How to Develop an eCommerce Subscription Business Model
One of the benefits of subscription business models is that you can start out with one subscription type and move on to another. It's common to focus on replenishment at first, and after getting some momentum with subscribers, also form an access-type subscription.
Access subscription types can be more complicated to set up and it may take longer to complete the entire process. But once you do, you can gain the advantages of offering both types of subscription services.
Then, depending on your business model, it might make sense to take the next step into curation, which will further differentiate your business from the competition. If you can start with one type of subscription to get a foothold in the space, then you can climb up and add more as you go.
Building an eCommerce subscription business model is especially beneficial in the B2B and eMarketplace industries as this is something that many offerings don't include. Subscriptions have become very popular for membership models, subscription boxes, and other things like this. You might see these types of subscription services a lot in certain areas, but there's a huge opportunity for B2B subscriptions.
One of the most crucial things is to understand how your business can roadmap these types of subscription services into your plans for the next one, three, or five years out. You'll need to start looking at how you can increase your recurring revenue and retention rates to grow your addressable market for these subscription-based offerings.
Something else to keep in mind is that it's really important to offer self-service and automated capabilities with all types of subscription models. You'll also need integrations to your back-office systems so that all your data remains up to date.
Most end customers don't want to use a subscription that requires a lot of interaction, as they want to quickly handle tasks themselves. Customers also don't want to be surprised that a product doesn't show up on time because it turns out it's out of stock.
That's why back-end integrations and self-service are essential when it comes to any online transaction, especially when it comes to these types of eCommerce subscription models.
Strategies for Growing an Online Subscription Service
Growing and sustaining a successful online subscription service requires careful planning and strategic execution. Let's take a look at four key strategies that can help you grow your online subscription management.
Price Optimization
One of the most important factors in growing an online subscription service is price optimization. Finding the right balance between pricing your subscription competitively and maximizing revenue is crucial. Conduct market research to understand the pricing landscape and what your target audience is willing to pay for your service.
Consider implementing a tiered pricing structure to cater to different customer segments. This allows you to offer different features or levels of access at varying price points. By providing options, you can attract a wider range of customers and increase the perceived value of your service.
Regularly evaluate and adjust your pricing strategy based on market trends, customer feedback, and changes in your offering. Consider offering discounts or promotional pricing to incentivize new sign-ups or retain existing customers. A well-optimized pricing strategy can drive customer acquisition and increase customer lifetime value.
Metrics and Reporting
To effectively grow your online subscription service, you need to have a clear understanding of your business metrics and key performance indicators (KPIs). Track important metrics such as customer acquisition cost, customer lifetime value, churn rate, and average revenue per user.
Use analytics tools and reporting systems to gain insights into customer behavior, engagement levels, and revenue trends. This data will help you identify opportunities for improvement and make data-driven decisions.
Regularly analyze and interpret your metrics to identify patterns and trends. For example, if you notice a high churn rate among a specific customer segment, you can investigate the underlying causes and take proactive measures to address them. Subscription eCommerce platforms can be integrated with customer relationship management (CRM) software.
Churn Reduction
Reducing churn, or the rate at which customers cancel their subscriptions, is critical for the long-term success of your online subscription service. High churn can hinder growth and impact revenue stability. Implement strategies to improve customer retention and reduce churn.
Focus on delivering exceptional customer experiences and continuously adding value to your service. Engage with your customers through personalized communications, such as targeted emails or exclusive content. Offer proactive customer support to address issues promptly and provide solutions.
Regularly analyze customer feedback and conduct satisfaction surveys to gain insights into customer sentiment. Identify common pain points and areas for improvement. By addressing these concerns, you can enhance customer satisfaction and loyalty, ultimately reducing churn.
Flexible Billing and Payments Infrastructure
Offering a flexible billing and payments infrastructure is crucial for accommodating diverse customer preferences and optimizing revenue streams. Provide multiple payment options, such as credit cards, PayPal, or digital wallets via a pay hub to cater to different customer references.
Consider offering flexible billing cycles, such as monthly, quarterly, or annual subscriptions, to accommodate varying budget preferences. Some customers may prefer the convenience recurring payment solutions, while others may be willing to commit to a longer subscription period for a discounted price.
Additionally, make sure your billing system is reliable and secure. Ensure that customer data is protected and comply with relevant data protection regulations. A seamless and secure payment experience fosters trust and encourages customers to continue using your service.