Consumers are going crazy for those ubiquitous once-monthly curated packages that are sent right to the door and contain a marvelous mix of goodies. Whether it’s healthy snacks, pet toys, wine, fashion items, or any number of other consumables, merchants seem to be lining up to accept subscription payments from eager shoppers. If you want to get in on this action, however, there are some important tips and pieces of information you should know. 

What are subscription boxes?

The subscription model appeals to two types of buyers: those who want to get regular deliveries of the same items at set intervals, and people interested in a particular category of products who want to be surprised by a specific offering. In this latter case, the shopper knows that they will be getting a certain product type at regular intervals but might not choose a specific variety.

The subscription model has several benefits.

• Predictable revenue. Because you know exactly what will be coming into your account from customers’ automatic payments, you can streamline inventory planning, accurately forecast sales, and plan future investments.
• More cash available. Many subscriptions encourage customers to pay upfront by offering a discount. This puts the funds in your hands sooner.
• Better customer retention. It costs five to 10 times more to acquire a new customer than it does to keep an existing one. By its nature, the subscription plan keeps buyers coming back for more.
• Ability to enhance the shopper’s experience, thus creating loyalty and even referrals.
• Ongoing customer contact enables you to expose shoppers to additional products, increasing your sales.

In short, the subscription model is a wonderful way to add extra life and variety to your ecommerce store, inspiring long-term loyalty and satisfaction.

Choosing the right subscription model.

There are different types of subscriptions. Each has its own set of advantages and drawbacks. Keep these and your own business needs and customers in mind before choosing.

• Curation. This is the typical “subscription box” setup that companies like Stitch Fix and Birchbox have made famous. Designed to inspire customers to discover new products, these packages usually come once a month and cost anywhere from $15 to $100. Profits can be high with this model, but churn rate is also elevated once the novelty wears off. Additionally, operating costs for branding, regular shipping and packaging can be significant.
• Replenishment. As the name suggests, this model suits businesses looking to help customers to automate the purchase of essential items needed on an ongoing basis. Common items in this model include pet food, diapers, razors, and makeup. Long-term retention rates are high for this model, but the profit margin is slim. This is because you will probably offer a discount to incentivize sign-up. As a result, you will need to spend time and resources encouraging as many customers to buy in as possible.
• Access. In this model, subscribers pay to receive exclusive members-only benefits. This model encourages members to bond as a community and works to enhance their relationship with your brand and each other. Loyalty grows even more when you offer periodic bundles, early product roll-outs, or members-only discounts. Making this model work requires time and creativity on your part.

In addition to these three distinct approaches, you might consider introducing subscriptions/recurring billing into your existing offerings. Doing this enables you to dip your toes into subscriptions without actually needing to pivot your entire business.

How to prevent “churn.”

Churn is a term that refers to customers terminating their subscription, and it happens a lot. The good news is that there are things you can do to minimize churn.

• Do careful research before you start to make sure that there is an unmet need for the products you want to offer. Some markets, such as meal kits, are saturated at this point.
• Determine the main goal you want to achieve. Do you want to sell a certain number of boxes, obtain X new customers in a specific time frame or make a set amount of money in profits? Knowing your mission will help you to take the steps necessary to get there.
• Pay attention to pricing, and don’t offer too many freebies during the first six months when churn rates are the highest.
• Cultivate the personalized experience. Periodically, harvest information from the data you collect about your subscribers to curate their experience even more narrowly.
• Use email and social media to keep customers interested and engaged. This will help with retention.
• Minimize involuntary churn by staying on top of network errors, customer address changes and lost, stolen or expired/expiring credit cards. If this seems overwhelming, ask your payment processing company if they can provide you with software to assist with sending reminders and alerts and dealing with dunning.

Initiating a new subscription business or adding it to your existing model is an on-trend, customer-friendly way to get out of a current sales rut. Furthermore, there is a good chance it will surprise and delight many of your long-term customers while appealing to potential new ones. Many owners find that incorporating recurring product delivery into their marketing strategy ends up to be one of the most fun and effective growth enhancers available today.