Guide

Your Guide to Subscription Model Types

By May 2, 2020 May 3rd, 2020 No Comments

If you read the newspaper online, enjoy the convenience of receiving meal boxes delivered to your doorstep, or stream music, movies, or your favourite series from companies like Netflix, you are a subscriber. And you’re not alone. According to Small Business Trends, 54% of online shoppers are subscribers.

But you’re not Netflix! Could you really turn your online customers into subscribers?
Spoiler alert – the answer is yes – as long as you choose the right subscription type for your business and the products you sell.

But before we dive into the different types of subscription models, let’s find out what a subscription business model is.

What is a subscription business model?

A subscription-based business model is simply where your customers agree to pay a fee at regular intervals to receive your products. Renewal of a subscription is usually automatic and it’s this automation of the future sale that is one of the key benefits of the subscription business model – it’s the perfect way to turn your one-time customer into a repeat customer. But it’s not the only benefit – let’s take a look at some more.

What are the benefits of a subscription business model?

A subscription business models offer many benefits to online sellers including helping you to:

  •         Predict your future sales
  •         Lower your customer acquisition costs & increase ROI for marketing efforts
  •         Better manage your inventory and waste
  •         Strengthen brand loyalty
  •         Strengthen brand recognition in the marketplace (helping you to get more customers)
  •         Provide valuable data to help you improve your offerings and customer service (helping you to retain more customers)

Subscription Model Types

Whilst there are 1000’s of subscription services to inspire you when choosing the right option for your business, there are 3 main categories of subscription models for you to consider for your online products:

  •         Replenishment
  •         Curation
  •         Access

Replenishment Subscription Model

The replenishment subscription model is best suited to commodity items and is designed to monetise convenience. If you sell a product that customers consume regularly, this could be the right model for your business. Popular items for replenishment subscription boxes include;

  •         Cleaning products
  •         Beauty products
  •         Pet Products
  •         Vitamins
  •         Nappies

With this model, subscribers receive a box of products at regular intervals – so they never run out of your product, or even have to think about re-ordering it themselves. Most subscription boxes are sent monthly, but some businesses offer quarterly and yearly services and others have a weekly service – frequency will be determined by your product and how often customers need a replenishment.

Lucky Pet sells practical solutions for pets with personality and with their subscription model, they also make it super convenient for owners to always have a ready supply of food, flea treatment and other medications on hand for their furry friends.  

Dollar Shave Club is one of the most famous and successful subscription boxes – they built their businesses by streamlining the process of shopping for razors. The key to their success lies in how well they have been able to monetise convenience for their customers and the brand loyalty they have built up with exceptional customer service.

Ecoriginals is another example – their monthly subscription box makes it easy for parents to have a constant supply of eco disposable nappies and wipes. Convenience is also the key here – no parent wants to run out of nappies and with a regular supply landing on their doorstep each month Ecoriginal subscribers don’t have to.

Curation Subscription Model

A curation subscription model is a selection of niche products sent to a subscriber on a regular basis.  Perth Organics do this well with their humble veggie box.  Subscribers receive a weekly delivery of fresh, seasonal and organic produce, hand-picked for them by the Perth Organics team.  

Another example of the curation subscription model in use is the Box of Style. This box is curated by celebrity stylist Rachel Zoe and subscribers are surprised each quarter by a selection of luxury goods – handpicked by Zoe and her team. Members pay yearly and receive a different selection of items each quarter.

Whilst this type of subscription box works well for beauty brands customers are loyal to and Influencers like Zoe, it is also popular with meal-kit services like Hello Fresh.

Hello Fresh have monetised convenience by curating ingredients for meals to be cooked at home by the subscriber. Each week subscribers receive a different box which contains;

  • Easy-to-follow recipes
  • Fresh, seasonal, and quality ingredients
  • Colour-coded meal kits for every recipe
  • Weeknight dinner inspiration!

 Quality products and the ability to surprise and delight your subscribers will help to make this subscription type successful in your business.

Access Subscription Model

The Access Subscription Model turns your subscribers into members and enables you to reward them for their loyalty with regular discounts, free gifts, and priority access to new products.

Online clothing store JustFab is an example of a company successfully using this model. JustFab offers a VIP membership subscription which gives shoppers 30% off retail prices for the products offered on their e-commerce site. There is a monthly fee to be a VIP.

This subscription type is ideal for fashion brands or any product business with an extensive inventory of stock. Your ability to excite your customers about exclusive deals and discounts will go a long way to making the access subscription type work for your business.

Which subscription type is right for your business?

The subscription type you choose should be based on the goals you have for your business and the product/s you sell. The different types outlined in this blog post should give you a clearer indication of what products are suited to what type and therefore which one is going to work best for your business.

Regardless of which type you choose; the subscriber experience you offer is paramount. You can capitalise on the compounding value of customer relationships as long as the customer continually sees not just the value in what they’re paying for, but also how you make them feel. Their customer experience must be so good, they don’t even think about the recurring fee on their credit card – only how good it is that your products show up on their doorstep each week, month, or quarter.

Summing up

As you can see, the subscription business model isn’t only for companies selling replenishable products like dog food and razors. Almost any Ecommerce company could apply either the replenishment, curation, or access model in their business to generate recurring revenue. In fact, we think it’s a no brainer for any Ecommerce company – it just makes good business sense to find a way to turn your one-time customer into repeat customers and the subscription business model makes that easier.

 

Katie

Author Katie

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