What is a Subscription Business Model and How to Build Yours in 6 Simple Steps

Companies like Netflix, Hulu, and Spotify have sparked a subscription startup revolution over the past decade. According to a Zuora survey, the subscription economy has grown more than 435% over the past decade. And this booming industry is not just limited to magazines, movies and music. Other monthly subscription startups like Winc (Wine), Birchbox (Makeup), Stitchfix (Clothing), and BarkBox (Dog Toys and Treats), have made customers get their favorite hobbies, collectibles and necessities delivered straight to the doorstep each month.

Companies tout the subscription business model for its recurring revenue, where customers are charged routinely, typically each month, for an ongoing product or service. This trumps the one-time sales model, as it allows business to generate consistent and predictable revenue streams. It enables companies to spend less to acquire new customers and builds loyalty among existing ones.

But what exactly goes into launching a subscription business, or how do you build the subscription model into your existing company? Here is a step-by-step guide on how to go about profiting from the subscription craze.

1. Brainstorm your business idea.

The first step is deciding what kind of subscription startup you want to launch, and if it’s a viable idea. The key is to come up with a clear subscription idea and map out how your business will operate and generate profits.

When determining product-market fit and product viability, you also want to research competitors and whether the market is oversaturated. From Birchbox, to Ipsy and Boxy Charm, there’s already an endless array of makeup subscriptions out there. How will yours be different?

Think of the pros as well as the cons. While it might sound like fun to ship lovely cosmetic and wellness items to customers, consider the effort and vendor outreach it will require to deliver freshly curated boxes each month. More importantly, can the business you have in mind handle the complexity of the operations, including the packaging and delivering of goods?

2. Brainstorm what kind of products you will offer.

Begin to map out what kind of products will go into that box. Think about what you and your team specializes in–do you have enough expertise to build on your subscription idea? Do you have a sommelier certificate or know enough about wine to launch a wine-related subscription?

If you’re thinking about how to incorporate a subscription into an established or growing business, then think about your current product or service, how to better curate your merchandise and introduce customers to new inventory.

For example, if you have an existing wine company and want to boost and solidify revenue each month, you might want to launch a wine-of-the-month club. Or you can get more creative by launching monthly curated wine flights and tastings of smaller bottles. You can take this a step further by partnering with a local chocolate company and start offering wine and chocolate pairing boxes.

While the possibilities seem endless you want to have a clear mission of what kind of goods you want to deliver to customers and stay in line with your overall brand.

3. Price your subscription strategically.

Once you’ve built a business plan around your subscription idea and refined what exactly you’ll be delivering to customers each month, it’s time to price out your options.

You can price depending on the frequency at which you deliver goods to a customer, or the number of items that go into a single box. For example, if you want to launch a monthly educational toy subscription startup, entry-level prices can offer a set of low-cost activity books, while higher tier boxes that offer interactive STEM toys can be priced at a premium. Think about your target customer and what is feasible for them.

4. Launch your online footprint.

A functional and well-designed website is essential for successful subscription startups. Think about building a hub that clearly lays out your product and service benefits. Ensure you use a cohesive brand message, from product, to website to your domain name. The more clear your brand identity is, the easier it is for potential customers to find your services online. Launching a boutique soap subscription company, check out www.soap.club, or maybe you’re a wine connoisseur, www.firstleaf.club does an amazing job marketing their online brand. Clear and transparent product descriptions, as well as pricing and return policies, will also instill the confidence customers need to subscribe.

5. Get the word out!

Market your subscription service via newsletters, social media, and of course, on your company website. Beautiful lifestyle photos of the subscription box can go a long way and entice customers to subscribe.

Allocate a reasonable slice of your ad budget towards promoting your new subscription service. Reach out to relevant press and influencers who have a following within your industry. If you are launching a fitness accessories subscription, reach out to writers at  Runner’s World or Men’s Health. Contact top running clubs and fitness influencers on Instagram to test and review your subscription experience.

6. Build a club for your brand.

Running a successful subscription startup is so much more than just curating and shipping out beautiful boxes. You as a startup founder and leader must commit to building a community of like-minded customers, and feed their enthusiasm for your specific category. Encourage them to post about your subscription on social media, write reviews online, and proactively listen to their feedback. To keep your community happy, ensure you have a solid and responsive customer service protocol to handle any missing or damaged items. Tweak your offerings and customer experience to their preferences in order to continue growing a successful subscription startup, and a loyal customer base. There’s no better domain for launching an online community than .club.

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