6 Rules to Live by When Starting a Subscription Business
Alex Zhardanovsky is an evangelist for subscription-based businesses, as he co-founded PetFlow.com, an online service that ships kibble and pet toys to consumers’ doors. Just three years after its debut, the company is expected to pull in $50 million in sales in 2014.
But as gung ho as he is, Zhardanovsky sees that this model isn’t for everyone.
He dismissed an idea that someone pitched him recently for a subscription-based sock-of-the-month club, for instance, saying, “How many pairs of socks does a guy really need? Once I get a few months’ worth, I’ll cancel, and that’s not a good subscription model.”
That said, Zhardanovsky and others in the marketing industry see broad and lasting potential in an emerging subscription economy that’s so far dominated by companies like Netflix,Birchbox, Amazon Prime, Dollar Shave Club and Spotify. Even retail behemoth Walmart has planted its flag, with a food-and-treats-based subscription service, and H. Bloom does big business by consistently decorating spas, hotels and office buildings with fresh flowers.
Zhardanovsky has called subscription services “the holy grail” of businesses because “you can acquire a customer once and potentially keep him for life as long as you provide a service or product that he wants and values.”
Consumers will lock themselves into a monthly subscription to get the best a company has to offer, with convenience, access, reliability and selection being among the strongest selling points. Businesses, meanwhile, will be laser focused on keeping those customers happy because they want the positive cash flow, higher profit margins and peace of mind that come with loyalists who pay upfront.
It’s not quite as easy as some of the successful companies may make it look, though. Their enthusiasm aside, experts say there are a number of guidelines to follow if a small business wants to become a subscription service.
1. Be unique
Give consumers a product or service they can’t get anywhere else, whether it’s Standard Cocoa’s curated artisanal chocolates from around the world or Forrester Research’s latest data analysis and market forecasts.
NatureBox sends its customers private-label healthy snacks in custom-created packages each month, without a Clif Bar, Kashi product or anything else that could come from the corner deli or a neighborhood grocery store.
And if you have head-to-head competitors, it’s not a bad idea to point out the differences in your two offerings, says Zach Bulygo, a writer for KISSmetrics.
“It can be in your headline, on your home page, close to your call to action,” Bulygo says. “Make it clear that you’re different.”
2. Be convenient
Every step of the process must be simple for the consumer, from signing up to placing orders to making returns. Netflix focuses on its all-you-can-eat, order anytime service, while Trunk Club emphasizes the hassle you’ll avoid if you skip the mall and use their virtual personal stylists to build your wardrobe.
Allow consumers to easily manage their subscription so they don’t run out of their necessities, saving them last-minute retail runs.
3. Be quirky
It’s no secret that Dollar Shave Club sells a commodity — men’s razors and shaving products — but the brand has also created a hip, almost party-like brand identity, experts said. It’s not that those consumers couldn’t pick up their Gillettes at Target, but they choose not to, instead paying to join the cool kids’ club.
New Master’s Academy, a Southern California-based school, offers subscription-based online classes in artistic endeavors like drawing, painting and sculpture. There’s more than 100 hours of content for budding Picassos to study at a price that no community college could beat.
4. Be valuable
When do most people realize they’re out of dog food? When the bag’s empty, Zhardanovsky says. That’s why PetFlow closely monitors its food manufacturers, making sure to have in stock what its customers need by their scheduled delivery dates. The company sends email alerts to its members one week prior to delivery. “You want to feel like the company is looking out for you as a consumer,” he said. “That’s a big value-add.”
PetFlow customers, who don’t pay a subscription fee in addition to their product orders, can control their deliveries and change schedules as often as they like.
Read full article by Terry Stanley on Mashable.com
