The Step-by-Step Guide to Starting a Successful Subscription Business

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People love convenience. From connecting to loved ones on the internet to online shopping, technology has swiftly evolved to make our lives easier.

So, it’s not surprising that many businesses can be started online today that advocate for convenience, such as subscriptions. And if you’re an aspiring entrepreneur looking to start something new, a subscription business is definitely for you.

Over the past fifteen years, our team has helped hundreds of entrepreneurs and small businesses in the United States and worldwide build and grow subscription businesses. This guide shares the actionable insights, tips, best practices, and expertise we’ve developed after helping over one hundred thousand brands.

Popular subscription businesses such as eCommerce subscriptions, streaming services, and more have grown drastically over the years as they’re more convenient and affordable.

Benefits of a subscription business

Subscription businesses may be affordable and convenient to customers, but they also benefit business owners greatly. Here are four benefits of starting your own subscription business:

  • More cash flow. Subscription businesses often ask for full payment upon subscribing at a discounted price. This helps businesses to have more cash flow to rely upon, especially for startups.
  • Increases brand loyalty. Consistency helps build brand loyalty in subscription businesses. Brands keeping contact with customers and delivering quality products and services on time increase customers’ trust.
  • Easier communication for future brand promotions. It’s easier to market and promote new products and services with a subscription business model as you’re already in contact with your customers. Leveraging this for new business promotions is more convenient and effective.
  • Lesser spending for customer acquisition. You don’t have to spend much money to acquire new customers with your subscription business, as you have a steadier revenue flow. Under a pay-per-product business model, businesses must invest more in marketing and sales promotions to acquire new customers.
  • Consistent revenue. Consistent revenue helps you know what to expect for your monthly revenue. This helps you keep track of your cash flow, expenditures, and more to budget better and invest for business growth.

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Five subscription business models to choose from

Knowing which model suits your needs is vital before you start your subscription business to understand how to grow it fully. Here are the five common subscription models to choose from:

  1. E-commerce subscriptions. This allows for recurring purchases of products or gives customers a regular supply of the same products. For example, people often subscribe to receive regular supplies of essential needs such as coffee products, weekly groceries, and more.
  2. Premium access model. This model often starts with basic features that people can later upgrade to gain access to premium features such as streaming services or video games.
  3. Usage-based. The usage-based model allows users to use a product or service and charges according to their used amount. For example, email marketing tools often charge users based on the number of contacts.
  4. Product and service-based. This model allows customers to use their products and services and charge them monthly or annually.
  5. Software-as-a-Service (Saas) subscription. ​​SaaS subscriptions allow users to use licensed software for business or personal use, such as CRM tools, in exchange for a monthly or annual subscription fee. Charges are often applied on a per-user basis.

Six steps to starting a subscription business

Starting your subscription business requires ample planning and understanding of the business model. Follow these six simple steps to successfully start a subscription business:

1. Set clear business goals

When starting any type of business, always set up clear business goals to map out your business’s direction properly. This will help guide you and ensure that you’re prioritizing key goals.

Start by defining your overall business goals. Ask yourself the following questions:

  • What do I aim to achieve with my subscription business?
  • How can my business help people?
  • What makes my business different from my competitors?

Once you have defined your overall business goals, create a checklist of things you need to accomplish to start your subscription business. These include:

2. Create a pricing strategy

Use the data gathered in your market research to create a pricing strategy fit for your business. There are many kinds of pricing strategies to choose from.

Some common examples are:

  • Freemium pricing. This is a combination of the words ‘free’ and ‘premium,’ where you allow users to use your product or service with basic features for free for a certain period in hopes that users will pay for an upgrade.
  • Skimming pricing. SaaS companies more commonly use this pricing strategy. Businesses charge the highest possible price for a new product or service and lower the prices in the future when they become less relevant and popular.
  • Bundle pricing. Bundle pricing is when you sell two complementary products or services together for the price of one. This is common in essential products such as cosmetics, food, etc., during the holiday season.
  • Competition-based pricing. This pricing is also known as competitive pricing or competitor pricing. It focuses on pricing your products or services according to the existing market rate or uses a business’s competitors as a benchmark for pricing.

Note that you don’t have to stick to one type of pricing for the rest of your business journey. It’s important to experiment responsibly to choose the best pricing strategy that suits your customer needs and ROI goals as a business.

3. Create and optimize your website

Nothing is more important for a subscription business than to have a functioning and hassle-free website.

If you don’t have a website for your business, start by creating one that aligns with your branding and is optimized to suit your target audience. Make sure to include effective CTAs to drive conversions and helpful content to help your website reach more people.

For example, don’t just create a blog to make one. Ensure that you put out content that your audience will appreciate and that will add value to your customers’ lives. A blog is a great way to supply this gap while helping your website rank better in Google or other search engines.

4. Develop inventory and logistics

To a subscription business selling physical products, good delivery, and logistics are vital to keeping customers happy and satisfied.

For example, one common reason why customers unsubscribe is due to late deliveries or damaged products. So, if you plan to send physical products or subscription boxes, ensure to create a checklist of the following:

  • Find trusted suppliers to produce high-quality products
  • Apply reasonable shipping costs for customers
  • Ensure safe and timely deliveries
  • Customize branded labels for your subscription boxes
  • Allow customers to track their orders seamlessly on your website
  • Cater to customer needs from pre-sale to post-sale

You must ensure your delivery and logistics arrangements are set and well-maintained to avoid causing inconvenience to you and your customers.

5. Promote your subscription business

One crucial part of the success of your subscription business is marketing. Ensure to strategize and plan out marketing campaigns to reach your target audience.

Popular marketing tactics such as influencer marketingsocial media marketing, and content marketing help gain traction and reach new audiences. You must experiment with various tactics to know which combinations of marketing efforts help reach your target audience.

For example, subscription boxes are typically popular amongst influencers as they have a more active and niche audience. Don’t forget to create social media profiles and be active on them when working with influencers to promote and make your subscription business easily accessible.

6. Track customer churn

Keep track of customer churn regularly to know why customers opt out of your subscription. This will give you insights into their pain points and how to improve your business.

For example, credit card issues, delays in shipping or damaged product deliveries, and economic changes are often why customers opt out of subscriptions. Knowing these will help you optimize your transaction process, ensure product safety in deliveries, and make amends with unsatisfied customers.

Avoid allowing your customer churn rate to rise more than necessary, as it could cost your business in the long run. Address issues as soon as possible, stay consistent in providing good customer service, and do your best to reconcile with unhappy customers.

A subscription business, at its core, is all about providing convenient and high-quality service or products to customers locally or internationally. It’s all about showing up whenever they need you. So, you must ensure that your subscription business is grounded by good customer service, a credible website, and a trusted brand that provides quality products and services.

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