How To Build A Subscription-Based Business

Subscription-based services have become integral to urban life and cover a substantial portion of monthly and annual expenses. From video streaming services like Amazon Prime and Netflix to beauty boxes from Birchbox and meal kits from Blue Apron, there is a wide range of popular subscription-based products in the USA. The sector is predicted to gain a market size of $1.5 trillion by 2025. Various industries are using the business model to retain customers and reduce churning. It helps build a loyal customer base that keeps generating a steady income for the long term.

Thus, these businesses do not have to worry about customer acquisitions because they get recurring income from the current set of buyers. The subscriptions are purchased for a finite period and come with renewal options to continue the service. The main types of subscription offerings include – software, product boxes, accessibility and e-commerce. Here is how aspiring entrepreneurs can build a subscription-based business. It can help them carve a niche with a high retention rate in the cluttered space.

1. Understand the Subscription Business Model

A subscription-based business model involves offering products and services to customers in exchange for recurring payments made every week, month or year. The concept has long been used by businesses like grocery stores, magazine companies, software providers, etc. In recent years, subscription boxes have become popular, allowing customers to enjoy personalized products every month, such as grooming kits from Dollar Shave Club, dog product packages from BarkBox, meat delivery service by ButcherBox, etc.

The boxes contain products customized to suit the needs of individual buyers, helping customers maintain a regular supply of items they need. It is more convenient to stick to a trusted brand and get the products delivered every month. Many individuals looking for businesses for sale in Orlando opt for this model because of the high-profit margins.

2. Identify A Market Niche for Subscription

A subscription model can work for products and services that are needed at regular intervals or frequently by customers, such as fast-moving consumer goods, work essentials, IT tools, etc. New entrepreneurs must choose a product or service that they want to sell and will be accepted by the target audience. They should not start with a vague concept or product with a universal customer base. It can be challenging to build a massive business with limited resources.

It is sensible to get hold of a niche market that has limited competitors or no competition. These markets are more profitable and offer a high probability of quick returns. They have a specifically defined target audience, which can quickly become loyal customers. For example, subscription boxes for book readers, marathon runners, pet parents, aged couples, etc.

3. Conduct Thorough Market Research

After identifying the niche, the next step is to evaluate the feasibility of the subscription business through research. Entrepreneurs must conduct surveys and focus group interviews to check the viability of the business idea and model. Creating a test subscription box with a sample of the target audience will help ascertain demand for the product or service.

Individuals buying a business for sale in Orlando should also evaluate competition in the segment and identify the demographics and psychographics of the audience. In addition, they must identify the best platforms and tools to use for the subscription business model based on the customers’ preferences.

4. Define Goals and Create Differentiation

Running a business requires planning that includes setting business goals, developing marketing strategy, predicting financial projections, budgeting, creating organizational policies, etc. Entrepreneurs must identify suppliers for the products and design the box if it is a product-based subscription model. They must register the business name and get the logo and creative materials in place for marketing.

The plan will detail the product features and unique value proposition that can make it stand out. It will also include information about growth strategies after the business builds credibility and reaches breakeven. The entrepreneur should have a clear vision and mission to maintain focus and motivation.

5. Determine the Pricing Strategy

Product pricing is paramount for subscription models because it must offer value for money to customers and profits to the entrepreneur. Calculating the cost of producing and delivering one subscription is vital to determining the required profit. The cost incurred by the business to offer one subscription must include all expenses like marketing, production, material, shipping, packaging, etc.

Entrepreneurs planning to buy an Orlando business for sale must know that subscription models offer various pricing packages for different types of customers. Some people do not want to pay a huge amount upfront and will need a monthly payment package, while others want to pay a lump sum once and forget about it. Thus, it is vital to offer various packages based on duration and product features. The most advanced product will be placed in the premium category, while the basic product will be in the standard category.

6. Build the Website and Infrastructure

The next step is to build a user-friendly and mobile-optimized website that can be used for online transactions and signing up for subscriptions. It should be easy to navigate and have all the relevant information needed to make the purchase decision. The site must have a clear call-to-action button to increase sign-ups. The virtual store must have details of pricing and product features along with customer reviews and testimonials.

If the business requires delivering subscription boxes to consumers’ homes, entrepreneurs must partner with a reliable shipping company after comparing prices and negotiating. They must also hire a team to handle the workload and fill different job roles like administration, marketing, accounting, distribution, etc.

7. Market and Provide Exceptional Support

After the business is established and ready to operate, it is time to start advertising and marketing. Social media is a cost-effective platform for promoting the business and can be used for advertising, engagement and customer interactions. Email marketing and pay-per-click advertising through search engines can increase visibility and build credibility.

Those who wish to buy a business for sale in Orlando must remember that they must follow up with customers to provide post-sales service. The website must offer live chat and respond promptly to customer queries and problems. Offering timely and satisfying support can help build a strong brand with a stable customer base.

Wrapping Up

Subscription-based businesses can quickly become popular with free trials and different pricing levels. To continue to generate recurring profits, entrepreneurs must focus on improving customer service and marketing the product effectively.