How to Use Subscriptions To Boost Recurring Sales

Generating sales is one thing. Generating recurring sales is something completely different.

One sale is great. It helps a business out and boosts the company’s bottom line. However, if the customer never returns, the same amount of marketing and outreach work must go into attracting and connecting with additional customers.

With recurring sales, this all changes. The company does not need to pay to constantly market to the recurring customer. This is why it is far easier to maintain a current customer and keep them happy over going out and trying to reach a new customer.

There are a number of ways to generate recurring sales. Realistically, it does depend on the business model of the company. A landscaping company might sign someone up for weekly services. A restaurant might offer specials to bring familiar customers back.

There is also a valuable subscription option. Until a few year sago subscriptions came in the form of monthly magazines, Internet service, and Netflix. However, now it’s possible to sign up for recurring monthly services ranging from boxes of dog toys to human socks. Recurring sales is a valuable asset to any business and ensures minimum monthly revenue. It’s exactly why any business with goods or services to offer needs to look into implementing a subscription service to help boost recurring sales.

The Benefits of a Subscription

Subscriptions offer customers recurring products and services on a set schedule. According to Forbes (2018), subscription numbers have doubled in the last year. In 2011, $57 million was generated from subscription services. However, that number jumped to $2.6 billion in 2016. It has reached a point where at least 15 percent of all Internet shoppers have signed up to receive at least one monthly box services.

The same Forbes research indicates there isn’t one product type or service that works better than another. As of 2018, the five most popular subscription services are Amazon Subscribe and Save, Blue Apron, Birchbox, Ipsy, and Dollar Shave Club. With products ranging from food prep to shaving equipment, there’s no limit or requirement to what products may work better or worse on a subscription basis.

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While 15 percent of consumers subscribe to a monthly box service, 46 percent of consumers subscribe to a media service, which includes Netflix, Hulu, Amazon Prime, and others. In total, 46 percent of all subscribers have some kind of a recurring subscription service. This demonstrates the importance of recurring sales and customers are open to the idea.

Who’s Your Key Demographic?

A company’s key demographic does have something to do with a subscription service. The Forbes (2018) research indicates individuals who subscribe to an e-commerce box service is most likely to be between the ages of 25 and 44 with an average income between $50,000 and $100,000. They will also likely live in an urban community.

Beyond this, women are more likely to have two subscriptions (29 percent as opposed to 18 percent). However, when men subscribe they subscribe to a large number of services. Of the number of males with an active subscription, 42 percent have three or more (with 18 percent having six or more). For women, only 28 percent of active subscribers have three or more subscriptions.

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Why Do People Subscribe? 

When looking to take advantage of a subscription service to boost recurring sales, a company needs to look at why a customer subscribes. Many businesses may assume if it puts out a quality product consumers will line up cash in hand, ready to sign up. Some consumers might. Those with a strong brand loyalty may sign up for such a service. For the general consumer base though this is not what they are looking for. As McKinsey (2018) points out, customers sign up expecting a great experience, not a great subscription.

When a customer signs up they know they are going to pay a monthly fee. This is another bill they need to take care of every month. For this, they don’t just want a standardized product. They want it to be unique to them and they want to enjoy it their own way. Even media services like Netflix and Pandora allow customers to create their own accounts, select specifically what they like and receive recommendations based on what they like. It isn’t a cut-and-dry service that offers exactly the same experience to everyone.

The McKinsey research indicates 55 percent of all current subscriptions are curetted to meet a customer’s needs. As the graph below indicates, people signed up for curtain subscriptions because they wanted to try something new (25 percent). The top reason customers signed up for a replenishment subscription (such as Dollar Shave Club) was because there was a financial incentive, while 24 percent said they were recommended by someone to try an access subscription. With these three different kinds of subscription services, a business needs to first determine which it falls under and then determine if they will offer a service for financial incentives, or if they want to provide something new and original to customers.

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The Marketing Funnel For Subscription Services

To reach a consumer there is an established marketing path. The first step is to educate a potential customer on the subscription. They need to hear about it. For a new subscription, this includes several forms of inbound marketing. The subscription will never take off if nobody knows about it. It also includes advertising it on the company website and using the generated email list to educate customers.

Once a potential customer has heard of the subscription, there is a funnel form of marketing used to familiarize a consumer with a subscription and to push access and provide incentives to sign up. As the funnel chart from McKinsey (2018) indicates, replenishment subscriptions do the best in educating a customer and eventually turning them into a subscriber. The financial incentive of possibly saving money helps bring in this higher percentage. Access subscription, on the other hand, performs the poorest, with the smallest amount of customer with knowledge of the subscription and only six percent of those with knowledge currently subscribed.

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Customers Are Ready For a Company’s Subscription Service

 There’s a good chance a company’s customers are ready for a subscription service. It is important to not just release a standardized product but to focus on creating an exciting user experience as if the customer is opening a monthly gift just for them. Once the business has identified how it wants to go about doing this, an established company will have an immediate audience.

According to BFS Capital (2017), six percent of US online adults have signed up for a themed box subscription service. However, 38 percent of US online adults are interested in one. They just want a subscription service that is designed for their needs, tastes, and requirements. This means 32 percent of US online adults want to sign up for a subscription, they simply have not come across one that meets their needs.

The same BFS Capital research indicates the top three subscription services are personal care, food, and clothing. This means these three, while popular, are already covered. In order to stand out in these three markets, it is critical to offer something different from other businesses. For those not on the list, it indicates an under-serviced client base and likely part of that 32 percent of US online adults who want a subscription service but have not found the right one.

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Small and Large Businesses Can Offer Subscriptions

There is no requirement as to what business is able to offer a subscription service. Dollar Shave Club began as a startup, building a massive email list before it went public. It did this by offering free startup kits and an ability for those who signed up early to receive extended discounts. Now it is one of the most popular recurring subscriptions around.

With the popularity of subscriptions, major corporations have jumped on board, including Walmart. This should not frighten small businesses and local shops from creating specially designed subscriptions. A subscription, for any size business, is still a recurring sale coming in every month. Even if the local store only has 10 subscriptions, it’s 10 additional sales made every month to help boost the bottom line. In some ways, smaller subscription services have a number of advantages, including the ability to curate personalized packages for customers, which makes it easier to offer these customers additional discounts and sales on future products they might like.

In Conclusion

Subscriptions offer an excellent way for businesses of all sizes to expand and to generate recurring sales. Nearly 50 percent of consumers in the United States have at least one subscription, and many of those who don’t have a box subscription want one, they are just waiting for the right subscription service to come about. Due to this, no matter what kind of products or services a company offers, it is important to focus on creating an experience while providing the customer with a product or service put together just for them.

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