Why Should You Start a Subscription Business in 2023?

In the past, subscriptions were restricted to items like newspapers, cable TV or electricity. But the marketplace has evolved now, and the subscription model is being used for all kinds of products and services. 

The subscription-based model is only expected to grow in the coming years. To put things into perspective, it is expected to be worth $10.5 billion by 2025. But is that the only reason you should start a subscription business? Definitely not.

There’s so much more that needs to be taken into account. And just like any business, there are pros and cons that you will need to work around if this is the kind of model you’re opting for.

Know what you need to be aware of when it comes to starting a subscription box business.

Why Should You Have a Subscription Business?

One of the biggest challenges in business is increasing customer lifetime and having them make multiple purchases. That’s not to say that customers who make a one-time purchase are not valuable. The truth is, they are much more expensive to acquire and maintain.

On the other hand, a customer in a subscription model is almost guaranteed to make multiple purchases.

Here are some reasons why going for subscription business ideas can be a great choice for your business.

• Maintains the cash flow on a regular basis (monthly, weekly or yearly).

• Makes for reduced customer acquisition costs.

• Increases customer retention without extra effort. 

One of the biggest struggles for a business with a normal model is that there is little to no customer longevity. That is completely flipped upside down here, where multiple purchases are hardwired into the framework.

Having your own subscription box platform is easier than you think, with a partner like IntervalPay. Our subscription-based business model makes sense for everyone, and you can start your own subscription box service sooner than you think.

The Two Kinds of Subscription Business Models You Should Know Of

In the case of products like cable TV, Netflix, or access to SaaS services, the customer is billed for access to the product. However, modern subscription businesses have changed the marketplace a little. The two models that have emerged quite strongly over the recent past are the box-based model and the replenishment model.

The Box Model – For Recurring Monthly Revenue

In a subscription box model, customers will receive a box of items related to a certain theme. Usually, they have little control over the kind of items that are delivered. And this is part of the appeal of the box model. Companies like Birchbox and Mystery Tackle Box have used the surprise box model very well.

How can Subscription Boxes Help?

Subscription boxes, for instance, may include cosmetic samples if that is the theme of the company. In that case, the customer pays for trying out the samples. And then, they can purchase a bigger size if they like what they have used.

A subscription box business model can work great for you if you’ve a higher customer lifetime value and recurring revenue. With a subscription service, you will be able to tap onto new customers as well as focus on customer retention. In fact, any successful subscription box business will focus on subscription box ideas that have recurring revenue.

If you place yourself in the shoes of a consumer, you’ll be able to tell that not all products might be to your liking. And it is essential that companies eventually fine-tune their services to be able to offer items that each unique customer will enjoy.

The Replenishment Model

Surely, you’ve come across the ‘Subscribe and Save’ option on Amazon. This is pretty much the idea behind the replenishment model. You offer the customer monthly refills of whatever product they’re using so that they never run out.

Let’s take cereal, for example. A significant number of people have some kind of breakfast cereal every day. Instead of having to manually order it every month, they can automate the order and avail of a discount.

As you can tell, the difference between the two models is that the customers know what they’re ordering in a replenishment model. That isn’t always true for the mystery box.

Challenges to Overcome for Subscription Businesses

While the subscription business does away with the initial roadblock of customer longevity, you still need to put in effort to retain them. Here are some of the biggest challenges that the subscription business model comes with:

Reducing Churn

Customer dissatisfaction is the number one reason why they opt out of a subscription model. So, it is imperative that the products are delivered on time, without damage, and are packed properly. 

Regular surveys about their experience with your brand can help you become more aware of the way things stand. This will also help you realise where your services need improvement. 

Reducing Costs of Acquisition

One of the main objectives of any business is to keep the cost of acquiring new customers as low as possible. The same is true for subscription businesses. Convincing them that your brand is the best every month can be a challenge if you’re not providing enough value to your patrons.

In spite of modern marketing tactics, word of mouth remains the best source for growing your business reliably. And offering a reward for referring a friend can help incentivize people to help grow your brand for you.

Saturation

In both of the subscription models, you’ll be providing regular products to your customers. But it is quite difficult to keep them committed and maintain the novelty of getting the same product over and over again. 

To overcome this, you can have a tier-based system that offers better or higher-end products for a higher price. This not only helps increase your average order value but also helps appeal to customers across all sorts of budgets.

Starting a Subscription Box Business

The subscription model can be a great tool if you have a product that customers require regularly. If you can work on the challenges and have a product that offers insane value, there’s no reason why you shouldn’t start a subscription business today.

IntervalPay can help make subscription management and recurring billing easier for you. Know how our automation and integration solutions can help your business do more – for less. Know how we can help you start your subscription box business easily – in just a few steps.