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Are you planning to start a subscription business?
Most people don't consider these essential aspects when starting a subscription business. In most cases, they start without knowing the fundamentals of operating a subscription business. In this article, we share 10 tips to help you get started with your subscription business today.
- Begin by doing some preliminary research
- Find a niche
- Find your ideal customer
- Analyze your competitors
- Build your first prototype
- Determine your pricing
- Get the right billing solution
- Automate your payments and dunning emails
- Find the best logistics partner
- Provide customer support from day one
10 tips to help you get started with your subscription business:
1. Begin by doing some preliminary research
Before you can start with your subscription business, you need to do some research. The subscription economy is booming, and many companies are trying to get in to receive recurring revenue.
For example, you can start with:
- Identifying if there's a need that your product can solve.
- Talking to potential customers and understanding their needs.
- Looking at competitors: are they offering something similar?
- Doing some research keywords and terms analysis to understand if there's a trend in the search engines for terms related to your product.
Use Google trends
You can use Google trends for looking into relevant keywords and trends for your product. Here’s an example of a coffee subscription keyword using Google trends.
2. Find a niche
The more specialized your subscription, the easier it'd be for you to approach your target audience, which will help you in the long term to maximize and retain customers.
There are different alternatives for selling subscriptions. If you're just getting started with your subscription business, you have to pick something that makes you stand out from the rest.
How to differentiate yourself from other subscription businesses?
- Have a clear proposition
- Offer a specific product
- Design a unique brand that stands out from the rest
Chopvalue is a great example of how to be unique. They Identified how their product differentiates from other alternatives in the market and how they can provide value for the people who care the most.
3. Find your ideal customer
After you've done your research and found your niche, spend some time understanding your ideal customers. This may involve looking at your competitors' customers or talking to potential clients.
Here are a few things to consider when finding your ideal customer:
- Who are they? What information do you have about them?
- What are their biggest motivations and pains (challenges) that your product solves?
- Why are you the best option?
- Where do they shop?
- What are their preferred social media channels where you can find them?
- Would they be able to pay monthly or rather per usage? If yes, how much?
These are some aspects to consider when understanding your ideal customer for your subscription business.
4. Analyze your competitors
The subscription market is growing, and more people are interested in acquiring products as subscriptions nowadays.
But what is the best way to find your competitors?
To find your competitors, you have to look for other companies related to your niche. How many other companies are you competing with? What are they doing? How can you differentiate from them?
You can use Ahrefs for something like this or do it while doing the preliminary research.
You can also search your product on a search engine and see which other companies appear.
Here’s an example of some other companies offering coffee subscriptions.
5. Build your first prototype
After you've done some preliminary research and found your niche, your ideal customers, and competitors, it is time to build a prototype so you can show it to potential subscribers.
You can start by building a website to showcase your product(s) there.
Vitafive is an example of how to build a great website to showcase your product(s) and to explain to subscribers how your subscription works.
6. Determine your pricing
Having a good pricing strategy from the beginning is one of the foundations for your subscription business. The pricing for your product should cover all the costs associated with producing and shipping the product.
When selling your products as a subscription, you need to contemplate that customers will pay per month or per recurring basis, so you won't be receiving the full amount per month.
Here are some other things to consider when setting your subscription pricing:
- Product costs
- Service costs
- Packing material costs
- Marketing costs (stickers, promo stuff...)
- Shipping costs
- Transaction and platform fees (charges from the payment processors and the e-commerce platform).
- Tools (email, communication, and design tools if needed).
- Acquisition costs
- Costs associated with your business (staff and other necessary expenses you have to pay).
7. Get the right billing solution
When getting started with subscriptions, companies build their own solution, but this will involve a lot of manual work and having 3-4 systems to make it work, which is not scalable when your business starts growing.
Billing for subscription businesses is different from traditional companies where products are purchased and invoiced without taking into account recurring payments.
Without a proper billing system, you can make a lot of manual errors. The best approach is to start with a company that offers you the best option to start your subscription business, so you can worry about what you do best: promoting your product.
For Firmhouse, bills should be simple, accurate, and properly branded. Your bills should be the first step in establishing a transparent, long-lasting customer relationship.
8. Automate your payments and dunning emails
In traditional business, customers pay up-front for their products with cash or credit. This approach doesn't work very well when you have recurring payments, the best to do is to automate your payment collections.
First, start by defining the market you want to sell in, identify the best collection method for your customer (once that allows you to collect payments quickly), and make sure you are communicating when a payment needs to be done for your customers.
You want to capture the mandate; so you will automatically invoice a customer, this is retried three times before dunning or debt-collection is notified.
9. Find the best logistics partner
Shipping rates are also one of the main costs associated with your product. Make sure you find a logistics partner that offers you a reasonable price if you ship regularly and always set the expectations with customers on when to expect their orders.
If you are just getting started, consider what makes more sense for your company if you have a few subscribers.
You might consider doing the logistics yourself at the beginning (which is fine), but as soon as you start growing, you'll need a trusted partner to help you. Firmhouse has a logistics partner located in The Netherlands to help you in this area.
10. Provide customer support from day one
Sometimes, when companies start their subscription business, they focus too much on building and selling the product that they forget to set a proper customer support center to help existing subscribers have the best experience from the beginning.
This is crucial as we've mentioned before because the cost of acquiring a new customer can be 5-7 times more than retaining existing customers.
Building a strong customer relationship from day one is crucial to retain current subscribers. Strive for providing an excellent customer experience from the very start.
Remember that good customer success from the beginning will allow you to:
- Prevent churn
- Increase customer lifetime value
- Create advocates for your product that will refer it to others. You can also use referral codes to get happy customers in.
Keep it simple
Make sure customers understand what you do and make the process of buying from you very easy. Many subscription businesses have a "how it works" page just dedicated to explaining customers how to acquire their products.
The opportunities for companies to start their subscription business is growing. If you are just getting started with subscriptions, don't forget to:
- Do some preliminary research into your customers and competitors
- Find a niche
- Set your pricing
- Build your prototype
- Get the right systems in place for you to grow your business.