How to Add Subscriptions to Your Business,
Without the Hassle

Interested in offering subscriptions to your eCommerce customers?
It's probably easier than you think.
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INTRO

In 2019, online sales surpassed brick and mortar retailers for the first time, as more and more consumers became comfortable buying things online. The pandemic and an increase in social media use have made eCommerce skyrocket even further.

We’re on the cusp of another shift, as the return to in-store shopping has online brands shifting their strategies to maintain sales and keep acquisition costs down. As the economy evolves so do we. One way that eCommerce is evolving is in the increase of online subscription services.

Subscriptions can be an incredible tool for boosting repeat purchases and LTV, but only if brands do it right. According to Gartner, by 2023 75% of organizations selling D2C will offer a subscription — but only 20% will succeed in increasing customer retention.

With subscription services taking off, you may be considering adding a subscription-based business model to your store. This guide will help you determine if a subscription service is right for your business (subscription business models fit more brands than you may think!) and how to set yourself up for success if you decide to add one.

Table of Contents
01
Understanding subscription eCommerce services
02
The top 5 benefits of adding a subscription model to your eCommerce business
03
6 questions to ask before deciding to add a subscription service
04
Prepping for your subscription launch; steps to getting started
05
What to look for in a subscription-based software partner
06
Growing your subscription business post-launch
07
The do’s and don’ts of subscriptions
01
Understanding subscription eCommerce services
02
The top 5 benefits of adding a subscription model to your eCommerce business
03
6 questions to ask before deciding to add a subscription service
04
Prepping for your subscription launch; steps to getting started
05
What to look for in a subscription-based software partner
06
Growing your subscription business post-launch
07
The do’s and don’ts of subscriptions
Understanding subscription eCommerce services
Chapter 01
Understanding subscription eCommerce services

Let’s start at the beginning: What are subscriptions?

Subscriptions themselves are nothing new. We’ve had magazine and newspaper subscriptions for generations. Perhaps you received a subscription to the book or fruit of the month club for the holidays.

eCommerce subscription services are similar, only they are sold online. Products or services are set up to be purchased and delivered on a repeat basis, usually monthly, weekly, or seasonally. Payment is delivered and products are shipped automatically. Often, customers are given a discount on these services or products in exchange for their reliable and repeat purchases.

Types of subscription models

Replenish

Replenish is used for products that have a consistent consumption rate, like health and beauty products, food, and office supplies. Amazon’s Subscribe & Save program is a popular example, but many companies sell more specific items like shaving supplies and pet toys. One-third of all subscriptions follow the replenish model.

Curation

The Curation model is the most popular, accounting for 55% of all subscription services. It relies on shoppers’ desire for new discoveries. Usually, a company has consumers take a quiz to establish their preferences. Then they send a collection of items based on the buyer’s stated desires. With each new box – and feedback from the customer – the selection becomes more personalized.

Access

The third model is Access, where customers get exclusive access to products, usually at a discount. Warehouse clubs like Costco, BJ’s, and Sam’s Club are brick-and-mortar examples of Access. Online examples include companies like Grove Collective and Thrive Market. Access accounts for just 13% of subscription services.

Subscription terms you need to know

Now that we have a basic understanding of subscription services and the three most common types of subscription models, let’s talk a little bit about the terminology marketers use in conjunction with their subscription offerings.

  • AOV: The average order value tracks the average dollar amount spent each time a customer places an order on your website or mobile app.
  • CAC: Customer acquisition costs refer to the amount spent to acquire one customer.
  • Churn Rate: This is most commonly expressed as the percentage of service subscribers who discontinue their subscriptions within a given period.
  • CLTV: The customer lifetime value is the average revenue you can generate from customers over the entire lifetime of their account.
  • Customer Portal: This is a secure hub on your eCommerce website that gives your customers easy access to all relevant information about their business with you.
  • Merchant Portal: This is an online tool that allows you, the merchant, to manage your subscription offerings, determine discount offers, and make adjustments to your customers’ subscription accounts.
  • Recurring Revenue: This is the portion of a company’s revenue that is expected to continue month after month. To learn more about recurring revenue, read our guide.
  • Subscription Management: This is the process of managing your customers’ subscriptions and making sure that their experience with your product or service is a positive one.
The top 5 benefits of adding a subscription model to your eCommerce business
Chapter 02
The top 5 benefits of adding a subscription model to your eCommerce business

With subscription-based businesses booming, it’s clear that there are many benefits to this model. Let’s go over the top five advantages of adding a subscription platform to your eCommerce business.

