Companies in industries from makeup and food to razors and shoes are building their own subscription services. Some of these businesses find success, but, unfortunately, many of them don't.
The subscription commerce initiatives that fail do so because companies are struggling to understand the core concepts that make subscription models work. Although many factors determine whether a business or an initiative will succeed or fail, those that flourish tend to follow a common set of guidelines. The winning formula, gleaned from an analysis of the traits separating the winners and losers, includes a heightened understanding of customer needs and key benefits, the use of outside experts to help draw in target audiences, extensive analysis of customer data to learn what works, and a willingness to try new tactics and strategies to stay ahead of the curve. Companies that falter often fall short in one or more of these areas.
If you want to create a subscription service, be sure to follow the path paved by successful predecessors:
Create a value proposition. Too many businesses want to dive headfirst into the subscription commerce pool. Before you take the plunge, consider how you're going to build a subscription service and how your customers will interact with it. Make sure you're building it to meet the needs and interests of your target market. Ask yourself, "What are the key customer benefits? What customer pain points does it solve? Will customers engage with the product?"
Consult with a third-party expert. Your company is presumably an expert on your core product or service, be it healthy food, beauty products, or clothes, but the specific dynamics of a subscription program are a lot different than traditional e-commerce dynamics. To avoid easily preventable pitfalls, you may want to look outside your company for help.
If you don't have any experience with subscription commerce, find an established third-party company that can provide you with best practices, advice, and guidance throughout the process. It's better to ask for help than to go it alone and fail. Companies that specialize in subscription commerce know the ins and outs—and, just as importantly, the perils and pitfalls—of the industry. They have research that can inform every decision you make, as well as insights and expertise on how to build your specific service. Put their background and knowledge to work for you. You want to focus on making your initiative successful—not cleaning up easily avoidable mistakes.
Embrace data. Big data is the trend right now, and for good reason: Verifiable truths can help a business thrive. Comprehensive, accurate data will provide actionable insights into what is and isn't working in your service. Collect and comb through as much data as possible to continually optimize your value proposition.
Netflix offers a valuable case study. The company began life as a video-rental service, mailing DVDs to subscribers' homes. The home entertainment industry has undergone drastic changes, though, and Netflix has had to adapt very quickly. Customer data showed that consumers wanted easy access to movies and TV shows from the comfort of their living rooms, so Netflix began offering streaming video to its subscribers. Data analysis also revealed a desire for quality entertainment, so Netflix began contracting for original content, such as House of Cards (or, in the case of Arrested Development, new episodes of an existing show), to appeal to a wider audience. The results, so far, are promising.
Clearly, the right kind of data can tell you what your current customers like and need—and what potential new customers are looking for. You need to know where your customers are shopping, what they're reading, why they abandon their shopping carts—in short, what they really want. A good third-party expert can help you with this. Subscription commerce companies employ marketing analysts who can identify the most useful metrics and thereby unearth or develop the information you need to attract and retain subscribers to your service.
Deep data analysis will also maximize your acquisition efforts, but only if you constantly test and retest everything. Remember: The first email was sent in 1971, cell phones weren't commercially available until 1984, and the World Wide Web wasn't open to the public until 1991. In spite of the vast reams of Internet data generated over the last 20-plus years, online marketing is still in its developmental stage (and even if it wasn't, you'd still need to keep testing ad campaigns, acquisition channels, and retention devices over and over again, because that's what successful marketers do).
The lack of definitive data regarding long-term online consumer behavior means that nothing is set in stone. From simple A/B tests of banner headlines to cutting-edge experiments with the newest mobile marketing gadgets, the best subscription providers are willing to explore all available options. What works on one demographic may not connect with another (consider the generational communication divide, for example), so you need to test every element of every revenue path again and again until you find the winning combination(s). Then you need to keep beating your latest controls.
A subscription service isn't a simple turnkey operation; it requires perpetual nurturing and optimizing. Fortunately, the rewards can be well worth the effort, regardless of your company's size. Just make sure your core product—and your core audience—fit a subscription model; consider bringing in an outside expert to help determine the ideal model for your company; and rely heavily on data testing to optimize your service and your marketing efforts. If you're willing to learn the lessons of those companies that have come before you, a successful subscription service is within your reach.
Tom Caporaso is the CEO of Clarus Marketing Group. He has nearly two decades of marketing experience, specializing in continuity, subscription, and custom loyalty programs. He has held senior management roles in e-commerce, subscription programs, site optimization, SEM and SEO, product, marketing, sales, and client services.