Whether your company sells a physical product or offers a service, the subscription business model is something that you should consider using to generate recurring sales. Once you’re able to get customers to pay for a subscription, you’ll get recurring sales on a monthly or annual basis. Don’t charge for your basic package Offer your most basic package for free. Now you’ll have a better chance of getting these free subscribers to upgrade their service for a fee. Even though you may not be able to do this long-term, you can still offer a month or two of your package for free. They offer a 60-day free trial for customers who want to try out their most expensive package at $9.99 per month. Set up different membership plans Profitable subscription models have different plans. People don’t want to pay for a feature or benefit that they won’t use. You don’t need to pay a monthly or annual fee to buy something on Amazon. For customers who just want the video streaming service, they can pay $8.99 per month.
Every business needs to come up with creative ways to drive sales.
Sure, you may be doing well today, but how are you planning on making money tomorrow? What about next month or next year?
Whether your company sells a physical product or offers a service, the subscription business model is something that you should consider using to generate recurring sales.
Historically, implementing a subscription business model has proven to be highly profitable.
In the last five years, this model has grown by more than 100%.
Businesses that know how to offer valuable subscriptions end up with extremely loyal customers, which is why it’s such an effective customer retention strategy.
Even ecommerce brands have been using subscriptions to drive sales.
That’s because the consumer market has accepted this model, causing it to grow in popularity over the last year.
Once you’re able to get customers to pay for a subscription, you’ll get recurring sales on a monthly or annual basis.
As a result, your company will be in a great position for sustainable growth over time.
But if you’ve never implemented a subscription model to your business, it might be a little bit intimidating for you. Where do you start?
Some of you may have already set up a subscription model for your business. But unfortunately, it’s not working out as well as you thought it would.
That’s why I created this guide.
Whether you’re new to the subscription concept or you want to make adjustments to your existing subscription model, I’ll explain what you need to do to be successful in this space.
Don’t charge for your basic package
Offer your most basic package for free.
Now for some of you, this may not be realistic. For example, if you’re offering clothing or accessories delivered on a monthly basis to your customers, you can’t just give that away for free each month.
But for those of you who are offering an intangible service, it’s a great way to get people interested if you have multiple packages.
- games
- mobile apps
- streaming services
These are all great examples of how you can leverage a free package to eventually get your customers to pay for the service if you’re in these industries.
For those of you who have a mobile application, this strategy is a great way to improve the profitability of your small business mobile app.
Let’s look at the Pandora packages as an example.
For those of you who aren’t familiar with this company, they offer a music streaming service.
As you can see from their website, they have three different listening packages. The basic package is free.
This introductory package gets people familiar with the service. If they had to pay from the beginning, they’d be less likely to try it out in the first place.
But if you offer something for free, there is no risk in people using it.
Now you’ll have a better chance of getting these free subscribers to upgrade their service for a fee.
Offer a free trial for your premium services
So you’ve offered your basic package for free. But customers still haven’t upgraded yet.
Why not?
Well, they don’t know what they’re missing.
If you offer them a free trial of a paid service, it will be harder for them to go back to the basic version. Let’s refer back to the Pandora example.
They offer a 30-day free trial for their $4.99 package. So for one month, customers on this trial will experience personalized content with no advertisements.
Once they go back to music that’s not personalized and are forced to listen to ads, they’ll be more inclined to pay the monthly fee for the enhanced experience.
Roughly 60% of all businesses are able to convert free trial users to customers.
For those of you who are offering physical products, such as a box of items mailed to customers on a monthly basis, you can use this strategy as well.
Even though you may not be able to do this long-term, you can still offer a month or two of your package for free.
Here’s something else to consider. The more expensive your subscription is, the longer you should offer the free trial for.
Again, we’ll continue to use Pandora as an example.
They offer a 60-day free trial for customers who want to try out their most expensive package at $9.99 per month.
It’s worth giving away two months for free if they’re able to generate $120 per year from each subscriber.
Set up different membership plans
Profitable subscription models have different plans. There are a few reasons for this.
First of all, not everyone can afford your most expensive membership, but you don’t necessarily want to exclude those people from being paying customers.
Second, you want to offer plans based on the needs of different customers.
People don’t want to pay for a feature or benefit that they won’t use. But if someone knows that they need something, they’ll gladly pay an additional fee.
Let’s look at the Netflix membership plans as an example.
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