The benefits of the subscription model for businesses looking to diversify

Subscriptions are growing in popularity with businesses and consumers alike - will they work for your business?

The subscription model, where a business charges recurring weekly, monthly or annual fees in return for goods, services or membership, is not a new one - magazine subscriptions have been around since the late 1800s - but it’s seen a huge rise recently. 

Subscription boxes are almost ubiquitous now, providing everything from socks to soap, tea to toilet paper, vodka to veggies. Whether it’s an essential product like a razor or a luxury treat of a novel and some artisan chocolates, there’s something a bit special about receiving that box through your door every month. 

Customers in Britain spent almost £1.4 billion on subscriptions in 2020 - the average cost of a subscription box ranges from £7.50 to £30 per month - with couriers delivering almost 88 million subscription boxes across the country. 

Research from Barclaycard Payments shows that despite lockdown restrictions easing, consumer demand for subscription products is not - households in the UK are signed up to an average of 7 digital and physical subscriptions totalling £323 million, an increase of 39.4% year-on-year in July 2021.

The benefits of subscriptions to your business: sustainable income and lower marketing spend

Whether you provide physical products or services, or digital ones, the benefits to your business of offering subscriptions are clear - instead of a one off purchase, your customer is paying over and over to continue receiving your product. This provides a sense of predictability and sustainability of income - you know at a glance how much is coming in over the next month or year. It also helps to build brand loyalty; if a customer receives your coffee through their front door every month they’re unlikely to be swayed by special offers or new products on the shelves as they simply won’t be looking. 

It’s 5 times more expensive to attract a new customer than to retain the one you already have, so making those repeat purchases automatic through subscriptions is a no-brainer. 

Another huge benefit to your business is the customer data that subscriptions allow you to discover. This can be mined for further insights and improvements to your services or product ranges, and in fact this will be key to keeping your subscriptions customers satisfied.

And your customers benefit too...

For your customer, the pros are pretty clear as well. The convenience - a key factor in decision making - of not having to remember to buy loo roll, tea, sticky tape or lightbulbs take a weight off our increasingly busy and distracted minds. 

The novelty of having what feels like a gift delivered through the letterbox every week or month adds a delight factor that keeps customers coming back for more. Subscriptions also make great presents to give to others as it’s the gift that, literally, keeps on giving.

Subscriptions could even help consumers cut their carbon footprint as they remove the middle man - the retail space - which removes an entire stage of transportation and storage from traditional shopping. They also remove the need for the customer to drive to a shop, and meal kit subscriptions can help cut down on food waste.

While many new businesses based on subscription models emerged during the pandemic, even more existing businesses added subscriptions to their repertoire with staggering success, with Pret gaining 15000 subscribers by 3pm on it’s first day of launching. 

A diverse income stream is a resilient income stream

As we’ve seen throughout the pandemic when repeated lockdowns forced businesses to rethink their entire model, a diverse income stream is a resilient one. Having a variety of ways for customers to access your products means that if one, e.g. in-person dining, is suddenly removed, another e.g. meal kits, can step up to take its place. 

Adding subscriptions to your offering adds a level of sustainability to your income which is smart and hard to beat.

Digital subscriptions

Digital subscriptions are perhaps even more ubiquitous than subscribing to receive a physical product. Businesses like Netflix to Spotify operate solely on the subscription model, while some businesses have even monetised their regular email newsletters. The membership platform Patreon allows artists and creators to offer regular content to subscribers - or patrons - at varying pay points. 

Netflix - perhaps the ultimate in digital subscriptions services - has around 74 million paying users in the US and Canada alone. Even assuming all of these people are subscribed at the lowest price point, $8.99, this is bringing in a monthly revenue of almost $7 billion - and that’s not taking Europe into account!

How to make subscriptions work for your business and customers

 If you’ve never considered working the subscription model into your business it can be difficult to see how it could work but a little out of the box thinking helps. 

If you provide a product that’s consumable or that will eventually need replacing, it’s simple - if customers enjoy buying your product, they should respond well to the option to purchase it on a recurring basis, particularly if your product is only available online, or the consumer is a distance from where they can physically get to regularly.

If your product is more long-lasting, could you offer a subscription to support or maintenance services? If you offer digital products or services, annual subscriptions work well, as do adding in tiers of support available.

The option to personalise the subscription is important for your customer. If you can’t bear the taste of red peppers but your meal kit keeps sending recipes that include them, you probably won’t be overly keen on keeping your subscription going. Similarly, a family of 5 will use significantly more loo roll than a single person, so being able to reduce or increase frequency, or to pause deliveries to accommodate holidays, is key. 

Consider carefully whether it’s right for your business to lock customers into a specified time frame. In some cases it will be appropriate to offer a yearly subscription, in others being able to cancel whenever they like will be a selling point for your customers. 

Making renewals automatic means customers don’t have to remember to resubscribe - but make sure that this is abundantly clear and sending reminders when an annual payment is due to renew is good practice. 

The ability to add upgrades, for example choosing extra products to add to a standard subscription, is a great way to upsell to your existing customers, and offering discounts based on longer timescales is a great draw. 

Focus on the infrastructure before rolling out subscriptions to your customers

There’s nothing more likely to put your customers off than trying to make a purchase and being unable to complete it! Making sure that your offerings are built on a strong foundation of functional tech is a must. 

At 93ft we’ve been working on adding subscription services for our client The Drinks Drop, built on the Shopify platform, utilising a third party Shopify compatible app that allows customers to buy subscriptions for regular deliveries of cocktails. 

The subscription service allows the customer to choose different packages which include a varying amount of cocktails per order, with options for the subscriber to pay monthly or to choose a discounted annual payment. As part of this, we’ve added the ability for customers to manage their own subscriptions within their customer portal.

We’re ensuring that The Drinks Drop team is fully briefed in how to manage accounts from their end, making it easy for the business to serve their customers, and we’ll continue to offer ongoing support for their website. 

What could you offer subscriptions for that your customers aren’t aware of yet?

Utilising some creative thinking, or getting some expert outsider perspective, to figure out what your business could offer on a subscription basis is step 1. Next, you need to let your customers know it’s there. 

Use every method at your disposal to market your new subscription offering: social media, your email newsletter and PPC (pay per click) advertising, as well as making it front and centre on your website. Your customers can’t take advantage if they don't know it’s available.  

To speak to 93ft about adding subscriptions to your business model, just get in touch.

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