When looking at a way to expand your business offering, one way to do so is through subscription-based products and services offered through your website. A McKinsey study found that the subscription-based e-commerce market in the U.S. increased from $57 million in 2011 to $2.6 billion in 2016.
And, it’s still growing at a considerable rate with more opportunities, especially since consumers are subscribing to everything -- from Netflix and Spotify to phone apps to curated product boxes with snacks, educational toys, food and prepared meals, clothing and makeup, and even pet items. As many as 58 percent of the consumers surveyed by McKinsey have multiple active subscriptions.
Consumers like the convenience, time and money savings, and affordability factor of these subscriptions, not to mention the surprise and excitement they get from seeing what they might receive from month to month.
The Recurring Payment Component
As part of the convenience factor, consumers pay for these subscriptions with recurring automatic payments that bill and remove the money from the account of their choice. This could be a bank account, or they could opt for a debit or credit card-based recurring payment.
There are many benefits for your business by adding this subscription model and the accompanying recurring payment method. It’s a way to capture customers, increasing their loyalty and lifetime value. Typically, it can be challenging to get customers to buy more than once, but the subscription model does the hard work for you.
Customers will also keep your brand top of mind because of the regular interaction they have during each subscription delivery. And, they won’t experience decision fatigue because you are essentially making the decision for them. They won’t even have to check out each month because the recurring payment process takes care of that for them.
Additionally, you’ll have a much better estimation of product volume each month based on these subscriptions and automated recurring payments. You’ll be able to plan your inventory around it if you are offering a physical product.
Determine the Right Subscription Model
There are three main subscription models to choose from.
- The curation model means you hand-select the items for your customers, personalizing the selections based on preferences they have shared when they signed up.
- The replenishment model means you focus on ensuring that a customer never runs out of the products they want.
- The access model gives consumers a way to get exclusives, like products and experiences, which others cannot.
Here are some ways to enjoy recurring payments while building additional revenue streams that highlight your brand’s value:
Samples subscription model
This uses the curation model filled with sample items that you offer. This is a way to encourage them to return to buy full-size products in your portfolio after the sample sizes have convinced them to do so.
Monthly use subscription model
This is also a curation model that lets customers use a new product for a month and then return it for another one. This emphasizes the idea of recycling and reusing, which is important to a large demographic.
Personalization subscription model
This is also a curation model where subscribers receive a package of products suited to their style and preferences. It is often used for clothing and some food and meal items. With a try-then-buy approach, it is an excellent way to leverage recurring payments while extending what a customer buys from you.
Hobby and lifestyle interest subscription model
As a lifestyle product option, this is ideal for customers that are looking to replenish supplies and materials related to a certain hobby they enjoy. This also works for products like kids’ learning toys and craft kits.
Favorite products subscription model
Amazon’s Subscribe & Save is the ideal example of this model. It ensures that customers keep buying their most loved items and ones they tend to regularly need. This can be everything from vitamins and protein powder to cleaning supplies and certain food items.
Changing needs subscription model
Think of this option as ideal with families that have babies who grow into toddlers and then children. Educational and learning subscriptions, book clubs, and clothing companies can take advantage of this subscription model.
Exclusives and VIP subscription model
Again, Amazon has set the benchmark with its Amazon Prime model. It involves offering some type of club or membership fee that you can charge annually. Like Amazon, you can offer exclusives, discounts, and things like free shipping that your other customers don’t get if they choose not to sign up for the membership.
Once you know what you can offer, how to price the products or services, and which of these subscription models work, it’s important to work with a payment provider who understands these models and has a comprehensive and highly secure recurring payment method you can use to leverage the benefits of this growing trend, including increased revenue.