Be it any industry – food, wellness, clothing, software – subscription models are on the rise all across.
A McKinsey & Company study shows 46% of online customers have multiple subscriptions. Over the past five years, brands offering subscriptions have grown 100% year-after-year.
However, setting up an effective subscription model is more than just coming up with a pricing structure.
There’s a whole lot involved. Here, we’ll discuss how you can set up a good subscription model for your Shopify store.
Step-by-step to setting up a subscription model on your store
Step 1: Understand the different types of subscription models
There are different types of subscription models. And you’ll need to choose a type depending on the products/services you offer on your eCommerce store. Your choice would also depend on what your target audience wants from your brand.
Let’s look at the different types of eCommerce subscription models:
Replenishment subscription model
Also known as ‘subscribe and save’, in this subscription model, subscribers receive deliveries of products/services on a periodic basis; for example, daily, weekly, monthly, etc. This model is commonly used for food and beverages, health and medical supplements, and personal care items, among others; basically, essential items that need to be replenished on a regular basis.
Curated subscription model
In the curated subscription model, eCommerce stores put together an assortment of products that are delivered to customers based on the period they choose. The products can be the brands’ own or of other brands. For example, you see these types of subscriptions for liquor, wine, chocolates, coffee, toys, books, etc.
Bargain or access subscription model
This type of subscription model enables customers to pay a monthly fee to avail bargained prices or members-only access to discounts and deals. For example, this model is commonly used in the health and wellness, packaged food, and fashion industries.
Fixed subscription model
In the fixed subscription model, brands offer a fixed set of products for a fixed price for a defined duration. For example, SaaS (Software as a Service) products – they offer a fixed number of features for a fixed price for a specific duration.
Unlimited subscription model
Unlimited subscription model is not common in eCommerce businesses. In this model, customers pay a certain amount and are allowed unlimited usage of a product. For example, some pubs charge a fixed entry fee and provide unlimited drinks.
Pay as you go subscription model
This is a usage-based subscription model. Customers pay on the basis of how much of a product or service they use. A lot of smaller companies use this subscription model to get started when they first launch a product or the company. This model of subscription is most commonly used by telecom and internet companies.
Premium member subscription model
In this subscription model, customers pay a fee to access premium services or to use products. This model works on the principle of making customers feel exclusive and special. A good example of this subscription model is Amazon Prime.
So, now, depending on the product or service you’re offering, determine which of these above subscription models would best suit your business.
Step 2: Understand your target audience and their needs
What do your customers want? Until you know that, you won’t be able to offer the right products/services to them. Understanding your target audience is at the core of your subscription model.
However, understanding your customers isn’t a one-time process. It’s a journey. You’ll keep onboarding new customers on your eCommerce site, and you’ll have to understand the needs of these new customers. You might even have to constantly review, adjust and refine your subscription plans.
A study backed by Accenture explains why having an understanding of your customers is critical. The study highlights that the key to successful subscription models is to change your mindset – “A customer is just—a name and address and payment method on an invoice. A subscriber is somebody you have an ongoing relationship with, a relationship you’re building over time.”
Every department of your eCommerce business has to understand your customers. Then, rethink what they do to make the model beneficial for subscribers. If you fail to do so, your subscribers will not renew and your model won’t work.
Here are some good practices to follow:
Be customer-centric
Your target audience for subscriptions should be people who want your products and services, people who want to engage with your brand, as opposed to people you want to engage with.
Back your understanding with data
Assumptions and guesswork doesn’t work when you want to understand your customers or target audience. You have to rely on real data. This data can be collected through:
- Surveys with your existing customers
- Market research
- Your customers past purchase behavior
Try to find out, through these mediums, what your customers need on a recurring basis. Then, create subscription models based on your findings.
Here are some questions that you should be able to answer:
- Who are your customers?
- How will you reach them?
- What products or services do they want or need?
- How would they benefit from your subscription?
- How much should you charge for the subscription?
- What type of subscriptions are your competitors offering?
Step 3: Use a good subscription app
To run a successful subscription model on your Shopify store, you’ll need to manage a lot of factors. And as your business scales, you won’t be able to handle all of it manually. You’ll need a good subscription tool to help you.
