows them to drive sales, maximize average order value, cut overhead costs, and increase revenue. Miva has been helping businesses realize their ecommerce potential for over 20 years and empowering retail, wholesale, and direct-to-consumer sellers across all industries to transform their business through ecommerce.

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