What is a subscription based business?
A subscription based business is a business that offers a monthly or yearly subscription to either a product or service. Customers will be charged on a recurring basis until they decide to end the subscription.
Subscription businesses are increasing rapidly in popularity. For example streaming services such as Netflix, music providers such as Spotify and delivery services such as Amazon Prime are all dominating their marketplace.
Are subscription businesses profitable?
The subscription ecommerce market is projected to reach $473 billion by 2025.
Subscription businesses give owners the opportunity to make thousands per month (every month) from content, knowledge and information they already have and turn it into a passive, recurring income stream.
It’s a way to make multiple streams of recurring income, fast. Subscription based businesses have the potential to get scaled to the point of making over 6 figures per year, in a short amount of time.
As long as owners have the insider knowledge of what platform, content and pricing structure to use, it’s possible to build THOUSANDS of members as quickly as possible while fully retaining ownership, building multiple levels from $10 to $500 per month and promoting the platform with minimal extra content creation.
Benefits of a subscription business
- Cash - Many subscription businesses offer a discount or additional benefits if users pay a lump sum up front for the entire year instead of charging on a monthly basis. This is a huge benefit for startups who might be strapped for cash, as it provides an influx from the very start, providing some peace of mind.
- Forecast for the future - Being able to predict monthly/yearly recurring revenue means that businesses can accurately forecast for future growth and scale. Owners can streamline everything and reinvest to scale the business at a much faster rate than other businesses.
- Reduce cost of acquiring customers - Acquiring a new customer can cost 5–10 times more than retaining an existing customer. Subscription businesses turn one-time shoppers into repeat and sometimes lifelong customers. With customers making payments on a regular basis, less money is needed to constantly acquire new customers.
- Increase customer loyalty - With the recurring nature of the business, customers are more likely to stay loyal and dedicated to your brand. Owners are able to get a deeper insight into their customers and provide them with a more personalised experience. Repeat customers spend, on average, 67% more than new customers.
- Upsell and cross-sell easier - Having loyal, dedicated customers who already enjoy your products/service gives a concrete foundation to upsell and cross-sell to as they already know you provide quality and value and are more likely to try other items.
How to make sure your subscription business is successful
The biggest concern of any subscription business is churn rates. To ensure you’re attracting customers to your business that are going to stick, like your product/service and become loyal, make sure to do the following:
- Product viability - Make sure your product/service is viable. Many subscription sectors are already overly saturated, therefore, making it a lot harder to enter and succeed in. Do extensive research on the market and competitors before choosing your niche and launching.
- Business goals - Always keep these at the front of your mind. Whether the goal is revenue, customers acquired or units sold, make sure to always be on top of your goals.
- Pricing - At the beginning make sure not to constantly offer free trials or huge discounts without calculating the return. Take into consideration if customers will churn quickly and if you have a clear payback outlined.
- Personalisation - A personalised experience is important to many subscribers, therefore investing in the expertise and technical abilities to provide this should be at the top of your list.
- Retention - After customer acquisition, customer retention should be a focal point in your marketing strategies. Since it costs more to acquire customers, than to retain them, it’s important to keep customers loyal.
- Marketing channels - If you’re a startup subscription business then influencers can help you gain a lot of social media followers. Email marketing is your best friend as subscribers want regular, personalised engagement.
- Churn - You should always be monitoring voluntary and involuntary churn. If customers unsubscribe make sure you’re finding out the reason why to improve future retention rates. If credit cards and addresses are out of date, make sure to contact customers and get these updated so that you don’t lose them involuntarily.
How do I create a subscription service?
Thousands of people are already running successful subscription businesses.
If you want to learn how to do this or any other ways of creating passive, recurring income then you need to join the Recurring Income Summit.
Learn from some of the world’s top international, expert entrepreneurs who have made not only thousands, but MILLIONS of additional pounds in recurring income.
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