Imagine what your business would be like if a significant chunk of your earnings was something automated that just happened every month like clockwork. Sounds nice, doesn't it? Now you have a pretty good idea why millions of online shoppers are are visiting sites that feature subscription-based services and products. Want to add a piece of that pie to your bottom line? Read on!
This kind of selling model can take several forms, here are the popular ones:
- Product / Box Subscription - Do you have a monthly product you can send out to subscribers? Or perhaps even a box full of them? Maybe you are a quilt shop that can sell the supremely popular Block-of-the-Month kits (BOMs), or perhaps you create digital content and can bundle a download together every month. This type of subscription has enjoyed a tremendous boost in popularity throughout the world in recent years, and is now a more mature market, and for you that means fewer unknowns going in.
- Service Subscription - Do you do repair or service work? Perhaps you offer some kind of short-term rental or even an online Software-as-a-Service (SaaS)? The old model of charging only when someone is right in front of you does work all right. But it's less reliable than offering some kind of package deal with reasonable, periodic charges that appeal greatly to your customers. Here's an example: Many dental practices have adopted this model and offer cleaning and whitening service for a low yearly payment and just allow customers to come in several times a year. During the cleanings, any further work that might need to be done is inevitably discovered, leading to more business for the practice.
- Membership - If you host some kind of club or program that offers benefits to members for which your normal customers are not eligible, charging a small annual fee can be one great way to add to your bottom line. The more you offer, the more you can earn, and group and club activities are a great loyalty builder, driving further sales for items or services your members need.
Why should you sell this way? What are the risks? What are the benefits? Here are some compelling reasons why you should be doing this kind of selling, if you are not already doing so:
One: Programmed Earnings
As you build a base of subscribers, you'll begin to notice that your fixed base of periodic recurring earnings also grows. Unlike the sometimes seasonal, fluctuating revenues that retail selling often suffers, the programmed periodic earnings of subscriptions fluctuate very little, as long as you're providing what the customers expect and following the three rules of subscriptions. More on that later.
Why would they fluctuate? Every subscription program is going to have a churn rate; a small percentage of subscribers will cancel on you. Ideally, your adoption rate for new subscribers will exceed your cancellation rate, so your program will grow steadily, but you may experience downs as well as ups over time.
But there is security in knowing that on that certain day each period of the subscription, your Rain system will automatically run charges for each of your subscribers, and your bank account will steadily and dependably get that influx of revenue.
Two: The Mode is Appealing
One thing the internet and the mobile data revolution have done is to make things much more convenient and automated than they have ever been. Shopping is no exception. Subscription sales satisfy the craving for easier everything by reducing the shopping decision to a single one: Do I sign up, or not? Once you've signed up, the expectation is that you'll continue paying periodically, and the company will continue delivering what you have signed up to receive.
As long as those expectations are maintained, the mode of buying will remain satisfactory. That's great, but the mode also lends itself well to making that initial decision easier for the customer. Instead of one, huge payment, you're spreading it out, so all you see is that first, little one. Safety nets such as, 30-day Free Trial, and No Contract: Cancel Any Time further reduce resistance. Nobody wants a contract, and if you as the seller are doing your job right, you're making it easier for the customer to stay with you by keeping that satisfaction threshold positive. Throw in freebies. Find ways to exceed expectations, and suddenly you have a subscriber base that's recommending you to friends and loved ones. And that leads us to the next point...
Three: Your Opportunity to Shine
Do you take pride in your service excellence? It's nearly impossible in today's world of instant online reviews to succeed unless your are prioritizing how well you serve your customers, no matter what your business model is. The power of word-of-mouth reigns supreme, and can easily make or break you. If service is a point of pride for you, subscription/membership selling will be your chance to truly stand out from the competition.
You should practice rapid-response communication. You should be willing to eat occasional costs to satisfy customers that are having a bad experience. You should constantly be asking, "How can we make this even better for our customers?", and follow through on those brainstorms. That kind of effort will be perceived by your customers, and they'll reward you by talking about how wonderful you and your company are. That kind of publicity is priceless, and will go a long way to helping you reach your revenue goals in the long run.
Four: Programmed Fulfillment
Just like an army in the field won't last if they don't have a good logistical strategy, your business won't do well if you can't keep products on the shelf, or services in operation, or whatever it is that you do. Add the subscription model to your sales strategy and that part of your business gets easier. Every month, you'll have a very good idea how many sales in that area you'll be making, so taking the steps to ensure that you have on hand what you need for each subscriber is simple math. Accounting for shipping and other costs also gets easier with this model.
That makes your entire business practice that much more secure: it's always better to work with known quantities. Don't get me wrong, with any physical product there's always going to be some guesswork on how much you'll need, but with the subscription model, the margins for error will be much more comfortable than with standard retail, and if you are padding your inventory so you have extra, reselling the items as standalone offerings can also be a very good thing.
Five: Long-Term Loyalty
Most Rain clients have brick-and-mortar stores, and part of our overall goal of Reinventing Main Street is creating a variety of opportunities for you to sell more. Subscriptions are a great example: this selling model is a new avenue for you to improve your bottom line, and if you're succeeding, then we're helping traditional retailers to thrive in a world with small-business-crushing giants like Amazon and WalMart. That's what Reinventing Main Street is all about.
The subscription selling model has synergy in this area: If your subscription is succeeding and growing, you are building loyalty over a much longer term than the traditional buyer-seller relationship. Your local subscriber customers are going to demonstrate that loyalty by walking through your door and coming to you for your other offerings more often than if they weren't happy subscribers. Your non-local subscribers are similarly more likely to shop your online store than if they weren't already familiar with you and happy with your service. Build on that synergy by rewarding their loyalty with coupons and special offers that only subscribers can get, and you've got a recipe for significant growth.
The Three Rules of Subscriptions You CANNOT Break
A couple times along the way in this article, I hinted at some rules you need to be aware of for this kind of selling. You're now familiar with the five major benefits of subscription sales. Those are all compelling reasons to consider launching a subscription or membership program of your own. Just be aware, if you do move in this direction, there are some rules you need to follow if you're going to be successful:
- Communicate Reliably
Reply quickly, communicate with full details and be proactive wherever possible. Your communication lets your subscribers know that they're not dealing with a robot automating the program, so add a healthy dash of your personality, and do it the same way for people who love you and for people who are upset with you about something. Unresponsive subscription services and ones that communicate minimal information in shaky ways are likely to get dropped, so stand out by always communicating well.
- Dependable Delivery / Pickup
Make sure you're religiously scheduling the time and manpower you need to fulfill the shipments for your subscribers. Hopefully during the process of signing up for your subscription, your customers were informed what to expect on delivery times: Do everything in your power to stay true to those expectations. If something happens that's beyond your control, be sure to communicate with affected subscribers and get them an accurate estimate of when the delayed delivery will happen.
- Be Excellent
Do you get excited about anyone who just goes through the motions and does the minimum? Neither do your subscribers. Make sure your subscription has excellence woven into it wherever possible, and never stop looking for ways to do it better. Your constant effort in this area will pay off with loyalty from your initial subscribers, and word-of-mouth referrals as you consistently find ways to improve. Good enough isn't good enough; do it better!
If this is an appealing prospect (and who doesn't like the idea of automated earnings?) take a look at this informative series of articles by Forbes about this kind of marketing and how to prepare for this kind of business model.