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10 tips for running a profitable subscription-based business

Jennifer Lonoff Schiff | Oct. 13, 2015
Experts in customer acquisition and retention and ecommerce share advice on how to create and sustain a successful recurring-revenue business.

5. Stay on top of your customers – and make renewing easy or automatic. “Through our retention marketing work with companies such as The Honest Company and Dollar Shave Club, we’ve learned personalized communications is one of the biggest factors in reducing churn and re-engaging customers,” says Jerry Jao, CEO, Retention Science. “Collect as much data as you can about your customers and email them personalized offers and information to coax them to renew before they churn, which is usually at the three-, six- or twelve-month mark.”

“Enable clients to auto-renew, or have a frictionless system for renewals,” says Janet Kosloff, cofounder and CEO, InCrowd, a provider of real-time market intelligence. “When you make it easy for the customer, they’re more inclined to stay.”

You can also make renewing automatic (giving the customer the option to opt out).

6. Offer something outside the box. “Successful subscription companies add value outside of the solution itself, often through content or community,” says Anne Janzer, an author and marketing consultant. “Companies like Birchbox, Dollar Shave Club and Blue Apron deliver much more than what’s in the box. Dollar Shave Club sends a newsletter filled with games and humor; Birchbox has online magazines, etc.” There are different ways to add value. You can do it “through content, community and stories,” she says. Just do it “in a way that is consistent with the brand identity.”

7. Don’t skimp on packaging. “Packaging matters,” says John Monarch, CEO, Direct Outbound, a fulfillment company that handles shipping for dozens of subscription box products. “Don't use a USPS flat rate priority box. It looks and feels cheap. If you're a premium business, have premium packaging,” he argues. “There are plenty of ways to make it easy to ship while looking high quality and keeping costs low [that can] make a huge difference in how your customers perceive the box and can increase retention significantly.”

8. Use a fulfillment service. “There are dozens of companies that help subscription box businesses with the dirty work of picking, packing and shipping,” notes Lininger. “Unless you love paper cuts and glue-mouth, do yourself a favor and find a partner for this. It's surprisingly cheap and easy if you do it [right].”

9. Provide excellent customer service. “Make sure your customer support reps bend over backwards to help your subscribers,” says Kat Fulton, founder, MusicTherapyEd.com. “In our email communications, it is our policy to always say ‘Thanks for going VIP!’ to our VIP subscribers. Our niche is filled with passionate people, so we match their passion with our gratitude.” As a result, “while the industry standard for membership retention is three months, our average stay time is 13 months, and we're very proud of it.”

 

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