Businesses that operate on a membership or subscription model benefit from the efficiency that comes from selling once and serving on repeat. Research done by McKinsey & Company reveals 46 percent of customers polled are already paying for online streaming subscription services, and another 15 percent subscribed to an e-commerce service in the past year. If done right, this strategy will quickly turn around the fortunes of struggling businesses.
So, can you convert your a la carte business to subscription or membership? Yes, you can.
Here’s what to know:
What is the subscription business model?
The subscription-based business model is a program that enables customers to pay a recurring fee charged monthly or yearly to access a product or service. This model helps businesses capitalize on the compounding value of customer relationships. Ideally, as long as you provide continuous value to your customers, you are guaranteed consistent revenue. Some of the popular subscription-based businesses enjoying massive success despite the pandemic are:
- Streaming services such as Netflix and Spotify
- Monthly subscription boxes like Dollar Shave Club and Stitch Fix
- Food services such as Blue Apron and HelloFresh
Many small local businesses have implemented subscription models. For example, information technology (IT) businesses used to operate on a computer repair model. When something goes wrong, you call them, they fix it, and you get an invoice. Today, most IT companies operate an ongoing service that tracks your network and detects problems when or before they actually occur, all for a monthly fee.
A retail clothing boutique could create a subscription service for monthly or quarterly personal shopping, outfit curation or special access to items before they are available to the public.
Many local restaurants who already offer grab-and-go or delivery could offer this same service on a weekly or monthly subscription.
How to succeed with a subscription-based business model
If you want to succeed in this kind of business, you should focus on using the right tools and strategy. The following are a few tips to get you started:
Define a clear goal
The first step when laying a strong foundation for success is to determine your goals at the start of your business. Clear business goals can be to achieve more revenue or achieve faster growth. A well-defined goal will guide you when choosing the best pricing strategy for your business. It will also help you build ideal buyer personas and pricing tiers.
Focus on best customer experience
The more customers you have, the more revenue you generate. A great customer experience helps build up your subscription base quickly. When customers are enjoying their onboarding journey, they will be more willing to pay for your services on an ongoing basis and recommend you to their friends.
Improve the billing process
If your billing system is unreliable, you will lose customers and revenue. Notably, modern software features complex account billing processes, and it is vital to understand all of them. In essence, streamline the billing process so that customers have a better experience.
Establish strong customer relationships
Your subscription business’ success will depend on the kind of relationship you have with your customers. You should focus on building strong and lasting customer relationships that guarantee your business retains customers for a long time. An unhappy customer finds it easy to cancel your service at the slightest prompting. Focus on providing a good customer experience, reliable data on feature preference, and a pricing strategy that is in sync with the value you are offering.
Plan on future growth now
Tech is ever evolving, and you need to plan now for anticipated changes that can affect your business strategies. Determine how you will acquire the tools to accommodate your subscription’s growth. If you fail to plan for future growth, the growing customer base can quickly overload your current infrastructure.
If you need help getting started, reach out to us. After all, the Chamber is an organization that uses a membership model. We may be able to provide some insights to get you started in the right direction.