Expanding your business by acquiring new customers is necessary, but much more important is customer retention; because that’s how a business thrives. Customer retention is an indicator of whether your product or service is satisfactory/pleasing to your customers. Businesses who convert their first-time buyers to repeat buyers have an edge over their competitors. Series of strategies are applied to get a potential customer’s trust to buy your product or service for the first time. There is a need to hold on to that trust and make the customer a returning one; that’s how companies stay in business. One of the ways to achieve this is by adopting a subscription business model. According to Investopedia, this business model started as early as the 1600s by newspapers and publishers. Over the years, with advances in technology, this model is commonly adopted and can be implemented much more easily.
First let’s talk on what makes this model stand out:
- Cash is King:
It is unclear where this phrase came from but it was popularized by CEO of Volvo, Pehr in 1987 during the global stock market crash. Jack Welch, a business mogul, went on to further give a little more detail in His own catch phrase: “Number one, Cash is King. Number two, communicate, Number three, buy or bury the competition”. It is interesting to note that the Subscription business model affords you the ability to do all three. Subscribers pay at specific intervals; monthly, quarterly or annually. The liquid funds gotten from this allows for flexibility and this cash flow can be used to fund the daily operations of the business.
- Building Loyal Customers
With a subscription business, you stay top of mind of your customers and can have an edge over your competitors. Businesses tend to communicate frequently with their subscribers as it is necessary. This in turn increases engagement and is a very subtle way of building loyalty.
- Compounding growth:
A business that continues to give it’s customers value they need or one that you’ve made them want, will always have renewed subscriptions. This builds long-term customer relationships which are capitalized on and causes growth for the business. Companies like this don’t easily run out of business because they constantly have customers they make provision for while they look for new ones also.
According to a report by Forbes in 2019, discussions were made on the rise in the subscription business model. Four factors were seen to drive this lucrative trend. We’ll discuss how these can be used as a guide to successfully launch a subscription feature for your business or build a business exclusively based on subscriptions:
- Price: Everyone loves a good deal. It doesn’t have to be a very low price, but should be discounted to some degree. There should be some discount for people who are willing to pay for an entire year of service/ product supply all at once. In some cases, you might not give a discount, but a combination of unique, irresistible value at a great price.
- Personalization: The psychology of selling teaches us how exclusivity is a driver of sales. People want to be seen and will buy products that are personalized in a way that seem like their struggles are well understood and can be sorted out.
- Convenience : People will subscribe to anything that makes their life less complicated. Personalized value that creates convenience is not easily overlooked. If a customer will constantly need a product at certain intervals, how do you make purchase, delivery and usage more convenient for them? Create an entire package that solves every stage of their pain point.
- Curation: Understand the value your target customer wants but struggles to find. This model works well when the value obtained, is a combination of their usual need plus a value that the consumer might consider off-limits.
With all that has been said, it is evident that understanding the customer is paramount. With Storebundle it is easy to analyze your customer and their struggles. You don’t have to build from the ground up to adjust to this model. Learn how to use Storebundle for customer retention here. For e-commerce businesses that are already using the one-off product-sale model, you can leverage customer feedback overtime to launch your subscription model. With features like sold count, you get to see the majority of what customers purchase and understand their pain points. Collecting customer feedback is simplified by this plugin. You can make inference on what value will serve as an add-on for your subscription business model.
When you have customer feedback, cross-selling is made easy. This way you can convert one-time customers to life-long customers with subscriptions tailored to their specific needs. Cross-selling involves studying the offers you bring and considering complementary add-ons that your customer will most likely need. So you sell the primary product and offer some add-ons to create a package. The customer typically will buy the primary product and get the add-on of their choice. If this package is one the customer needs at specific intervals, the package can be converted to a subscription delivered to them at the required time without their constant involvement. The best way to do this will be to have as many add-ons as possible. Then, the customer chooses out of the variety, a package they want to subscribe to. This personalization and exclusivity makes the customer feel very involved in deciding the value they want and would be willing to pay for it.
Subscription business is not exclusive to service providers or SaaS companies alone, it can be well implemented in the product niche also.
Customer acquisition is necessary but costly. It could be as much as 25 times costlier than retention. A 5% increase in customer retention can increase the business revenue by about 25-95%. We see that customer retention strategies are cheaper and are a steady way to grow your business over time. There are several strategies for customer retention from loyalty bonuses to ‘free-shipping on next order’ and so on. A grand way to retain customers will be to find an exclusive personalized offer that customers cannot resist but subscribe to.