Subscription Model: E-Commerce Benefits and Best Practices

August 29, 2019

 

Lots of people are just now getting hip to the subscription model, not even realizing that it’s something that’s been around for years… it’s been around long before the emergence of the internet! Have you ever sat at your grandparents' house and noticed a stack of prehistoric Reader’s Digest or National Geographic magazines lying around? You might not even realize it but your grandparents were some of the first subscribers to the subscription model back in their day. To receive their subscriptions, they mailed in a check!

 

Mailing in a check! A lot of the younger generations don’t even know how to write a check, let alone mail one! Those are signs of the times but one of the biggest signs of the times is that the subscription model is still relevant today, especially in the world of e-commerce. It’s actually considered a “norm” with online shopping. Lots of e-commerce businesses have a revenue model but they are also incorporating the subscription model as an additional revenue stream.

 

It’s a Win/Win!

 

The best part about the subscription model is that it’s a win/win for both businesses and customers. For businesses utilizing this model, it has better scalability, easier to run, and it’s guaranteed recurring revenue. For customers, subscribing not only provides convenience but in most cases, it’s less expensive. Customers have the peace of mind in knowing they’ll “never run out” of whatever they’re subscribed to.

 

Now, even though incorporating a subscription model to your e-commerce business is an overall win/win, there are also some things that all entrepreneurs need to know about it. Yes, the many benefits will be discussed but you need to know the other aspect of it as well.

 

The Benefits of E-Commerce Subscription Models

 

Better Revenue Predictions
 

One of the best aspects of a subscription model for your e-commerce business is that it allows you to have a more reliable forecast of your recurring stream of revenue. Typically, when it comes to businesses predicting their revenue for the month, estimates are formulated by analyzing data from the previous month’s sales and expenses but with a subscription model, you’re better able to forecast your revenue because the revenue is recurrent.

 

Subscriptions are based on retention and when a business is able to retain a customer, it can better predict a customer’s lifetime value (LTV). Business models that are not subscription models make it harder to predict a customer’s LTV simply because there are just too many factors that can influence a repeat purchase. Not only that but it also helps your marketing efforts by providing actionable data to go on in understanding your customers on a consistent basis.

 

Enhances a Customer’s Overall Experience

 

Aside from profit, isn’t customer experience the ultimate goal of your e-commerce site? If it’s not, then it should be! The whole point of having your own business is to acquire new customers and convert them into repeat customers, right? That’s why you have to take all the necessary measures during the building of your website.

 

In building your e-commerce site with customer experience in mind, you take steps to ensure you find and secure a memorable domain name, make the navigation user-friendly, and provide multiple payment options but when you add a subscription model to your business, it just takes the customer’s overall experience to a whole new level by way of convenience and peace of mind.

 

Convenience
 

Your customers never have to worry about running out of your products or having to leave home to get those products… your customers can receive them right at their doorstep. Diapers are a perfect example of a great product to recurrently have delivered to your home because diapers go quickly and you can never have too many of them!

 

Peace of Mind
 

Lots of subscription boxes are put together based on the customer's preferences and other factors they listed so they can rest assured that whatever products they received in the mail are solely based on what they wanted and approved. They no longer have to search for products that are the right fit for them when they can just customize what they want a get it on a regular basis.

 

Better Inventory Management

 

In typical e-commerce business models, inventory management can get way out of hand if not handled properly. Poor inventory leads to wasted money. Maybe you have a product that’s not selling too well but you continue to buy it… you’ve lost so much money. With a subscription model, inventory management is not hard at all if you think about it. Based on the number of subscribers you have, you will be better able to have a more accurate estimate of how much inventory you need.

 

 

 

 

The Best Practices of the Subscription Model

 

Put a Focus on What Makes Your Subscription Unique From Others

 

It’s pretty safe to say that certain products are so innovative and unique that the product sells itself but there are some products that are very practical that don’t really stand out on its own but are of great quality. For those products, you need to look at ways to put a focus on its quality to bring customers in.

 

Create Buyer Personas

 

Buyer personas are already standard with a lot of e-commerce businesses but they are quite critical for subscription businesses. Being that your customers are subscribed to your business, that means that they’re going to be with you for a long time receiving content and products and with that, you should be learning all you can about your customers to help build your persona.

 

Social Media Today talks about how buyer personas are important but the place where lots of businesses go wrong is promoting what they do and not what the customer needs, and furthermore, what that business can do to meet the customers’ needs. Doing this can hurt you worse than not creating a buyer persona at all!

 

Create a Totally Different Marketing Strategy for Your Subscription Model

 

Sure, your business is going to have a marketing strategy but your subscription model needs to have its own marketing strategy and it needs to stand out from your business’ other marketing strategies. You, of course, will want to utilize social media but also consider loyalty programs and various types of email marketing.

 

In Conclusion

 

It’s quite obvious all the wonderful benefits subscription models can add to your e-commerce business but the best part about it is that everything you need to start one is available for you right now. If you already have an e-commerce business, you should consider incorporating a subscription model to add a more steady source of revenue. There are so many resources out there that can walk you step-by-step during the process that it’s almost too good to be true… but it’s true! There’s no reason why you shouldn’t be able to get a piece of the subscription pie too!

 

 

 

 

 

 

Sarah Saker  |  Small Business Owner and Writer in Hattiesburg, Mississippi

 

 

 

 

 

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