More reliable sales metrics

Subscriptions allow you to have a better sense of your future sales, revenue, and inventory. Customers “opt-in” to your service for a set duration, making it easier for you to predict the number of customers you have each month and what they will be purchasing.

With this knowledge, you will have a better handle on what inventory you need and a better understanding of your retention rate, allowing you to focus more of your attention on acquiring new customers, rather than managing inventory and payments.

Retention

Subscriptions are retention-driven models, rather than acquisition-driven models. Because you have a 60% to 70% chance of selling to an existing customer, versus a 5% to 20% chance of selling to a prospective customer, subscriptions give you more stability.

Brand loyalty

As customers receive your products or services on a regular basis, they will begin to understand your brand better and value it more. Then, if they like what you offer, they will come back for more products. Especially with the curation model, where the company learns more about its consumer’s preferences as they make their purchases, customers end up investing in the company because it knows them. You then have the opportunity to upsell or cross-sell to your current customers.

More engagement opportunities

In this age of social media and instant access, engagement with the customer is especially important. In the subscription model, there are many natural ways that engagement happens.

With the replenish model, when you remind customers that their subscription is coming, it can be an opportunity to educate them about how to use the product, improving the longevity of their subscription, or highlight new items they may add. With the curation model, you can encourage customers to review the items and give you feedback, so you can better understand their unique needs. And with the access model, you have opportunities to share with them the members-only advantages their subscription offers.

And with every model, there’s an opportunity to strengthen your relationship with customers beyond the transaction.

Subscriptions are popular with customers

Finally, customers love subscriptions. They love the convenience of not having to worry if they run out of toothpaste. They love the excitement of opening a new box to see if you were able to “get them” with your latest curated package. They love the exclusivity of being a member of a private club. They love the discounts, the time saved, and the ability to get what they need without leaving their house. Over half of online consumers have a subscription service and 58% of eCommerce subscribers have multiple subscriptions.

6 questions to ask before deciding to add a subscription service
Chapter 03
6 questions to ask before deciding to add a subscription service

While subscription services seem to be the trendiest offering in eCommerce, they’re not the solution for everyone. Before adding a subscription service to your business, there are a few things you should consider.

1. How will it affect your current customers?

Adding a subscription service should not replace your existing business model. Current customers should be able to order products or services from you the way they always have and/or choose to subscribe to your new service. The subscription service should only add value. This way you don’t alienate customers that already love your business and the way they interact with you. You will just give them a special opportunity to enhance their relationship with you.

Adding the subscription service, rather than replacing your current business model, also gives you the opportunity to just dip your toe in the water. You can add items to your subscription slowly, and if it doesn’t make sense for you, you can remove the subscription option without disrupting your business.

2. What products should you add to your subscription?

Look at your current sales and see which products are the most popular and which products customers make repeat purchases of. Look at your reviews and feedback to find ideas for what your customers would appreciate in a subscription service.

3. Do you have a niche?

Another thing to consider is whether or not you have a niche. Things like protein or collagen powders, women’s multivitamins, and hosiery are great examples of niche subscription products. Niche products make up 20% of the subscription box market.

If you have a niche, how well is it doing? What are some of the current trends surrounding your niche? One thing that seems to be prominent in all successful subscription services is their specificity. The more you can pinpoint your corner of the market, the better.

4. Who are your customers?

Are they single or married? What kind of car do they drive? Where do they live? What kind of magazines do they read? What kind of television shows do they watch? What are their other interests?

Dig into the minds of your customers to see what they may be looking for that you can provide. Perhaps your customers are busy parents who could use the convenience of a replenish subscription

5. What sets you apart from other businesses in your field?

Look at other businesses in your field that have subscription services. What can you offer that will set you apart from them? Can you provide more functionality, more style, a wider selection, or more customization than others in your niche?  Are your items organic, environmentally friendly, or made locally? Can you promise a fast turnaround, free shipping, or a free gift with each purchase?

Harry’s and Dollar Shave Club are both popular subscription businesses in the grooming industry, but they have taken separate approaches. Harry’s focuses on style, has one type of razor, and offers an a la carte option, while Dollar Shave Club is strictly a subscription business and has several types of razors to choose from.

6. Which subscription model works best for your brand?

After examining your products, your customer base, and what sets you apart from other businesses in your field, you should have a pretty good idea of which subscription model works for you. If the products you offer are regularly consumed items like hand soap or paper clips, you will want to go with the replenish model. If you find you can expertly curate a specific niche or your customer base prefers to discover new items, you should consider the curation model. And if you have high-end products or customers that thrive on exclusivity, the access model is right for you.

