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Lately, I've seen a trend of products being offered as a subscription. I receive every month a set of products that I regularly consume, which I prefer to receive on the commodity of my house rather than buy it from the store. Companies are looking to take advantage of the digital transformation that makes people buy more online and get their favorite products conveniently.
In this article, we explain what is really a subscription product, what benefits it has for companies, and how you can start and manage your subscription product.
Let’s start by defining what is a subscription product?
A subscription product is when a customer pays to have access to a product as a subscription and get billed on a recurring schedule.
Subscription products are on the rise, and they will gain more popularity over time as more customers adopt this model.
Subscription products have three powerful benefits for your company:
- Enhances customer loyalty: increasing the number of successful interactions that your customers have with your business.
- Improve cash flow: with subscription products, your customer doesn't have to pay upfront, but they will have to pay for a period of time, which helps you to receive recurring revenue.
- As a revenue stream: Allowing new customers to access your product as a subscription is a great way to receive additional revenue streams from different customer segments.
There are different types of subscription products, so which kind of products are best for subscriptions? Of course, this depends on the industry, but in short, it has to be a product that your customer consumes regularly or a product that is expensive to buy upfront.
Type of products that can easily be offered as a subscription:
- Consumable or disposable products are a great choice for e-commerce subscriptions.
- Expensive products, such as electronics or furniture.
- Products that people use regularly and need to be replaced.
- Products that your customer consumes, wear or recycle after its use.
6 industries that are offering subscription products:
3 Examples of product subscriptions:
- Kiwi crate - $19.95/month
- Honest company - $39.95/month
- Green kid crafts - $19.95/month
- We craft box - $24.99/month
- Grooming and fashion-men
7 Steps that can help you when starting your product subscription:
- Make sure to offer something customers want: First, start by deciding which product(s) you'll offer as a subscription. Stick to one or two product offerings at the beginning to test what works and the reception from the people. Keep in mind that this doesn't mean you can't have all your products as a subscription, if you are a company that sells more than 1 product or that plans to expand). Start with the one that will be the most suitable for the audience you try to convince. This could be your most popular product or a new product that you are trying to test in the market.
- Once you pick a product to sell as a subscription, you'll need a tool to manage your sales and operations since doing the process manually can get messy when you have a handful of customers. As you scale, you need to manage your subscribers; otherwise, it can become unmanageable.
- Billing is one of the most complex aspects, especially if you offer different product variations such as Fat Fit Fun, with the ability to choose what goes on the box or specific customer needs.
- Give customers a try-before you buy option. Aren't your customers ready to subscribe? Ask them to buy for one month so they can try it and see if they like it.
- Ensure customers have an option to suggest your product to friends. From the very beginning of your subscription business think of a strategy so customers can refer you to other people.
- Another option is to send a special discount with the product if they refer more people or suggest your product to their friends. This is valuable if you are trying to scale fast. It would give you a network effect that can help you promote your product and ultimately grow.
- Make sure all product items are clear. If you deliver on the 11th of every month, can a subscriber get your product if they sign up on the 9th? If a customer travels, can they change their address or pause their subscription? Take this into consideration and communicate it with customers so they can better understand how your subscription works.
What is a subscription management software, and what has to do with subscription products?
If you are thinking of offering a product as a subscription, you should make sure some aspects are covered before starting.
Some of the aspects to consider when starting your product as a subscription are; your customer lifecycles, trials, credit checks, operations, refunds, logistics, and subscription changes.
A subscription management software oversees the interaction between your business and the customers, which is more complete and different from just recurring billing.
Subscription management software helps you update your customers' information, upgrade/downgrade subscriptions, perform customer-oriented tasks, customer communications, and dunning management.
Meanwhile, recurring billing helps you only generate an invoice (including location-based taxes), tracking payments, and safely storing payment information.
8 ways in which a subscription management tool or software can help you with your subscription product:
- Easily track changes from the customer, such as; credit card expiration, contact information updates, and the possibility of upgrading or downgrading their subscription.
- Instantly access the historical data from your customer: view invoices, cancelations, deliveries, and much more.
- Have a self-service portal where customers can find all the necessary information for their product subscription.
- Communication with subscribers is key: Subscription management improves your overall customer's experience by enhancing communication with your subscribers.
- Dunning management helps you set pre-determined communications to reach out to customers throughout their lifecycle.
- Ensure revenue recovery and communicate when a payment or a transaction fails. A subscription management software also helps you contact subscribers to let them know their credit card is about to expire.
- A subscription management software stores your: subscribers data, any add-ons, product catalog and prices, history of transactions, and billing cycles.
- Subscription management works on top of a payment processor to support billing. It allows teams to take actions that need to be automated, such as customer signs up or special discounts or trial periods.
Having your product as a subscription enhances customer loyalty, it is a great revenue stream and improves your business cash flow.
Some of the best products to have as a subscription are; products that are used more frequently with the possibility to be recycled after or products that are expensive to pay upfront. Industries such as; furniture, electronics, vitamins, and children's toys are well suited to start offering product subscriptions.
A subscription management software helps you oversee your customer interactions and make sure you run operations smoothly.
Are you looking to start offering your products as a subscription? Request a demo for free today and start using our subscription platform today.