How to Create an Effective Subscription-Based Service for Your Business

During the stay-at-home order, people demanded more regular direct-to-your-door deliveries as they were unable to leave their homes. This led to the rising popularity of subscription-based services.

Of 1,000 shoppers certified, ⅕ purchased a subscription box service during the pandemic. Hello Fresh, BarkBox, Blue Apron, and Dollar Shave Club were the most popular subscriptions. By 2023, it is expected that 75% of direct-to-consumer businesses will have a subscription-based service. 

There are two types of subscription models: curated boxes and repeat orders. Curated boxes are an assortment of selected products curated to the customer’s taste. When a business gets to know their customers really well, that’s when their mystery boxes perform best. Centered around people’s hobbies and interests, the boxes excite people and make them more likely to try out new products. Subscriptions, therefore, allow businesses to maintain a strong relationship with their customers. They present a unique chance for smaller, up-and-coming businesses to make their way into new customer homes.

Subscription-based services are here to stay, so how can you make them work for your business? Let’s take a look at a few examples of subscription models that have worked for other companies.

Keep it Simple

The initial draw towards subscription-based services is the free trial, which entices 29% of customers. On the other hand, 22% of customers sign up for monthly subscriptions due to the element of surprise that comes with each package. 

Founder of Grounds & Hounds Coffee, Jordan Karcher suggests against creating subscription-based services with special pricing or promotion. Instead, they place a greater emphasis on marketing, emphasizing the savings, convenience and flexibility that come along with the subscription model. Karcher’s company saw their monthly subscribers increase by 35% throughout the pandemic.

While some subscriptions have a set monthly fee depending on quantity, other businesses operate differently. Rent the Runway and Stitchfix are two examples of companies setting their own model. 

Emphasize the Sustainability of Subscriptions

Rent the Runway and Stitchfix both offer clothing from a variety of brands shipped directly to your door. These subscription-based services make it accessible for people of all socioeconomic statuses to access the same clothes that someone in a higher tax bracket would purchase, at more affordable prices. 

These businesses focus on recruiting younger customers. Youthful consumers care a lot about sustainability, and the idea of renting clothes rather than buying them is appealing to this demographic. Further, if an item is rented out three or four times, “a retailer is able to monetize the inventory better,” according to a comment from designer Rebecca Minkoff to CNBC

Rebecca Minkoff is among the first designers to offer the opportunity for people to borrow clothes, wear them a few times, and return them, or purchase the items at an adjusted price. The borrowed product can be returned or purchased. The service will be launched this summer, and the subscription model is already underway. 

Product sold on RebeccaMinkoff.com website.

The recurring revenue coming from subscription models provides an opportunity for retailers to have a predictable revenue stream, and maintain customer loyalty. 

Customize the Experience

A crucial step to creating an effective subscription-based service is to find a way to effectively collect information from the customer in order to send them things they will want and use. Dollar Shave Club is an example of a business that does this especially well. The “tell us how you get ready” section on their website gives the company insight into each individual customer’s routine. This allows them to only ship things to the customer that they will use. Blue Apron is able to collect similar personalized information. They ask the customer to describe their lifestyle, taste preferences and more when signing up for the service. This ensures that their meal kit deliveries give the customer autonomy over what they are cooking.

Subscription models are a great asset for many businesses, streamlining demand levels over time by allowing the customer to tell the company what they want and how much they want. If you don’t already have a subscription-model in service, consider that this may be the best option to take your business to the next level.

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