According to a cross-channel marketing report conducted by Responsys and Econsultancy, 70% of companies find it’s more costly to acquire new customers than it is to bring back existing ones.
This is undoubtedly one of the reasons that subscription models have become so popular in the world of eCommerce. Subscriptions keep those hard-fought customers on the hook for automatic repeat purchases, plus they create a reliable source of recurring revenue.
However, starting a successful subscription-based business, or adding a subscription to your existing store, isn’t easy. It takes careful planning, knowledge of your customers’ needs, willingness to try new things… and then some.
If you’re considering trying the subscription model for yourself, here’s what you should know and do to bolster your chances at long-term success.
Why recurring revenue is so important
Recurring, predictable revenue is ideal for eCommerce stores. In a world where the next sale might be anywhere between ten seconds or ten days away, revenue that can be counted on month after month, year after year, can go a long way in creating stability.
We addressed why subscription-based revenue is ideal for many stores in a previous post:
A subscription-based sales model introduces regularity into this world of chaos and unpredictability. Store owners will always know how many subscriptions they have running at any given time, how many subscribers belong to each tier, and when the next billing cycle will occur.
With subscriptions, a stream of reliable, recurring revenue is introduced that store owners can count on. […] And with predictable revenue, you can make smarter decisions about how to spend your marketing dollars, what technologies to invest in, and which areas of your store to grow next.
This reliable form of revenue doesn’t just affect how much money you make — it affects what you’re able to do next, whether that’s invest in an improved design, try out new forms of marketing, or upgrade your hosting. Subscription revenue might even allow you to hire an employee or work with an agency!
Let’s go over some of the elements that you need to capture this revenue and establish a successful subscription model.
Success begins with strong backbone: your website
As you might expect, the very first thing you need to have is a reliable website with eCommerce capabilities or a content management system (CMS) that supports subscription-based goods.
If you’re just getting started, we recommend using WooCommerce and the WooCommerce Subscriptions extension. WooCommerce allows you to start your store for free, while the Subscriptions extension gives you the power and flexibility to offer both physical and digital goods on schedules you choose, take automatic payments through 20+ supported gateways, offer free trials, and much more.
Here’s an overview of WooCommerce Subscriptions and why you should give it a shot:
To give your customers a reliable, enjoyable experience — whether they buy from you a single time or have a subscription that lasts for years — we also recommend the following:
- Managed hosting — This hosting experience gives you hands-on assistance with updates and maintenance, plus better security and monitoring that’s ideal for an eCommerce environment.
- Easier payments — Whether this means accepting PayPal or being selective with your choice of payment gateway, the easier you can make paying for subscriptions, the better. You can see the gateways that support automatic payments through WooCommerce Subscriptions right here.
- Security — Read our post on securing your WooCommerce store to learn the first steps you should be taking.
With the software out of the way, let’s talk about what really makes a subscription business or package viable. We’ll start with the financial aspect, which includes both pricing and the frequency of payments.
Fair pricing and payment schedules
One of the first things to consider is how much to charge for each item included as part of your subscription program. If your subscribers receive a single, regularly-stocked product each month, this will be easy. But if your subscription is for monthly “boxes” or surprise “packages,” this might take a little more consideration.
A few things to keep in mind:
- Your customers will appreciate, or might even expect, discounts in exchange for subscribing. This is especially true if you’re shipping regular-price items they could otherwise buy from you on demand (for example, if you have a subscription program for underwear, food, or household goods).
- If you received any items for free, pass along the savings (if possible). Many subscription boxes include free samples or discount goods provided by manufacturers. Throwing these in without upping the price can make your offering look like an even better value.
- The higher the cost, the bigger your “wow” factor should be. Subscribers who don’t feel as if they’re getting what they paid for — or more — will drop out quickly.
Along with the cost of your subscriptions themselves, you should also be considering how often you charge for them. Some customers prefer to pay monthly, while others will be fine paying once per year.
The smartest thing to do: if you can manage it, give shoppers both choices and allow them to switch between payment plans (or even delivery frequency, if you choose to offer multiple options here).
Products that are sensible for recurring deliveries
If you’re thinking about offering subscriptions on your store, it’s likely because there’s something you want to deliver automatically to customers month after month. But is that “something” really what they’re going to want or need?
The best subscription businesses are founded on real, expressed needs, not guesses or ideas that “sound cool.” It’s a harsh reality, but it’s the truth.
