Discover How Incorporating Subscription Service Helps You a Steady Revenue Flow
income flow. The business model is a win-win for both brands and customer.
The subscription business model has been around for a long time, but it wasn’t unit recent the business leaders realized the true potential of subscription box. The prefiltration of internet has kick-start that subscription services. Owing to this, there has been a steady rise in the number of brands opting for a subscription services in their business model. The subscription box differs from brand to brand, it could be a magazine, pack of beauty products, fitness, clubs, software, and streaming services.
Shopify Define Subscription Services as-
“Subscription e-commerce is the golden goose of online sales: a gift that keeps on giving.”
Ease of access, low price, and personalization are some of the features that are inherent with subscription services. One of the biggest reasons for abrupt rise in the subscription services among the entrepreneur is the opportunity it has given to connect with large customer base and help them try their larger services and products. This way the cost of acquisition of the customer is much lower as compared to others. Whereas on the other hand, subscription boxes are helping customers get a cost advantage and opportunity to try larger number of product and services.
This has helped businesses reach potential customers for a fraction of the cost as compared to the other marketing channels. Some of the proven benefits of retail subscription service are-
1. Increased return on customer acquisition costs
Cost of acquisition for a business is often on a higher side specially when they are new. They need to spend a lot on different marketing activities in order to gain a customer. And retaining this customer is again full of challenging episodes. While on the other hand, there is a big tussle among the big-brands to bind their customers beating their competitors. Subscription services create a steady cash flow from returning customers. Thus, it is worth
investing for a small as well as big brands.
The best part of subscription services is repeat purchase is implied at the time of purchase,
thus helping brand a constant flow of cash, provided, the subscribers are happy.
The longer a subscriber stays loyal to your brand, the better is the value for money when it comes to acquisition spends, which is great news for your profit margins.
2. Lower Retention Spend
Of course, you need to spend less on your subscribers as compared to a prospect in terms of follow up that because the customers are automatically ‘buying’ from you on a regular basis. This decreases the need to target your subscribers with extensive remarketing. Subscribers who are committed to regular payments are less likely to churn, which means you don’t have to eat away at your budget with retention marketing.
3. Better financial forecasting
This is probability the best of the subscription services business model, this gives businesses ability to accurately predict business’ revenue stream. None of the marketing campaign can ever give you this advantage. This model helps retails get a clear idea of how much profit they can expect. Of course, customers may decide to cancel a subscription without warning, but for the most part, financial forecasting is much easier with a subscription model.
The precise financial forecast can help you to make better business decisions. It’s particularly useful when it comes to setting marketing budgets, for instance. Additionally, if your brands is looking for investors that such a predictable cash flow is an added advantage.
4. Benefit of Word of Mouth
Subscription-based businesses create a sense of community and presence for you in the customer’s life. If you can consistently delight a customer over a few months, then customer loyalty will run high. Word of mouth promotion of the brand especially form the happy customers is one of the best marketing strategies that a brand can ever receive. With subscription services a customer tends to attach with the brand this can be a boon to your
5. Inventory Management
If you have products that are slow-moving or are looking for an easy way to sell the excess inventory for discontinued products, subscription services are a
great inventory management strategy. It can help reduce the inventory age of your product portfolio while also helping you to save profit on products you'd otherwise dispose of. Beyond customer loyalty, brand-strengthening opportunities are plenty in retail subscriptions. The nature of regularly supplying products to the customer creates more touchpoints and opportunities to keep your company top of mind.
Challenges of a Retail Subscription Service
Retail subscription services looks highly lucrative for retailers while they are not flawless. There are issues and challenges which entrepreneurs need to consider before investing in the services such as capital investment, declining quality, and competition to navigate before establishing a successful service for your customers.
Once you configured retail subscription in your online store you need to make a plan for the launch. As it is equally important for the brands to convey their customer about their subscription services. To achieve this, brands should opt for robust marketing campaign. This will help in awareness and also let you estimate pre-orders for your subscription box. Once interest has been cultivated and your boxes are ready to ship, you can launch your
offering and gather data on its performance. As we’ve discussed, you’ll need to monitor and adjust your offering to optimize its performance among your customers.
Excited about Subscription Services? Talk to one of our solution experts to help you incorporate subscription services in your business without hampering your current processes.