The best subscription services fulfill a genuine need, rather than just give people more stuff. Quality is more important than quantity. And a quality experience is essential to getting people to love their subscriptions and remain subscribed. A superb experience can mean different things — expert curation, substantial savings, fast delivery — depending on your brand.

Prepping for your subscription launch; steps to getting started
Chapter 04
Prepping for your subscription launch; steps to getting started

Once you’ve determined that a subscription service makes sense for your business, there are just a few steps to prepare for your launch.

Determine your subscription offering

Not everything on your site needs to have a subscription offering. The key to growing a successful subscription business is to start small. It is incredibly easy to get started with just one product. Yotpo customer Jill & Ally decided to take one product from their website and offer it as a subscription. They created the Crystal Candle Club, the subscription cycles through an assortment of scents and crystals based on the seasons. Their subscribers set up their own order frequency, ensuring they get what they want when they want it.

As mentioned above, get started with your most popular product. Introducing a beloved product on a subscription basis reduces the barrier to entry, customers are already purchasing this product from you, and some people may purchase it on a regular basis so they’ll feel more comfortable and confident subscribing.

Something else to think about is do you want to bundle products? There are a few ways of doing this with a subscription model.

  • Best Sellers: Try bundling your best sellers, the products you know people love and reorder time and time again.
  • Best Sellers & New products: Bundling your best-selling items with a new product is a great way to get it into your customer’s hands.
  • Best Seller & Less Popular Items: A great way to move through some of your less popular products is to bundle them with the best sellers. It gives your customers the chance to try something new from you that they may not otherwise order.

Calculate Cost

Next, you need to calculate the cost of your subscription service. There are a few different approaches to doing this based on what kind of subscription you’re offering customers. Of course, you will need to include the cost of the product, shipping, and labor, but don’t forget to also account for cancellations, packing materials, credit card transactions, and marketing.

You will also want to consider how you are charging for your subscription. If this is a curation subscription there are several options. Is it a flat rate? Perhaps you want to consider bundling various products to maximize the value to your customers (and the profits to you). Many subscriptions have 2 or 3 tiers for customers to choose from, based on how many products, the duration of the subscription, or the frequency the item is shipped.

Cratejoy has a nice subscription calculator that can help you determine how you should price your curation subscription. If you have a replenishment subscription you’ll want to define your incentive. Are you offering a discount or maybe you chose to give customers free shipping? No matter what kind of subscription model you’re working with it is important to calculate your costs ahead of time to make sure you’re always coming out in the green.

Define your customer experience and service

The very definition of a subscriber is loyal, their experience with your brand as well as the service they receive from you should be top of mind to make sure that they remain devoted. Worldwide, 96% of consumers say customer service is an important factor in their choice of loyalty to a brand. According to the McKinsey & Co. study, experience is the top reason people stay with the curation and access models of subscription services. Likewise, bad customer service and poor experiences are the main reason for a high churn rate. Don’t let that deter you from building your subscription business, set expectations for the kind of experience you want your subscribers to have. Similarly, be sure your customer service is ready to provide best-in-class support.

We’ll dive more into this in chapter 5, but it boils down to the subscription app. Having a tool that allows your customers to make edits to their subscriptions isn’t just convenient, but it puts them in control of their own experience. You’ll also want to look for a subscription app that offers a great merchant portal so customer service can easily make changes on behalf of the customer. Yotpo Subscriptions was built to strengthen the relationship you have with your customer through easy-to-use interfaces and native shopping experiences.

Have your marketing in place

As experience is so important in today’s eCommerce business, making sure you have your marketing in place is critical. Having platforms that work together for reviews, SMS, referrals, and visual UGC is essential for customer recommendations and attracting new buyers. 24% of subscribers cited recommendations as the main reason they signed up for a subscription. It was the most cited reason for subscriptions to the access model.

Also, make sure you take advantage of the customers you already have in your marketing strategy. SMS is a great way to personalize your customer’s experience, treating them as a friend rather than a business transaction. Take the opportunity to reach them where they’re at and give them the “exclusive” to new offerings, sales, and events. Reward your current customer base by offering pre-launch discounts to those who already enjoy your products — and maybe their friends and family too. Incentivizing your existing customer base is a great way to enroll your first subscribers and launch your subscription service.

