When it comes to online subscriptions, convenience is key. People like knowing that their monthly mega pack of toilet paper will arrive on their doorstep. Instead of having to buy a movie every night, they want unlimited access to streaming channels. Many online shoppers look for dozens of subscription options to help them simplify their lives, from cooking to cleaning, razors to gift giving. Subscriptions are not only useful for simplifying lives, but they are also a fantastic business model. Consider how many businesses have switched to a subscription model: Adobe, Microsoft, Disney, and Equinox have all realised the benefits of subscriptions and have switched to them (at least for parts of their businesses). We’ll explain why selling through a subscription model is so advantageous in this article. Following that, we’ll show you how to sell subscriptions on Shopify, which is the simplest way to start a subscription business.
Why is the Subscription Business Model So Appealing?
Adobe is a great illustration of what I’m talking about. The well-known photo/video/website editing software firm has a long history of selling high-priced industry products. A photographer who wanted to utilise Photoshop, on the other hand, would pay somewhere between $500 and $1,000 for the privilege. That big purchase, however, meant that our professional photographer would possess the Photoshop software for the next 10 or 20 years, or for as long as that individual was willing to use an out-of-date programme. As most older Photoshop users are aware, the software is capable of lasting a lifetime. Many of the current version improvements weren’t enough to make you spend another $1,000, and the version from ten years ago was still quite powerful. However, Adobe wised up, or at the very least followed the lead of other companies who sold subscriptions rather than one-time purchases. They realised the huge advantages of selling Photoshop (and all of their other software) as a monthly/yearly subscription rather than a one-time purchase. And those advantages apply to almost every subscription business:
Customers are attracted to subscriptions. When a customer just has to pay $10 or $20 each month for a product rather than a large flat amount of $100, $500, or $1,000, it’s a much easier pill to take. Nonetheless, the company offering the product makes the same amount of money as long as its subscribers are satisfied.
The revenue streams from a subscription company model are predictable. You aren’t forced to make irrational sales forecasts every quarter. Yes, subscription businesses lose customers over time, but it’s much easier to estimate unsubscribe rates each month and look at your promised continuous subscriber base to instantly know how much money your firm will make in the future.
The return on client acquisition costs is increased with subscriptions. This is because subscribers are more likely to stick around, forget about cancelling, or at the very least spend time deciding whether or not they want to keep using the subscription.
You create a high level of brand loyalty. Finding new clients is significantly more expensive than keeping old ones, therefore the subscription model lets you to focus on keeping current customers satisfied. And when that happens, your brand will gain a lot of affection, and your client lifetime value will rise.
Up-selling and cross-selling opportunities are boosted by subscription models. A subscription company can continue offering similar products to users with whom they already have contact rather than wasting time and money on recruiting new customers. And they’ve already expressed an interest in your business!
With that in mind, it’s no surprise that so many businesses have converted to a subscription-based business model. If you’re interested, keep reading to learn how to use Shopify to start your own business and sell memberships.
Select a Subscriptions Model on Shopify
Stitch Fix is a subscription service that blends curation and “try-before-you-buy” shopping.
To sell subscriptions on Shopify, the first step is to decide which products to sell, but more crucially, which subscription model to use. After all, the subscription model typically dictates or goes hand-in-hand with the things you sell on your site. When selling men’s shaving supplies, for example, a commodity refill subscription model makes the most sense, whereas for monthly activity boxes, a product curation subscription model makes the most sense. If you’re curious about what each model entails, we’ve listed them all below. You can combine your subscription model with your chosen product line for a more effective online business once you’ve established one.
Companies like Stitch Fix, CrateJoy, and Breobox have made product curation popular by compiling a selection of things that are given out to clients at regular intervals. These are normally delivered in boxes, and the consumer may have the option of specifying which things they desire. For example, Book of the Month curates trendy books for subscribers to read every month, but instead of making it a complete surprise, where someone who doesn’t read romance receives a romance book, customers can choose among five books. The majority of the work is done for the consumer by other curation boxes. You can choose the size of your Nomadik subscription box, but after that, the company assembles a variety of outdoor, camping, and exploration gear such as hammocks, compasses, and trail food.