A fully functional subscription app is vital to your business success. And there are a few good apps to help you. One of the best subscription apps to use is Appstle.
Let’s go through how Appstle can help your subscription-based business.
- One of the most basic reasons for using ready-to-use apps and platforms is that you don’t have to spend the time and money to develop your own app. Appstle’s plug and play set-up means you can get started in a few quick and easy steps. This saves your time, money, resources, and you can hit the market in no time.
- However good a tool is, eCommerce brands want something that is unique to their brand. And that’s where customization comes in the picture. Appstle allows 100% customization so that every brand can make the app its own, in their own manner.
- The platform you choose must ensure security – of your business, as well as of your customers’ data. Appstle offers robust security so that you can run your business without any stress. Plus, your customers build trust in you.
- Your eCommerce platform will require many other apps and tools to perform different functions. For example, payment gateways, messaging apps, marketing apps, etc. The subscription tool you choose should be easy to integrate and sync with the other tools on your site.
Step 4: Promote your subscription model
You might have the best and most beneficial subscription model on your eCommerce store. But if your potential customers don’t get to know about it, it’s not going to be difficult to get people to buy subscriptions.
To make your subscription model a success, you need to promote it. Let’s look at some ways in which you can promote your subscription model:
Use all marketing platforms and channels
Allow your customers to choose different communication channels to communicate with your brand. For example, enable communication via SMS, email, WhatsApp, Messenger, phone, live chat, etc. Similarly, allow your subscribers also to choose the communication channel they prefer to communicate for the subscriptions.
Let’s get into some details now:
- Create lists for all your channels
- Create segmented lists within these lists
- Create unique content for all the different channels
- Offer exclusive promotions for different channels
- Avoid duplicating offers on different channels
- Differentiate your communication from what your competitors are doing
- Run different types of campaigns – new subscribers, retention, festive offers, etc.
Reach out to customers who’ve bought from you multiple times
If you’ve launched a new subscription model, one of the best ways to begin promoting it is to start with your existing customers. Reach out to customers who have bought from your site multiple times. Create a special campaign for this segment. You could even offer personalized incentives to your most loyal, long-time customers.
Run campaigns to promote your subscription model
Subscriptions are no longer a new thing for customers. The number of brands that are adding subscription models to their offerings is increasing day-by-day. With so much competition, you have to make sure your brand stands out in the crowd.
Among the most common challenges that businesses face with subscription models are:
- Subscription fatigue and its direct impact on churn rate
- No differentiation from subscriptions of other brands
Two things to do to overcome this challenge:
1. The first way is to offer a unique subscription model, like no other brand offers
2. The second – think of creative ideas to promote your subscription model
Again, create multi-channel promotional campaigns. Use all mediums – email, SMS, social media, paid ads, Messenger, WhatsApp, etc.
Step 5: Measure and optimize your subscription model
Just like you measure and monitor your sales and other business aspects, there are a number of metrics you can measure for your subscription model.
Some figures to keep an eye on:
- Monthly revenue from subscriptions
- Number of subscribers
- Churn rate
- Customer lifetime value
- Cost of subscriber acquisition
By measuring and analyzing these KPIs against your business goals, you can know whether your subscription model performance is on the right track, or do you need to optimize it.
Apart from quantitative monitoring, you must also collect qualitative data.
- How is your subscribers’ experience?
- What is their feedback and rating?
- What is their feedback on the subscription pricing?
- What can you change to improve?
By collecting the above quantitative and qualitative data, you can know what changes you need to make to enhance the returns on your subscriptions.
Wrap-up
As you see, subscription models require continued attention and learning. A one-size-fits-all approach doesn’t work. Nor is it a one-time task that you can set-up and put on auto mode. You’ll have to constantly look at how you can enhance your subscription model based on the market, the competition and customers’ needs. And that’s what makes it so exciting to have subscriptions!
To get started with your subscription, install Appstle today!
About the author
Appstle Inc. is a team of ecommerce experts who specialise in building apps that enable online stores to grow in a sustainable manner using powerful features and the latest technology.
