For over a decade, the revenue model of various companies has shifted to a trend of a totally customer-centric model which is known as Subscription Economy. It’s an age-old phenomena when people used to subscribe to magazines, newspaper etc. that shaped into a trend of the 21st century. Companies like Netflix, Booksnbeyond, BirchBox etc. work on the subscription-based business model rather than pay-per-product services.
So what is Subscription Economy?
A subscription model runs on periodic use or access of a service or a product instead of ending a transaction in one go. It’s like maintaining a relationship. This creates repeated business opportunities. Another additional benefit from this model is that we come to know more about the customers and their buying behavior. This can be used to create customized customer experience and increase the brand loyalty.
Companies mentioned above and more who work with the model of subscription economy understand the ongoing and recurring consumer preferences, and they let their consumers choose – to either pay in one go or pay per subscription monthly, bi-monthly, quarterly, semi-annually or more.
The customers are happy because they do not have to worry about the repeated process of purchase. The store/company owners are happy with the predictable revenue and some assured business in addition to the gained insight after every purchase which helps them customize the product, service or the product ensemble as per the need.
This is what subscription economy is all about.
“A modern business transformation from selling products to offering highly personalized subscription services as per the consumer needs”.
Small-medium business owners are now recapitulating their product payment options, in turn leading way for the rise of a “New Subscription Economy” — meaning, a recurring income and long-lasting customers.
As far as the technology or software industry is concerned, Gartner, a prominent analyst firm discovered that “by 2020, more than 80 percent of software vendors will shift to the subscription-based business model, regardless of whether the software resides on-premises or in the cloud.”
How is Subscription Commerce different than regular eCommerce business?
The subscription commerce aims at bridging the gap between expectations of the modern customers and traditional pay-per-product services, which not just benefits the customers but also helps businesses scale up steadily with recurring business.
Consumer Behaviour: Subscription business model is driven by consumers and not vendors; that is why you need a different strategy to acquire prospects and retain subscribers. Deep understanding of your existing and potential customers gives you a broader picture of “what triggers the people to make buying decisions”. This helps to create great customer experience which leads to brand loyalty, business sustainability, and repeat purchase.
Products: Depending on the analytics of the buying behavior and preferences selected by the customer, the subscription products can be assembled with an element of surprise.
Unlike the regular eCommerce pattern where the products are already selected and the maximum that can be done is to showcase some recommendations to the customer, via cookies, the products that he might buy – here the customer can be delighted more. This is the reason why many subscription boxes are the surprise boxes where the customers know the product type or category, but do not know what exactly the product would be.
Packaging: A good packaging can turn your subscribers into the brand advocates whereas a bad packaging can reverse the game. In traditional eCommerce business, the priority of seller is the safety of the products rather than beautification of the box.
In subscription commerce, you have to work equally on the box styling and safety as you are aiming to build a long-term relationship with subscribers. Customer retention is tougher than customer acquisition and certainly needs extra efforts.
Tip: Some personalization on the boxes can really add to the delight factor, the customers can actually use the beautiful, durable, personalized boxes for other purposes, which keep your brand close to them.
Technology Differences: From subscription box website design to delivery, you have to walk an extra mile to delight your subscribers. To build a subscription box website, hire an expert team, which has a substantial experience in developing recurring-payment systems and subscription-optimized designs rather than a regular eCommerce development team.
Like traditional eCommerce business, there is a huge growth potential in the subscription industry – Over 2000 B2C companies are capitalizing upon customers’ diverse tastes. Globally, an average subscriber has seven or more different types of subscription services.
Harvard Business Review team report says that B2C subscription box companies have successfully acquired more than 11 million subscribers in the United States in the year 2017, and the industry has been growing at a faster pace since 2011.
What will take you ahead?
To stay ahead of the subscription game, focus on building long-term relationships with your prospects/customers by understanding their needs and offer them a more personalized, real-time experience with immediate fulfillment.
A recent research by Genesys (a prominent customer experience platform) of 27,000 US-based consumers across 44 industries found that businesses who committed to enhancing customer experience( like more personalised offers, on-time delivery, better support) got positive outcomes, including a 10-15% rise in the revenue growth and a 20% increase in customer satisfaction.
Personas: Identify your ideal customers based on the existing market insights and real-time data of the present subscribers. The key metrics to consider here: customer demographics, behavior patterns, motivations, and goals. Process out the common patterns and similarities to create detailed subscriber persona(s). A well-defined persona will guide you where to invest more time, what type of customizations can be done with the products or product-combinations — in turn allowing you to align your business in the right direction. This step will help you target quality visitors, leads, and subscribers.
Since subscription economy is totally relationship-centric therefore defining the personas of your customers initially and also taking feedback continuously is the key to running your product/service.
Think Inside the box: As as subscription-based business owner, you will get the true opportunities to delight your customers with the element of surprise. Get familiar with your consumers taste and preferences to send the box with surprise items each month. This will create a sense of mystery and increase the level of excitement to receive each package.
Choosing the Right Platform: Starting a new subscription box website or adding subscription boxes to your current eCommerce site are the two most confusing options out there for you to pick. If you want to save yourself some research time then appoint an experienced subscription commerce consultant, who is ready and experienced with all the legwork for you to choose the right technology and meet the needs of your business.
Relationship-centric Marketing: To stay ahead of your competitors, you must focus on accelerating customer engagement on various media channels (selected on the basis of subscribers persona research) by offering them the relevant knowledge and a personalized experience at the right time on the right channel. That’s how your customers will start recognizing, knowing, and trusting your brand.
This Is Your Chance as a budding Subscription box Entrepreneur
The best part about a subscription model is that everything you need to begin with is very accessible to you – right now. The relevant technology and platforms, all are available and partners like ‘My Subscription Business’ can help you develop your own subscription box website and plan out strategies to reach out, drive more engagement with potential customers.
