Some tips for starting a profitable subscription business

    PechkinAlmost any novice startup wants to instantly appear on the Forbes lists, with his probably brilliant idea, but as life dictates, this happens to one in millions. And if you dig deeper, then with no one at all, because months and years of hard work, blood, sweat and further on the list are behind the seemingly instant success. As a banner, pages of glossy business publications with examples of successful jet business starts fly before our eyes.

    Today, when the market is much richer than just a couple of years ago, and users and investors are more sophisticated, the founders almost immediately face the question of monetization. The times when they launched projects without a clearly defined business model, and then persistently searched for opportunities for this very monetization, have sunk into oblivion.

    In runet most popular operating models for services are still advertising and transactional, mobile applications and games - freemium, and oddly enough, for a country which is still working mail subscription system for various periodicals, one of the most seldom-used working models, is a subscription payment. Nevertheless, the advantages of a startup model for a startup are quite obvious: revenue predictability, pronounced user loyalty and the availability of information about user preferences.

    The old capitalists have long appreciated these advantages and a huge number of companies have successfully used the subscription model. Most of the old news media companies, such as WSJ and the Financial Times, used the subscription for their electronic versions as an alternative to print media, while reducing paper circulation. Various financial and analytical companies such as Bloomberg generally work exclusively by subscription. Today, Americans are pragmatic to disgrace by subscription, unless babies are sent. One boom with the Dollar Shave Club was worth it, although I don’t understand what kind of original in replaceable razor blades that come once a month. The only innovation, in my opinion, is the very fact of special communication between the seller and the consumer. Just for fun in its most obvious manifestation.

    One way or another, but subscription as a business model works, and in our country, it seems to me, she has a long and bright future ahead. The repeating subscription-based revenue model is acceptable for dozens and hundreds of new companies of all kinds and, just as importantly, the subscription has one of the lowest thresholds for entering the market. Yes, this model has its own shortcomings and some of them are extremely specific for us. Firstly, even for the very beginning of work, it is necessary to attract customers, but what is more terrible is that they also need to be kept, and this task is of a different level of complexity. Secondly, our country is large and the Russian post is far from an ideal logistics option; you have to look for reliable suppliers or engage in deliveries yourself.

    Let's look at some useful steps that companies (intending to) earn by subscribing can take to reduce customer churn and ensure a stable income.

    Research the applicability of the subscription model for your business

    In general, there is an opinion that any business can be monetized by subscription, the most important thing is that the product is in demand on an ongoing basis, but in my opinion is by no means a modest opinion, the idealized product is the best for signed products, the one that needs to be thrown away after application, and this meaning Dollar Shave Club hit the nail on the head. Although I would better recommend condoms for such a service, they in all respects skip replaceable blades (for anyone who needs an idea - I give it away for free, I do not mind). At this step, it is necessary to assess whether the market is large enough to support the business. Are there any similar offers on the market? Can you deliver your product on an ongoing basis? What customer problems does your product subscription solve?

    Checking the concept with crowdfunding services

    I will not list domestic resources, who needs to find it. Of the western ones, the most famous are Kickstarter and Indiegogo. The successful use of crowdfunding platforms confirms the market value of the proposal, while not requiring the cost of analysts and market research, and allows us to assess the scale of the market niche. In addition, the funds raised by themselves are a good bonus.

    Using free trial lots

    Give people the opportunity to try your product and get hooked on it before starting sales. This good old proven concept has been used by hucksters for decades, and judging by the unsuccessful attempts to eradicate the products they offer, the concept is very effective, so why not use it for your ingenious product?

    Offer cheaper, but longer term subscriptions

    In fact, there are always two types of customers: those who come to you forever, and those who want to try. In this case, providing different subscription options, with a discount on longer ones, gives you a better chance of attracting new and retaining old customers.

    Tracking the smallest changes in the mood of your customers, easy or automatic updates

    Personalized communications are one of the most powerful factors in reducing churn and re-engaging customers. Collect as much data as possible about your customers (of course legally and unobtrusively) and send personalized offers. To do this, of course, you will need a powerful customer service. Light or automatic updates that do not require significant labor from customers encourage users to continue using the products. What can I say, we are all lazy people, we don’t like to strain and we value comfort extremely.

    Use of additional materials

    Successful subscription companies use a variety of complementary materials. These can be brochures, scanwords, fridge magnets, labels and titles in online communities, and much more. The main rule will be constancy and, like, free bonus materials.

    Do not save on packaging

    Packaging is very important. They are met all the same by clothing, and in this case by wrapper. Use premium packaging, because the outcome of the decision to stay with you or go to competitors may depend on how your customers perceive the next box.

    Using Outsourcing

    If you yourself do not want to bother with packing, picking and shipping, you can try to find a third-party organization, or a partner who will engage in such a routine, leaving you more time to think about and implement strategic plans to capture the world’s market.

    Providing a high level of customer service

    Make sure that customer service representatives will do everything to help the needy customer, and even a little more. Organize support on several different channels, ranging from a multi-channel phone number to social networks. Thanks are expressed in a long-term subscription and free “word of mouth” advertising.

    Using metrics to identify problems and reduce churn

    Define key performance indicators and make sure that the team (if any) sees this data constantly. Average revenue per user ( the Average revenue The per user, in ARPU ), the average time of the client's life ( time average to customer a lifetime of value, ACLV ) and monthly recurring revenue ( monthly a recurring revenue, MRR ) are just a few indicators, tracking where and opposition of their expenses for the acquisition of and customer retention, provides an opportunity to assess the return on investment.

    Thanks for attention. Good luck!

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