In this week’s podcast, we talked to Matthew Holman from Qpilot about how to run a successful Subscription scheme.
Also available as a Podcast.
What is an eCommerce subscription?
Subscriptions are a part of eCommerce, which is experiencing strong growth. A four or five-fold increase is expected over the next few years.
There are two main types of eCommerce subscription
- Membership subscription, i.e. giving discounts and deals, e.g. Amazon Prime
- Automatic repeat purchases of physical goods, e.g. monthly subscription box
Many subscription services have been launched recently, and some commentators have suggested that subscription fatigue is setting in. However, if you can get it right, a subscription service will generate recurring revenue and help form a close relationship with your customers.
What kinds of products do subscriptions work best for?
Subscriptions are typically used for consumables, i.e. things which are used regularly e.g.
- Fresh food
- Food supplements
- Dog food
- Health and beauty products
These items are things which are used on a daily or regular basis and the customer is shopping for frequently. Getting products on a subscription saves the customer time.
Steps to launch a subscription business
Step 1. Understand your customer
To launch a successful subscription business, you need to understand your consumer and consider whether there are products they are currently getting elsewhere.
- Think about how you can add value to the consumer. Are there certain products which customers buy regularly?
- Are there products that would complement your current range that could be sold on a subscription basis? For example, could you start a pet food subscription offer if you sell pet accessories?
- Why should the consumer buy from you?
Step 2. Iron out your offer
Details to consider are:
- Frequently. What frequencies will you offer? E.g. Weekly, monthly, quarterly
- Selection options. Is it a fixed offer, or can the customer selection options
Step 2. Choose a platform
You will need a platform to run your subscription service. There are 30+ apps on Shopify (of which Qpilot is one option). Compare the app’s functionality against your proposed subscription offering and choose the one that bests fits your requirements.
How to promote a subscription service
Your offer should have a dedicated page on your site highlighting the features and benefits of your subscription scheme. Include:
- Subscription contents, i.e. what you get
- Subscription benefits. Why this helps the customer and the value it provides
- Branding. Highlight benefits such as environmental impact
- Subscription conditions. How will payment be taken, and how can the subscription be cancelled
To promote your subscription scheme, start by promoting the scheme to customers who are already frequently buying from your site.
Qpilot recommends giving a discount of no more than 10%. Pricing too low will leave less room for discounting in future. For example, You might want to run a sales event over a holiday weekend to drive additional sales
Understand your customers
Subscriptions can be very profitable as customers buy for several months before cancelling. Ask customers why they sign up and leave the programme to improve performance. By understanding why people leave, you can change your programme to improve performance.
There are two types of churn
- Passive churn. Customers forget to update their payment details so the subscription expires
- Active churn. Customers elect to leave the programme
To reduce churn, ask customers why they leave the programme. For example, they may have too much of something, so giving customers the option to pause the subscription can help.