It’s very obvious that problem solving skills and creativity of business owners from all around the world have been put into test this year, resulting in business owners finding themselves facing a constant challenge to retain and gain new customers.
This is why recurring to a billing model has been on the rise. Businesses have been able to see substantial and sustained growth in their revenues, as well as proving to be a worthwhile method, as it can increase the long-term value of your products and customer loyalty.
However, it is easier said than done and of course this business method like every other business model comes with its own challenges. There are a few aspects to take into consideration before kicking off with a subscription model for your business.
Not every business structure may be able to adapt to a subscription model, since it requires marketing and technological challenges including keeping up with product stock levels, payment system, choosing a suitable marketing approach and the effect on margins.
One of the first steps is to decide what type of subscription model will be the most suitable to provide for your customers and this will depend on your type of business.
The replenishment model which supplies the same product to a customer on a regular basis is the most popular option among businesses. This model has proved to be effective for many successful start-ups supplying health products, sport supplements and skin products.
Another more adventurous and tailored approach would be creating customised products such as Hello Fresh which sends to their customers a different meal and programme each day, which will have customers trying and consuming a variety of new products.
You could also take the opportunity to include testers in your deliveries inviting customers to find about them or partner with other companies to include their products and experience a mutual benefit. Win, win.
The following approach is considered more exclusive which grants subscribers access to exclusive products and services. For example the subscription model that the Financial Times currently operates where in order to access to premium and exclusive content you must pay for their subscription.
So these are some of the approaches you might take into consideration and decide if it would be profitable for your type of business. Once you decide which of these approaches you would like to incorporate on your business let’s look at some other factors to bear in mind.
How cost effective will the subscription method in the long run? How much margin will be impacted by it? How long will this method be effective?
The length of time subscribers consuming your products will vary, but it has been proved that subscription based businesses have manged to retain a greater amount of customers because you have a continuous contact with your client base, building a strong bond of trust resulting in life-long consumers more available every day.
Acquiring new customers is always a difficult task that’s why is very important that before deciding if this method will be effective for your business, you need to understand how a subscription model and the promotion of the service needs in relation to the existing product offering.
If you are looking to introduce this business method to your business and to be guided through, get in touch with Feet On The Street and we will able to assist you and your business with a marketing strategy according to your business needs.
Written by Coralie Ayala