A few tips to start a profitable subscription business

Almost every novice start-up wants to instantly be on the Forbes lists, with his probably brilliant idea, but as life dictates, this happens with one of the millions. And if you dig deeper, then in general with no one, because behind the apparent instant success are months and years of hard work, blood, sweat, and further on the list. The pages of glossy business publications with examples of successful jet business starts flutter before our eyes like a banner.

Today, when the market is much richer than some years ago, and users and investors are more sophisticated, the question of monetization almost immediately arises before the founders. The times when projects were launched without a clearly expressed business model, and then stubbornly searched for opportunities for this very monetization, have sunk into oblivion.

In RuNet, the most popular working models for services are still advertising and transactional, for mobile applications and games - freemium, and oddly enough, for the country where the postal subscription system for various periodicals still works, one of the most rarely used models, is a subscription fee. Nevertheless, the advantages of a subscription model for a startup are completely obvious: the predictability of income, the pronounced loyalty of users and the availability of information on user preferences.

For old capitalists, these advantages have long been appreciated and a huge number of companies successfully use the subscription model. Most of the old news media companies such as WSJ and the Financial Times used a subscription for their electronic versions as an alternative to print media, while reducing paper circulation. Various financial and analytical companies like Bloomberg generally work only by subscription. Today, pragmatic outrageous Americans by subscription, except that babies are not sent. One excitement with the Dollar Shave Club was worth something, although what's so original about the replaceable blades for razors that come once a month, I don’t understand it for me. The only, in my opinion, innovation here is the fact of a special communication of the seller and the consumer. Just for fun in its most obvious manifestation.
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One way or another, but the subscription as a business model works, and in our country, it seems to me, she has a long and bright future ahead. A recurring subscription-based revenue model is acceptable for dozens and hundreds of new companies of the most varied sense and, equally important, a subscription has one of the lowest entry thresholds to the market. Yes, this model has its own shortcomings and some of them are extremely specific for us. Firstly, even for the very beginning of work, it is necessary to attract clients, but what is more terrible is the fact that they also need to be retained, and this task is of a different level of complexity. Secondly, our country is large and Russia's post is far from an ideal logistic option, you have to look for reliable suppliers or to supply yourself.

Consider some useful steps that can (and should) be taken by companies intending to make money with a subscription to reduce customer churn and ensure a steady income.

Research the subscription model applicability for your business

In general, there is a perception that any business can be monetized by a subscription, the most important thing is that the product is demanded on an ongoing basis, but in my opinion not to a modest opinion, an idealized product is best suited for subscription goods, the one that needs to be thrown away after application, and in this Dollar Shave Club's sense got straight to the point. Although I would recommend condoms for such a service better, they in every way bounce replaceable blades (if you need an idea, I donate for free, I don’t mind). At this step, you need to assess whether the market is large enough to support the business. Are there any similar offers on the market? Can you deliver your product on a regular basis? What customer problems does a subscription to your product solve?

Concept validation with crowdfunding services

I will not list domestic resources, who needs to find it. Of the western, the most famous are Kickstarter and Indiegogo. Successful use of crowdfunding platforms confirms the market value of the proposal, while not requiring the cost of analysts and market research, and allow us to estimate the size of the market niche. In addition, the collected funds themselves are a good bonus.

Using free trial lots

Give people the opportunity to try your product and get hooked on it before selling. This good old proven concept has been used by bargains for decades, and judging by the failure of attempts to eradicate the products they offer, the concept is very effective, so why not use it for your brilliant product?

Offer cheaper but longer term subscriptions

In fact, there are always two types of clients: those who come to you forever and those who want to try. In this case, the provision of differing subscription options, discounted for longer-term, gives more chances to attract new and retain old customers.

Tracking the smallest changes in the mood of your customers, light or automatic updates

Personalized communications are one of the most powerful factors in reducing churn and re-attracting customers. Collect as much data as possible about your customers (of course, legally and unobtrusively) and send personalized offers. To do this, of course, you will need a powerful customer service. Light or automatic updates that do not require significant effort from customers, incline users to continue using the products. What can I say, we are all lazy, do not like to strain, and extremely appreciate the convenience.

Use of additional materials

Successful subscription companies use a variety of complementary materials. These can be brochures, scanwords, fridge magnets, labels and titles in online communities and much more. The main rule will be consistency and it seems as if free of charge bonus materials.

Do not save on packaging

Packaging is very important. They meet all the same on clothes, but in this case on the wrapper. Use premium packaging, because the result of your decision may depend on how your customers perceive the next box, stay with you or go to your competitors.

Using outsourcing

If you yourself do not want to mess around with packaging, picking and shipping, you can try to find an outside organization, or a partner who will be engaged in such a routine, leaving you more time to think about and implement strategic plans to capture the world market.

Providing a high level of customer service

Make sure that customer service representatives will do everything to help the needy customer, and even a little more. Organize support through several different channels, ranging from multi-channel phone number and ending with social networks. Gratitude will be expressed in a long-term subscription and free word-of-mouth advertising.

Using metrics to identify problems and reduce customer churn

Identify key performance indicators and ensure that the team (if any) sees this data all the time. Average revenue per user (ARPU ), average customer lifetime ( average customer lifetime value, ACLV ) and monthly recurring revenue ( MRR ) are just some of the indicators, tracking which and contrasting their acquisition costs and customer retention, provides an opportunity to assess the return on investment.

Thanks for attention. Successes!