Subscription based eCommerce businesses are taking the world by storm. No longer exclusive to streaming movies and TV shows, online subscriptions deliver everything from cosmetics to razors and pet supplies exactly when they’re needed.
They’ve proven to be an easier way to bill customers, and have helped create a more reliable revenue stream. Imagine the start of the day, week, month, quarter, or even year, payments are completed automatically and the funds poured directly to your bank account, all you need to do is ensure the customer gets what they’ve paid for.
Companies like Birchbox, an online cosmetic and skin care store, are thriving with this model. They have an option for a monthly subscription that sends a customer a box full of sample sized products right to their doorstep. If that customer likes a product they can go to the Birchbox website and purchase the full size product. They provide a seamless experience for their customers, which is exactly what today’s consumers are demanding.
The appeal doesn’t stop there. When I was a kid I remember my brother and I would subscribe to our favourite magazines. Coming home after school and finding the latest edition of whatever we were into at that time was like finding hidden treasure.
Today, it’s rare to find anything in your mailbox. This nostalgic appeal plays a role in the success of many subscription based businesses. Who doesn’t love coming home to a surprise?
That nostalgia coupled with consumer’s need for convenience and another avenue of taking payments is a powerful business model that only have positive effects on your business growth.
However, finding a subscription model to add to your eCommerce store will take work; determining the right subscription model and price point, and making sure you keep building that relationship with your customers to reduce churn.
Your first task will be determining your subscription model. Typically there are two types of different subscription models: Replenishment and Discovery.
A replenishment based model works for companies selling products that are typically needed on a monthly or bimonthly basis such as razor blades. This model is based on practicality and convenience.
A real life example of this model is The Dollar Shave Club. Their customers pick the appropriate razor for their needs and are billed monthly. There is no contract and they can cancel any time. Its a simple business model that works. It also helps that they market their product extremely well.
However, there are some factors that need to be taken into consideration that can significantly impact the effectiveness of your subscription model. Although a straight forward monthly plan works for The Dollar Shave club, this might not work for your business. You need to determine what time frame, whether weekly, monthly or quarterly works best for your customers.
What if The Dollar Shave Club took their model one step further by providing their customers an even more personalized experience?
The guy that shaves everyday will probably want that monthly plan. But what about the guy that shaves once a week; a monthly subscription leaves him with left over razors, and the feeling he’s wasted money. In this case, why not offer him a plan where he receives razors once every 2 months? The more personalized experience you make for your customer, the closer you get to building and maintaining a long lasting relationship with them.
How many times have you run out of essential items you use on a daily basis, and don’t realize how precious they are until you’ve run out? While replenishment items such as razor blades are not the most luxurious or exciting item to receive in your mailbox every month, getting them delivered gives you another precious commodity that we all want more of: time. Time to do things other than run to the store for razor blades.
So be sure to ask yourself, do I have an online store that could support the replenishment model?
The discovery model is different in that a customer receives a product without knowing what exactly was shipped.
An example of the discovery model is Vancouver’s own Meowbox. They offer a monthly box full of samples for your cat. A customer can choose between a one, three or six month subscription. They’ve also employed a discount to the longer subscriptions, encouraging customers to commit for a longer period. A proven pricing model that customers then feel is even more value for the hard earned money. However, they do not offer pay-per-product option in addition to their subscriptions, limiting their possible revenue sources.
Birchbox is another example of a business that uses the discovery model. Every month Birchbox sends their customers a box of sample products. Like Meowbox, they offer their customers a discount if they commit to a full year of samples for a total savings of $40.
Once you’ve figured out your subscription model and you’ve got your first customers, you’ve still got to maintain those customers. What’s great about subscriptions is that opportunity you have to really build a relationship between them and your brand, which many consumers want.
Communication plays a key role in all relationships. In fact, psychology tells us that it can make or break a relationship. A good subscription company will have open communication with their customers, engaging with them on social media channels, asking for their feedback and taking action based on suggestions. Over time this builds a strong bond between brand and consumer.
Without its customers a business wouldn’t exist. Gautam Gupta, Co-Founder and CEO ofNatureBox says this:
“Focus on the customer…You have to prove to the customer that you have the best products or offer compelling value…
The subscription implies that you will provide value on a sustainable basis, so think about what happens after the first few months. How do you make the experience unique?”
Every business wants to grow, that’s pretty obvious. Extending your reach by offering subscriptions is a simple way to increase growth.
Are you an eCommerce company that also offers a subscription? If so, share your expertise with us. We want to hear from you!
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