These days, there’s a subscription service for everything. You can subscribe to dog food deliveries, unlimited video streaming, and some vehicle manufacturers even offer car subscriptions! Gartner estimates that 75% of businesses will provide subscription services by 2023, but only 20% will succeed in increasing customer retention rates.
Subscription commitments are higher than any other type of product, which can make people nervous about signing up. Consumers aren’t just buying your product once; they’re committing to an ongoing relationship with your brand. To overcome this challenge, businesses need to take a different approach to marketing. Here are some tips to help you create successful subscription products that actually sell.
Not every product is suitable for subscriptions. Choosing the right subscription product that people will regularly need/want is the first step toward success. Here are a few qualities that make a good subscription product:
If any of your existing products fit into one or more of these categories, it might be a good contender to be made into a subscription product. If it doesn’t, it might be best to leave it alone.
The goal of subscription commerce isn’t to get people to pay for your product; it’s to get them to KEEP paying. One of the most effective ways to decrease churn rate—the percentage of customers who cancel service within a time period—is to offer a discounted annual subscription in addition to the standard monthly subscription. By collecting the entire year’s payment up-front, you’ll increase your business’s cash flow and create a more stable and predictable revenue stream. You won’t have to worry about lost subscriptions hurting your bottom line.
Annual subscriptions can also decrease churn rate. Not only will customers be locked in for the full year, but they’ll also have more opportunities to learn about your product. If your products are technical or complicated, an annual subscription will give customers time to get past the learning curve. They won’t get frustrated and cancel their subscription after a month. Then, when the annual subscription comes around again, they’ll be pros and sign up for another year.
The difficult part is getting customers to choose paying a large lump sum instead of a small monthly payment. That’s where discounts come in. Offer customers a discount if they pay annually instead of monthly. For example, if your subscription is $20 per month, offer a $200 (or whatever works for your business) option for the year. They’ll save $40 on their annual subscription, and you’ll have 12 months of guaranteed customer retention. Win, win!
Bundling is a powerful B2B pricing management tactic that works for individual products as well as subscription products. Grouping similar products into a package adds perceived value and makes your subscription seem like a better deal.
There are four primary ways to bundle products in your commerce platform:
Product bundles increase your average order value. A customer might visit your site looking for one product and leave with more than they anticipated. And, since you’ll be selling more products, your bottom line will continue to grow.
Bundling is also a great way to cross-sell and show off your other products, which can lower your marketing costs. Instead of buying expensive advertisements to promote a specific product, bundle it with one of your more popular products. It’ll be seen, and purchased, by more customers without any additional marketing effort.
Of course, even if you find the perfect product, provide monthly and annual subscriptions, and offer fascinating bundles, your subscription product will fall flat if you don’t use a commerce platform that can handle the unique challenges of subscription selling.
Subscriptions are challenging for many traditional commerce platforms. They require recurring payments, front-end customizations, better customer communication, and unique reporting tools for long-term profitability. Many traditional commerce platforms need third-party extensions, add-ons, or customizations to handle these challenges, which can be expensive and may bog down system performance.
Choose a commerce platform that enables subscription commerce without needing third-party integrations. A more flexible commerce engine allows your subscription service to operate more smoothly, which will reduce headaches on your end and create a more positive user experience for your customers.
Plus, these platforms will come with tools that help you analyze your commerce metrics and determine which strategies work best within your subscription model. Headless APIs pull product and customer data from each website and storefront in your system and centralize it within the platform’s database. From there, it’s easy to see how each of your subscription options perform relative to one another and which could be improved -- no matter how many storefronts you’re running.
By switching to a commerce platform built to support subscriptions, like Slatwall, you can avoid these headaches entirely. Contact the experts at Slatwall Commerce to get an assessment of your existing or planned eCommerce features and be on your way to subscription product success.
Photo by Zachary Keimig on Unsplash.