With an uncertain economy, subscription and recurring revenue services are becoming incredibly popular among businesses.
Monthly Recurring Revenue (MRR) helps organizations maintain a consistent cash flow and continue to stay profitable despite the industry's strength in the market. In fact, companies with a stream of recurring revenue are valued higher than companies without one.
Adding a subscription component to your business helps diversify your revenue streams. Here's how you can implement a subscription service to your company.
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3 types of subscription services
While it may not seem obvious at first, every business can package their product or expertise and consistently distribute it to customers. And modern consumers have come to like or even prefer subscription-based services.
“Subscription models benefit the customer through convenience,” said Aaron Meyers, CEO of Hammer & Nails. “Easy billing makes a customer's life more comfortable as it allows ‘set it and forget it.’ But to offer memberships correctly, you need more than just convenience, you need value.”
The best way to determine what type of subscription service will bring value to your customers is to think about how they engage with your products and how recurring services would enhance their experience.
“The commitment from a customer must feel like a better value to the customer,” Meyers added. “A brand must pass on the savings from increased customer retention and revenue predictability.”
Knowing that consumers look for better value, you can determine what kind of subscription model to adopt for your business. There are three main types of subscription services: information, software and physical products and services.
Information
There are many different ways for you to leverage the information your company and your team has to offer. Customers purchase your product or services in order to fit a need in their lives. However, how much do they know about its other uses and related industries? Are there different ways they can use your product? Will teaching them more about your company or industry better enhance the value of it?
Your organization has more content to offer than you think. Finding a way to create new content or leverage existing content on a regular basis is a great model for a subscription service. Some of the most popular forms of information subscription services include:
- Archived content.
- Newspapers.
- Magazines.
- Videos.
- Online courses.
- Membership groups.
- Webinars.
- Events.
- Networking opportunities.
Physical products and services
The subscription model became popular when companies that sold products, such as razor blades, makeup or food, began mailing them directly to customers on a regular basis. Companies can use a subscription service as a means to offer clients new products, give them first access for shopping or features or provide more streamlined services. Customers who pay a fee can get regular shipments or priority service from a company. Some of the most popular forms of these services include:
- Scheduled boxes.
- Sample boxes.
- Consumable products.
- Exclusive items.
- Primary access.
- Physical labor.
- General services.
Software
If your business provides software, consider licensing it at an annual or monthly fee. Not only does this give you a regular stream of income, but it keeps customers engaged and they’ll continue to use your product to justify the cost. While creating a software subscription can be a lucrative revenue stream, it is not recommended unless this is your company’s primary product.
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To offer memberships correctly, you need more than just convenience, you need value.
Aaron Meyers, CEO of Hammer & Nails
4 tips for adding a subscription component to your business
If your business is ready to add a subscription component but doesn't know where to start, here are some tips to help you round out your ideas and implement your services
Repurpose existing content
Thanks to the internet, all the content you've ever produced can now live in a digital environment. The downside to this is that content is disposable. However, this gives you an extra advantage for a subscription service, as you can repurpose archived content and update it to distribute on a regular basis to your customers.
If you're in a goods-based industry and have an excess of certain products you no longer sell, you can package those in a subscription box service. This gives your customers extra products and helps you clear out inventory.
Meet your customers where they are
Take into consideration how your clients purchase and use your products and services. Do they primarily shop online? Are most of your new clients from email marketing or in-store services? Do they get your products delivered to their home or do they pick them up?
“[Subscription models] start with critically thinking about the behavior you want to reward, while always keeping your customers top-of-mind when in the planning phases,” said Vanessa Yakobson, CEO and co-founder of Blo Blow Dry Bar. “Host focus groups or send surveys to understand what your audience is looking for and test your ideas before running with the first program idea that makes sense to you. Consider running pilot tests of your program for a period to gather feedback.”
Yakobson added that an important step that is sometimes overlooked is surveying staff members. Since your staff members are the individuals interacting with the customers, they will often have great ideas about what to offer and how to promote it.
Finally, deliver your subscription service on the platforms your consumer base finds most comfortable. Don't try to reach them in a way where they are engaging, as they may not find or use your subscription.
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Price your subscriptions according to your business goals
Strategically price your subscription service so that your customers are rewarded for their loyalty and feel as though they're getting a deal. You also need to account for your own company goals. Setting a price can be tricky; however, if consumers see value in it, you can also attract new customers.
Focus on building customer relationships
The goal of a subscription service should be to enhance your customers’ existing feelings towards your business. The more they feel as though your company is a part of their lives, the more willing they are to continue using and buying your products.
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