Stock your inventory

This may go without saying, but you should double-check that you have plenty of inventory of the items you plan on including in your subscription service. The last thing you need is a lot of subscribers to an out-of-stock item. You will want to be sure that you can ship those items right away.

Download and install your subscription management software program

We’ll go into more details on how to choose the right software program in the chapter below.

What to look for in a subscription-based software partner
Chapter 05
What to look for in a subscription-based software partner

Here at Yotpo, we recently launched Yotpo Subscriptions for Shopify brands, an easy-to-use solution that enables our brands to understand and engage their repeat customers and nurture those customers into loyal subscribers.

As we were developing our subscription product there were a few key features we knew customers would be looking for. Our goal is to help brands not only create a subscription offering but to easily manage subscribers on a day-to-day basis. Here’s what we knew our customers were looking for in a subscriptions partner:

1. Ease of use without disruption to your current business

As we stated before, adding a subscription service to your eCommerce business should add value; it shouldn’t be a complete overhaul of your current business. When the solution is easy and aligns with your current business model, you have the opportunity to grow your subscription service at your own pace and manipulate it without disrupting your current operations.

You want a service that will help your brand seize growth opportunities with minimal friction to your current sales process. When we created our subscriptions product, having a frictionless experience was top of mind. We made it possible to launch a subscription on your Shopify store in under 8 minutes with our self-guided onboarding steps.

2. Allow subscribers to suspend, renew, and modify subscriptions

Since customer service is critical to the success of a subscription service, giving customers flexibility with their subscriptions is important. We realize this may sound like a contradiction, but making it easy for customers to adjust their subscriptions — and even suspend them — can help keep them subscribed for longer.

Getting customers to subscribe can be a hard sell if the commitment doesn’t provide off-ramps. McKinsey & Co. found that only 55% of people who knew of a subscription service converted. They suggested that free trials and more flexibility could help increase the rate of subscribers.

Yotpo Subscriptions enables customers to self-manage their subscriptions. Your customers can easily re-schedule, skip, and adjust their plans as they need.

3. Supportive and approachable pricing

When you’re looking to partner with a subscription software provider, another thing to consider is their pricing model and what kind of support you’ll get out of the partnership. Many platforms charge a monthly platform fee plus a 1% to 2% processing/transaction fee on all subscription orders.

For platforms offering a free version and a paid version, bear in mind that the free versions typically come with little to no customer support and consist of the most basic features. As you approach this decision-making stage be sure you’ve outlined your company’s needs so that you can make the best match possible.

Yotpo Subscriptions takes a growth-centric approach. Pricing is designed so that you can leave the subscription app running in the background at no cost to you until you’ve reached over $500 in monthly subscriptions. That means absolutely no monthly fees and you are only billed at 1% of the subscription income over $500. Yotpo also offers 24/7 support no matter your subscription standing, so you’ll get the same support even if you’re not paying anything.

4. Integrates seamlessly with your brand and the tools you already have in place

One of the benefits of already having an eCommerce business is that you probably already have platforms for many of the systems you need. You’ll want to make sure that your subscription service has adopted the latest Shopify technologies, so you can collect payments from subscribers on a recurring basis.

You’ll also want to make sure that the subscription platform you use merges smoothly with the current loyalty, referrals, reviews, visual UGC, SMS, and social media in your tech stack. These tools are more important than ever in a subscription-based business, as word-of-mouth and great online reviews are what convert new customers.

5. Offers a variety of supplementary services

You don’t want a subscription software partner that leaves you in the weeds to figure this new platform out for yourself. Make sure that the program you use offers tips and tricks every step of the way. Your software partner should have dynamic tools that can support your special circumstances. Finally, it should have scaling recommendations based on your analytics.

6. Tracks your KPIs

You will want a software platform that tracks all the key data to make sure your subscription-based eCommerce business is thriving. It should track both quantitative data — such as monthly recurring revenue, customer acquisition cost and recovery time, CLTV, and churn rate — and qualitative data. Working with your referrals and reviews platforms should allow you to cater to individuals in a more targeted and efficient manner — especially if you’re using the curation model. And it should be able to use this qualitative data to correlate the customer experience to the calculated metrics.

7. Has a strong reputation

Finally, you’ll want to work with a company that has a track record for best-in-class software programs. The subscription-based eCommerce sector is still growing and changing, so you’ll want to work with a company that will evolve with the industry.