The product curation model has a number of advantages, including:
- Profit potential is high.
- Customers were sent things that were both exciting and shocking.
- If customers like something in their box, there are opportunities to upsell or cross-sell.
- Excellent gift ideas.
And there are certain drawbacks to consider:
- Operating costs are extremely high.
- Logistical complexity, because each month you must create a custom box for each subscription.
- Because many customers consider these things to be non-essential or novelty items, they have a high churn rate.
Commodity Refill Subscriptions
Customers may refill their supply of critical consumer goods like toilet paper, washroom products, and pet food using the commodity subscription model. Outside of a standard online store, many ecommerce businesses offer the refill subscription model, which gives customers a discount if they sign up for recurrent orders.
Here are some of the advantages:
- Because they are things that clients require on a regular basis, conversion rates improve.
- It’s less difficult to retain subscribers around for extended periods of time.
- As an alternative to cancelling, you might offer subscription “pause.”
And here are some of the potential drawbacks:
- Because many replenishment models rely on substantial discounts, margins are razor-thin. These businesses also sell consumer items, which have thin profit margins to begin with.
- There is a lot of competition.
- Because it’s challenging to reinvent everyday things, businesses must come up with distinct value propositions that haven’t been explored previously.
Before you buy a subscription, give it a shot
Customers can test out products or services before deciding whether or not to buy them with the “try before you buy” subscription, which includes elements of product curation. Stitch Fix and Birchbox, for example, both offer try-before-you-buy models, in which the client receives a curated variety of clothing every month. They must then choose which ones they prefer and return the rest.
- Brand aficionados are likely to stay with these subscription services for a long time.
- You aren’t squandering inventory that your clients aren’t interested in.
- Even if the consumer does not want to buy anything from the box, there is still a subscription charge. As a result, you are assured a set amount of money.
Potential drawbacks include:
- Operating a firm like this, where you’re curating each package while also accepting returns on a regular basis, is a logistical achievement.
- Customers are anticipated to return a large number of products, hence margins are frequently tight.
- It opens the door to misuse, such as when people wear/use things and then try to return them.
Online creators and agencies might benefit from a content subscription. Magazines, podcasters, bloggers, and video influencers who wish to establish a paywall in front of their premium material are the ones we’re talking about. A membership unlocks the paywall, and we frequently see additional incentives such as access to a private forum, free swag, or a private training call with your favourite influencer included with subscriptions.
- Your material generates a steady stream of revenue.
- If you have a following, it’s more reliable than ads or affiliate marketing.
- People assume that something very exceptional is behind that paywall, therefore content subscriptions assist portray a feeling of authority and exclusivity.
- Subscribers that are loyal to your brand become great brand ambassadors.
- Forcing individuals to pay for online information has a negative connotation. As a result, it’s recommended that you give anything away for free before selling a more exclusive side subscription.
- You must supply high-quality material; else, users will refuse to pay for it.
- If it’s obvious that your free content is only a method to get people to pay for your paid content, you can be hurting your overall growth.
- Many content providers forget about their free content (or it deteriorates in quality), resulting in angry fans.
The support subscription option, perhaps one of the oldest subscription models, has evolved into the digital age, particularly for software firms. Companies that sell actual items or services can also use support subscriptions, such as if they wish to provide consistent maintenance work for HVAC clients or a yearly subscription payment plan for auto mechanic consumers (something that loops in everything from oil changes to routine maintenance). This is also quite prevalent with digital products, where a user of software, an app, or an online tool can pay a monthly or yearly price for email support and yearly programme upgrades.
- If you know you’ll only have to spend time and money on assistance when someone genuinely needs it and pays for it, you may offer products and services at a cheaper price (often even for free in the IT industry).
- It provides a supplemental revenue source for customer service that is only required in certain circumstances.
- You can create several support packages so that all of your customers can use your services.
Potential drawbacks include:
- Some may view this as an unneeded and compelled investment in order to entice clients to sign up for a subscription.
