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Growth calendar    Nov 02, 2022

Subscriptions boxes: how to run this business model successfully?

If you're wondering if the subscription box business model is right for you, check out today's post!

In 2022, doing business on a subscription model was one of the trends on the lips of the entire industry.

What's more, as data compiled by McKinsey and Company shows, as much as 15% of US online shoppers are enrolled in at least one scripting program, and on a year-on-year basis this is a significant trend in growth.

But is it a model that will work in all industries? How to wisely design such a program to be an unqualified success? These and other questions related to the subscription model will be answered in today's blog post.

Subscription box business: a brief market overview

The subscription business model has gained enormous popularity in recent years. This is a relatively new business idea, whose business plan is based on periodically sending boxes containing often new or niche products to customers on a recurring basis, in most cases on a month-to-month subscription model allowing such online business to gain constant cash flow.

It's an opportunity not only to create an entire business and build customer loyalty when gaining recurring payments but also, for example, to try out an offer in a new market and see how it will be received by potential customers.

Perhaps this business model seems like a rather bold and risky idea to you - but keep in mind that according to the already mentioned report "Thinking inside the subscription box: New research on e-commerce consumers", the subscription ecommerce market is expected to reach a value equivalent to $473 billion by 2025.

Considering that in 2019 it was only $15 billion the potential of this sales model is undeniable.

But why are online shoppers so keen on this kind of shopping? We can distinguish three main motivations behind this choice: the desire to save time and money, the desire to try a wide product variety, and the opportunity to get exclusive access to new products.

ecommerce-subscriptions

Subscription box service is also (or perhaps primarily) profitable from the point of view of the companies offering such solutions themselves. Among the most important advantages that benefit the providers of this solution are:

  • the possibility of a real prediction of continuous revenue - which in turn facilitates further business growth forecasting and inventory planning;
  • significant facilitation of cross- and up-selling - subscription business is based on loyalty, customer trust, and long-term relationships. Thus, you can afford to offer them new products knowing that the services you have already provided are appreciated and considered valuable by them;
  • less expenditure on acquiring new consumers - subscription businesses in a large measure are based primarily on customers already acquired and give a chosen company a lot of customer loyalty. This does not mean, however, that the owners of this type of company can rest on their laurels and not struggle to attract new buyers; however, note that the cost of acquiring them is significantly lower than in the case of pure product companies.

PS We know that not every product sold online can be offered on the subscription box model - this idea will be hard to defend in the case of... furniture for example, but then you can rely on Linker Cloud help!

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Subscription business: tips and tricks

To run a successful subscription box businesses you need to undertake a lot of marketing efforts and research well the needs of your new customers.

Check with us what indicators to pay attention to - and what actions to take to stand out among the growing competition in the subscription business models market.

  1. Be creative and precise: come up with ideas for your subscription boxes (and don't forget to check your competitors' activities) - a good idea is a basis. However, it is important that it is original and does not overlap with the offer of the competition. As you can guess, in the market for subscription products some categories are quite crowded, which can create difficulties in entering this market.

    An example of creativity? Finders Seekers is perhaps the most original representative of the subscription industry. The company's customers receive boxes containing... puzzle elements. Their task is to solve it within a month, and then log on to a dedicated platform and provide the solution. If they are among the first - they will get a well-deserved reward.

boxes

2. Bet on personalization (and marketing actions in general) - curation business model is particular in its requirements (and customer expectations as well). One of them is the need to personalize both communication and marketing issues, as well as the offer itself. So it's worth investing in tools that make it easier for you to achieve this goal and, for example, bet on marketing optimization tools, in addition to focusing exclusively on activities conducted on various social media platforms.

Moreover, it is also a good idea to take care of issues related to the packaging of subscription boxes - theoretically, it is a small thing, proverbially it makes a really big difference. The design (and branding) of the box is very important, as are the materials from which it was made. For example, if you offer customers products that are eco-friendly, it is worth betting on sustainable packaging materials as well.

The issue of perfect packaging has been mastered to perfection by the owners of subscription boxes supplying plants - Suculent Studio.

suculet-studios

They grow their plants organically, using organic soil and fertilizers; being consistent, they went for a minimalist box design and biodegradable pots, and an eco-friendly subscription box business.

3. Think well about strategies regarding the topic of customer retention - some wise person once said that without retention, tan really business growth is not possible: because we need to learn from the needs of customers in order to understand them as accurately as possible. However, this does not mean that the retention rate should not be under special protection.

But how can you monitor and survey customers' expectations on an ongoing basis? There are several marketing tricks that can be easily implemented and reap profits.

One of them is to bet on... quizzes for current (and potential) customers. By asking them this way about their needs, you'll be able to more easily select just-right messaging and products and services that may prove useful from their point of view in the future. You'll make segmentation easier and maybe learn things that aren't obvious at first glances - such as regarding the frequency of delivery.

The second idea is obvious follow-up questions. Any feedback, even negative, from the perspective of the subscription business is worth its weight in gold - it allows you to make the necessary corrections and thus achieve growth. The second idea is obvious follow-up questions. Any feedback, even negative, from the perspective of the subscription business is worth its weight in gold - it allows you to make the necessary corrections and thus achieve growth.

4. Monitor customer churn rate continuously - the churn rate can be really problematic, especially at the beginning of the subscription box business running. Don't be discouraged, though - but also don't invest too much in big discounts or free trials, at least until you've nine earned a measurable payback from them. Also, remember to react and change prices as your business grows.

Subscription boxes: summing up

The subscription box business model is not one of the easiest businesses - it requires commitment, attention to customer needs, and investment in marketing issues.

However, the game of recurring revenue is undoubtedly worth the proverbial candle. It is enough that as a subscription service owner you will take care of several factors: customer relationships, continuous monitoring of customer lifetime value and the rest of the business strategy, the design of the online store, and investing in some new marketing channels enriched with social media marketing and influencer marketing, and you will undoubtedly succeed.

So we are keeping our fingers crossed for your new potential customers, their low acquisition cost, profitable pricing models, and your whole brand new business!

Head of Marketing at Linker Cloud who gained experience in the insurance and tech industry. She also has a marketing agency perspective.

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