The Power of Subscription-Based Sales: Why It Works and How to Implement It

food on a pink surface
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The subscription based sales model has been gaining popularity in recent years as a way to increase customer loyalty and lifetime value. In this model, customers pay a recurring fee to receive access to a product or service. This could be anything from monthly access to a software app to a subscription for physical goods like food or apparel.

There are several advantages to this model for both businesses and customers. For businesses, it provides a steadier stream of revenue and can help them predict their cash flow more accurately. For customers, it can offer convenience and peace of mind.

If you’re thinking of implementing a subscription-based sales model for your business, this article is for you. We’ll explain everything you need to know about how it works and how to set it up.

What is a subscription based sales strategy?

A subscription based sales strategy is a way of selling products or services where customers pay a recurring fee to receive access to the product or service. This type of pricing model is often used for software as a service (SaaS) products, where customers need to have ongoing access to the software to use it.

Dollar shave club subscription based sales.
Subscription sales for Dollar Shave Club

However, in recent years, we have witnessed a wider adoption of this sales strategy by both service and product-based businesses. You may have come across advertisements for signing up for monthly shaving kit and socks subscriptions. And this is not a new model. Think about gym or health club memberships.

The benefits of subscription-based selling

There are many benefits to using a subscription based sales model, both for businesses and customers. For businesses, the main advantages are:

1. A steadier stream of revenue: With subscription-based selling, businesses can predict their cash flow more accurately since they know how many customers they have and how much they’re paying each month. This is in contrast to the traditional model of selling products or services one-off, which can be much more unpredictable.

2. Increased customer loyalty: Customers who are paying a recurring fee for a product or service are more likely to be loyal to the business and continue using the product or service long-term. This is because they’ve made a commitment to the business and are invested in the success of the product or service.

3. More data for marketing and product development: Since businesses know who their customers are and how much they’re paying each month, they can collect valuable data that can be used for marketing and product development purposes. This data can help businesses learn more about their target market and what they want from a product or service.

The main benefits for customers are:

1. Convenience: Customers who subscribe to a product or service can enjoy the convenience of having the product or service delivered to them regularly without having to worry about reordering. This is especially valuable for products that customers use regularly and don’t want to run out of, such as coffee or toothpaste.

2. Peace of mind: Customers who subscribe to a product or service can also enjoy the peace of mind that comes with knowing they’ll always have access to the product or service. This can be valuable for products or services that are essential to the customer’s lifestyle, such as a fitness app or a subscription to a meditation app.

3. Discounts: Customers who subscribe to a product or service often receive discounts on the price of the product or service. This is because businesses know they’ll be receiving a steadier stream of revenue from customers who are subscribed, so they’re able to offer lower prices.

How to implement subscription based selling?

There are a few things businesses need to do in order to set up a subscription-based selling model.

1. Decide on a product or service: The first step is to decide on a product or service that you want to offer as a subscription. This could be anything from a physical product to a digital service.

2. Set up a billing system: The next step is to set up a billing system so you can charge customers on a recurring basis. There are a number of different billing platforms you can use.

3. Create a subscription plan: Once you have a billing system in place, you need to create a subscription plan. This will outline how much customers will pay and how often they will be charged. It’s important to make sure you offer a variety of subscription plans so customers can choose the one that’s right for them.

4. Promote your subscription: The final step is to promote your subscription to potential customers. You can do this through a variety of marketing channels, such as your website, social media, or email marketing.

The challenges of subscription-based selling

There are a few challenges businesses need to be aware of when implementing a subscription-based selling model.

1. Churn: One of the biggest challenges businesses face is churn, which is when customers cancel their subscriptions. This can be a problem if you have a high churn rate, as it can eat into your profits. There are a few ways to combat this, such as offering a discount for customers who commit to a longer-term subscription or offering a free trial.

2. The up-front cost: Another challenge businesses face is the up-front cost of setting up a subscription-based selling model. This includes the cost of setting up a billing system and creating a subscription plan. This can be a barrier for businesses on a tight budget.

3. The risk of failure: There’s also the risk that a subscription-based selling model will fail if customers don’t see the value in the product or service. This is why it’s important to offer a free trial or a discount for customers who commit to a longer-term subscription.

4. Competition: Finally, businesses need to be aware of the competition when setting up a subscription-based selling model. There are a number of businesses offering subscription-based services, so you need to make sure you offer a unique selling proposition.

Wrapping Up

In conclusion, the subscription-based sales model is a great way to increase customer loyalty and lifetime value. It offers a number of advantages for both businesses and customers, including a steadier stream of revenue, increased customer loyalty, and more data for marketing and product development.

If you’re thinking of implementing a subscription-based sales model for your business, this article has everything you need to get started. Just remember to keep the challenges of subscription based selling in mind and you’ll be on your way to success.

And if you’ve got any tips for us and our readers, do share them in the comments. Thank you!

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By BMB Staff

Business Management Blog is your online resource for business management and strategy articles, insights, ideas and tools. We talk about Business Management, Strategy, Customer Experience, Employee Engagement, Leadership and Career Growth. Subscribe to the blog to get updates about new posts.

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