- Many software firms find that users prefer to buy the original product and then opt out of future updates and support, which means that recurring payments aren’t as secure.
Launch an Online Store on Shopify
It’s time to construct an online store once you have a subscription business idea, things to offer, and some drive to get started. Selling subscriptions on Shopify, one of the most popular ecommerce platforms, is the simplest method to do it. From the Shopify Admin site, read our entire guide to launching a Shopify store, creating products, and marketing your business. Overall, Shopify acts as a central hub for all aspects of your business. You pay a nominal Shopify subscription to host a website, create it with pre-made themes and a drag-and-drop designer, and process payments (through the Shopify Payments payment gateway) when customers buy things from your store. It’s a one-stop shop for starting an internet store.
Select a Shopify Subscription App That Suits Your Needs
Shopify lays the groundwork for showcasing products and allowing clients to complete purchases using the Shopify checkout module. However, you’ll need to develop a subscription tool so that your website saves customer subscription selections, collects payments on a regular basis, and allows customers to alter their preferences through a customer portal. The Shopify App Store has a number of apps that can help you do this. It all depends on the subscription option you choose, but here are some of our favourites:
- PayWhirl: A great way to sell subscriptions, set up automated invoicing, and add subscription choices to your existing product sites.
- Bold Subscriptions: If you want a ready-to-use subscription system for your product pages, this is the plugin for you. It has a full dashboard for users to control their subscriptions, as well as delivery frequencies and hybrid alternatives with one-time payments.
- Launch subscriptions with shipping profiles, email notifications, dunning management, and more using native subscriptions.
- Seal Subscriptions allows you to charge consumers automatically and send recurring billing invoices. It has functions such as product swapping, subscription modification, delivery profiles, and payment calendars.
- Appstle Subscriptions: If you’re searching for inventory forecasting, we recommend this subscription app. Customer segment-based plans, enhanced subscription management, and dunning management are also excellent.
- Recharge Subscriptions: Order management tools, subscription billing, merchant tools, and credit card payment management let you turn transactions into relationships.
Best Practices to Sell Subscriptions on Shopify
When it comes to establishing a subscription business, there are some best practises to keep in mind, just like with any other online store. Use this list as a reference once you’ve set up your store to avoid complications in the future:
Spend a significant amount of effort tracking and evaluating churn. When a consumer cancels their membership, you have the opportunity to investigate what went wrong. Use the polls and forms on the cancellation page to learn how to enhance your services and prevent future cancellations.
Increase the number of marketing and sales channels you use. Customers learn about subscriptions from a variety of places on the internet, so make sure yours is listed where they spend time online. Many individuals discover subscription boxes on CrateJoy, and manufacturers frequently collaborate with influencers to promote subscriptions. Affiliate marketing, email marketing, and social advertising are all prominent ways.
Spend a lot of time and money on customer retention. The most crucial clients are your present subscribers. Don’t ignore them just to make room for new ones. Spend time and money to make the overall consumer experience more personalised. Consider consumer feedback and data to determine how to best assist subscribers and alleviate trouble spots.
At first, avoid using aggressive pricing techniques. Discounts and free trials may seem like great methods to attract a flood of new customers, but they’re typically a recipe for high churn, especially among those who have only recently discovered your subscription. It’s fairly typical for people to sign up for something for free with no intention of keeping the subscription going. By delivering value in other ways, you can avoid eating into your early earnings. Make your membership so appealing that customers will be willing to pay full price for it.
Set defined corporate objectives and monitor them on a regular basis. Do you wish to meet a specific income target by a given date? What about the number of units sold? Or how about client acquisition figures? These allow you to concentrate on meeting expectations rather than merely hope that more people would sign up for memberships.
Before launching a full subscription business, spend a significant amount of time testing product viability. Many product categories have experienced high saturation in the subscription arena, which means you’ll have a difficult time persuading customers to switch to your service. As a result, you must conduct thorough research on all subscription services. Surveys, trial runs, and product testing can help you figure out if a subscription product is really needed. It also gives you the ability to learn more about possible competitors.
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