Think about the practicality of someone going out and buying what you sell (or plan on selling) monthly — or even biweekly — from a local store. Some products are going to sound realistic, even for very specific shoppers or situations. There’s definitely a group of people who buy specific kinds of food and drink often, and certain household supplies run out quickly.
But how often do shoppers actively buy new socks, or pick out new toys for their children? Maybe not often enough.
Having said all this, there are still ways to make subscription businesses work for products that are desired less frequently. And the solution is pretty simple:
- Turn down the frequency to quarterly or perhaps bimonthly (and take payments accordingly), and
- Consider including more than one product, since shoppers are likely to buy several new goods at once vs. just one item or pair. (Think about socks — you buy a pack at a time, not just one set!)
There are still, of course, products that just won’t suit a subscription business. A hammer of the month club? Er, we think we’ll pass on that one.
Delivery schedules that suit customers’ needs
We’ve already hinted at this, but a huge part of establishing a successful subscription program revolves around finding delivery schedules that meet the needs of your customers.
For most programs, it’s going to be safest to start out with monthly deliveries and actively ask your customers for feedback. This will allow you to find out if you should scale up or down, or just offer more options. This applies to consumable goods like food and alcohol, beauty or makeup collections, and other delivery items that might “run out” or be used up (ex. laundry detergent, hand soap, shampoo…).
If your program is going to take a lot of work to run — maybe you’re partnering with several manufacturers or other store owners — quarterly is a good place to begin. Again, once you are in a good spot with your processes you can ask subscribers if they’d like more frequent deliveries for an extra fee.
Shipping partners offering fast and affordable services
One of the most exciting feelings in the world is getting a “your order has shipped!” email. The wait between that email and your package’s arrival can be nearly unbearable, depending on what’s inside the box.
This is why your subscriptions should be shipping with reliable carriers who are able to deliver at reasonable speeds, no matter where you’re sending your goods. No one wants to wait two weeks for anything, especially if they’re just going to be billed again two weeks later!
WooCommerce supports many shipping providers, which you can explore right here. You can also use an extension like ShipStation to streamline the process of printing labels and generating tracking numbers.
Planning to offer multiple shipping options for subscribers? Be sure to add estimates to each method. Shoppers will likely pick the cheapest thing they can find, but if Option A is just $3 more and gets their package there 5 days sooner every single month, they’ll probably spring for it.
Don’t forget about the price of your shipping, either — if potential customers think your subscription is reasonably priced but your shipping is too high, they’re likely to abandon you in favor of another provider. Negotiate with your carriers to get better rates, or consider factoring some of the shipping cost into the subscription cost to alter the perception that you’re charging too much.
You can always completely eat the cost and offer free shipping, too, but that’s not for everyone. Weigh your options carefully before you launch!
The ability to listen and act on feedback
In the section above on delivery frequency, we mentioned asking your customers for feedback on whether you’re sending products too frequently or not frequently enough. This simple action has the potential to make or break your subscription program.
From the very start, you should actively solicit subscribers for feedback, and make it easy for those who want to give it to get in touch. This could be as simple as monitoring a Twitter account, setting up a contact form, or dropping a “let us know what you think” card with an email address on it into your shipping boxes.
- Delivery frequency — Should you have more options, scale up or down, or is your timing just right for everyone?
- Pricing — Are your prices fair for what subscribers are getting? Could you offer occasional discounts via email (or even surprise printed coupon codes in your boxes) to offset necessary high prices?
- Shipping — Is shipping reliable and affordable? Are your products arriving safely? Are there any countries you might want to consider shipping to in the future?
- The products themselves — Is the quality good? If you’re shipping a selection or surprise package, are the items worth the cost paid (or even worth a little more)?
- New options — Maybe you sell subscriptions for your freshly-baked cookies, but your subscribers want you to ship out your world-famous brownies, too. You’ll never know unless you ask.
Once your customers are giving you feedback, listen closely and be prepared to act. If you see a trend or something alarming, try to resolve the issue and notify the customers impacted or interested as quickly as you can.
Keeping communication open and showing commitment to your business can go a long way in keeping those hard-earned subscribers around!
A successful subscription-based business is within your reach
With the right knowledge, tools, and products, attracting subscribers and creating a steady stream of recurring revenue is well within your reach. We hope you’ve found the tips and ideas in this post helpful as you continue your journey toward maximum profitability.
Looking for more advice on running a subscription-based business? Have a look at how subscriptions can benefit your site, whether they’re your primary source of income or being added as a new product to an existing store.
Have any questions for us about selling subscriptions online? Give us a shout in the comments and we’ll be happy to help.