The new year has begun, which means you’ve probably been seeing quite a few articles about what “eCommerce in 2018” is going to look like. With visits to subscription service company websites growing 800% over the past 3 years, and up to tens of millions of visits per month, one common prediction for 2018 is that subscription business is going to be big news. Subscription services (like Spotify,) subscription boxes (like Dollar Shave Club and Trunk Club,) and subscriptions to essentials (like Amazon Dash,) are experiencing incredible growth as they offer their products to customers who eagerly sign up for months or even years of packages. While it’s theoretically possible for any product to be sold on a subscription basis, these businesses distinguish themselves by selling branded products and excellent customer experiences.
So sure, the business model is growing, but why? What’s all the fuss about?
It’s a steadier business
This is the obvious one; customers who subscribe are customers from whom you’ll get repeat business. Retention is built into the business model. It’s a win-win: customers don’t have to remember to buy your product each month, and you can anticipate supply and demand more easily, which means planning inventory, shipping, and predicting cash flows just got a lot easier, plus, you only have to pay to acquire that customer once, then you can enjoy repeat purchases from them for months to come.
Subscription customers have a lot of cash
Customers who are more likely to sign up for a subscription are more likely to be higher earners; subscription box customers in particular commonly have a college degree and earn more than 100k in a year. These are customers who don’t mind being upsold, so from a marketing perspective, once you have their email, it’s a piece of cake to start sending them information about other products they might be interested in.
A few things to keep in mind
A subscription business with a high customer churn rate defeats the purpose of having a subscription business––subscription customers have to be kept happy. They expect top-notch customer service, and branded products with entertaining marketing copy that delights and surprises them. This means you need to have the tools to run your subscription business smoothly. At LimeLight, we’ve seen that tools which help business owners design flexible billing models and forecast their subscription revenues for months to come are key to lasting customer relationships, intelligently focused growth, and profitability.
The subscription business train is coming, we want our clients to be able to smoothly step onboard, rather than be left coughing in the dust.