Growing your subscription business post-launch
Chapter 06
Growing your subscription business post-launch

Once your subscription business is up and running, it’s time to start thinking about your post-launch strategy. How are you going to tell everyone you just launched a subscription? That’s a great question! Below you’ll find some quick tips for getting the word out.

Set your offer

We’re not saying you need to offer deep discounts to acquire customers, but shoppers have been conditioned to expect a discount when it comes to subscriptions. Many brands offer between a 10% to 20% discount. One tactic we’ve seen a lot of is offering a steep introductory discount and then leveling out to a reasonable offer from then on. For example, brands will offer 25% off the first order and 15% off each order after that when you subscribe.

Another great tactic we’ve seen is the gift with purchase or GWP. This kind of offer does a couple of things, first customers love free things and second, it’s a perfect way to move through some inventory.

Segment your lists

If you haven’t already, it’s time to get your mailing lists squared away. Email and SMS campaigns are a great way to generate some buzz with your existing customer base. Start by segmenting out the customers who have purchased from you more than two times in the past 90 days. This is going to pull together a highly engaged audience. From there, it’s all about showing your loyal customers why a subscription will make their life so much better.

The next segment we recommend pulling is the customers who have only purchased once. There may be a few shoppers within this segment who loved your product but forgot to reorder. Take the time to share your subscription offering and explain how easy it is to set it and forget it.

Lastly, segment the list to include people who have never made a purchase. Put your offer front and center and lean into the “deal” to entice this segment to convert.

Bring in the influencers

75% of companies use influencers to reach potential customers. Who remembers when FabFitFun ran a massive influencer campaign a few years ago? They had a huge year with 300% annual growth.

The point is you can, and should, be investing in influencer marketing to help grow your subscription business. Influencers are trusted members of the community they hold influence over making them a very valuable resource for subscription marketers.

Content. Content. Content.

No matter what format you’re creating it in, there’s no question that good content will bring people in. The key here is consistency. Every brand out there is swimming in a sea of competition, and we’re all fighting for attention.

Staying top of mind needs to be priority number one and the best way to do this is by remaining consistent on the content front. That could be via newsletters, TikTok, Instagram Stories, blogging, vlogging, etc. With content, there are no rules except finding out where your customers hang out and then create content that grabs their attention.

The do’s and don’ts of subscriptions
Chapter 07
The do’s and don’ts of subscriptions

We covered a lot in this guide, so when in doubt grab a quick gut check from your fellow eCommerce experts. We’ll leave you with a few quick do’s and don’ts that came from our Yotpo community.

The Do’s 

Do your research 

With Gartner predicting 75% of all DTC brands will have a subscription offering by 2023, it’s really important to do your research. Not only do you need to understand your customer, but you also have to know what makes you unique in the market. Find your angle and lean in.

Keep it simple 

Nothing is worse than overcomplicating your subscription offering. Not only is it hard to manage, but it turns your customers off too. Just ask Frangiosa Farms: “There are people out there who want to buy your product and who want an easy way to buy your product … Yotpo Subscriptions is probably one of the easiest subscription platforms we’ve ever seen.”

Just do it 

The beauty of the replenish subscription model? There’s little risk to just getting started, as Til You Collapse illustrates: “If the margins make sense in your business and your customers buy from you continuously, not having subscriptions means you’re missing out on areas of opportunity to increase average order value for customer retention and overall profit.” 

The Don’ts

Don’t set it and forget it

Subscriptions can be a key pillar in your retention strategy, but you can’t just launch it and forget about it. Remember, the whole is greater than the sum of its parts. Using all of your marketing tools in concert is the best way to consistently push your subscription offering. Bonus points if your platforms work synergistically the way Yotpo’s suite of products does. 

Don’t hold all the cards 

We can all agree there’s nothing worse than having to call customer service to make a change to an order. Put that power in your customers’ hands. Give them options to change their subscriptions or pause their delivery. Not only will this keep them happy, but it reduces the time you spend managing customer service requests. 

Wrapping it up 

When it comes to adding a subscription service to your eCommerce business, the main thing to consider is what sets you apart from everyone else. Find that uniqueness — whether it’s a niche product, exclusive merchandise, or expertise in a field — and lean into it. 

There are many ways to take the subscription service model and make it your own. Whatever you’re offering, if you can find a way to set yourself apart and serve a distinctive need, you will find success. And remember, you don’t need deep pockets or an in-house web development team to get started. Yotpo Subscriptions are making subscription channels accessible for businesses of all sizes. 

Ready to add Yotpo Subscriptions to your eCommerce business? Download the app and get started for free today.

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