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Building a Successful Subscription Business Model

  • Nadine Ghica - Jr. Marketing Assistant
  • Jun 17, 2022
  • 8 minute read

The seventh annual SubSummit conference brought together the world’s largest DTC subscription community, and with it a lot of lessons to make your subscription business model successful.

With insights in every corner, SubSummit had 70 speakers and over 50 sessions attendees walked away from with key takeaways and lessons learned. Each one asked the ever-important question, “What are the key elements to building a sustainable subscription business model?”

Thanks to the impactful insights discovered at SubSummit 2022, there are eight ways you can successfully launch, grow, and scale your subscription brand.

8 Essential Questions to Build a Strong Subscription Business Model

Are my Customers Segmented?

Every subscriber has a unique need. 

To better cater to those needs, you must segment your customers into different groups. 

Segmenting helps you identify new opportunities to grow your subscription business model with the customers that are already strongly committed to your brand, according to Jing Xue of Wyze in her keynote session with Adam Levinter of Scriberbase at SubSummit 2022.

“We want to be friends with users,” said Xue. “So, we create this awesome platform where our users can get on and talk about our products.”

For example, creating a Facebook group or various forums for subscribers to talk about your product will help you get to know their needs and why they chose to subscribe to your brand.

Segmenting your customers also allows you to collect specific data that helps you when targeting their needs. “If you want to be able to grow your business, data is the key. It helps you know what you’re targeting,” said Xue at SubSummit.

Am I Testing Everything?

“Test everything,” said Natasha Trindall of Alo Moves in her SubSummit session with Nisho Cherison of Meta.

If you want to implement new marketing strategies in your subscription business model, that means testing every single component of your plan. Working with influencers, for example, entails testing their content across different verticals in your brand.

In order to discover which segments made the most sense for Alo Moves, the brand tested its digital subscription in the following categories:

  • Wellness journey vs. beauty/lifestyle segments
  • Male vs. female
  • International vs. national

Doing this enables Alo Moves to discover what’s successful, repurpose it, and shift the brand’s marketing strategy.

From these tests, the Alo Moves team discovered that, “Instagram is one of the strongest platforms for authentic content creators and their audiences,” Trindall said. “It also allows us to tell our brand stories through reels.”

For example, Instagram Reels enable you to showcase your product in an engaging way that customers can look forward to, Trindall explained.

While Alo Yoga — a segment of Alo Moves — has more than 460,000 subscribers on YouTube, smaller brands can also benefit from simple A/B tests. It’s often a free or low-cost way to better understand your customers and choose the right vertical to grow your business. 

You can test so many variables of your marketing. Some simple testing options include:

  • The color of a button in a promotional email 
  • An ad campaign’s call to action
  • Email subject lines
  • Target audiences for paid promotions or email campaigns

Is my Brand Fostering a Community?

“Customers are your evangelists,” says Matthew Thelen, General Strategy Officer of Winc.

The most successful subscription businesses foster engaged communities; here’s how your brand can create connection with subscribers:

  • Personalize messaging to your customers.
    • For Esker Beauty, Pinterest is their most engaging platform, according to founder Shannon Davenport. As a result, the SubSummit 2022 speaker says they know to invest more heavily in that market. 
  • Step into leading your brand.
    • Your box or service is not the only thing your subscribers are interested in. Leverage Facebook groups to make connections, expand your community, and show your involvement in the business. 
  • Show up for those that can benefit from your business, even if they’re not subscribers.
    • “It’s important to give back to your community,” says Ellyette Gheno, Founder of BootayBag. “There’s a lot of leftover inventory from subscription boxes in general, so think about who you can donate to that is in need.”

Is my Subscription an Authentic Brand?

When you’re talking to your customers, the conversation should be about more than the product to create engagement with your community.

“We are more critical of the people that we’re buying from,” said Jennifer Cline, SUBTA’s Director of Marketing, in her session with Gheno.

Marketing authentically is the key to being relatable to your customers.

For example, Alo Moves reported that 58% of customers bought something in the last six months due to a creator recommending it.

Why?

Because the creators were authentic about the brand and the journey of them using the products.

How Transparent am I with my Subscribers?

Subscribers canceling is something every subscription business owner tries to avoid. However, making it easier to cancel can actually improve your relationship with customers. You want to make your subscribers feel like they are part of your brand, not a hostage.

“It’s the consumer’s right to end a subscription easily,” said Haroon Mokhtarzada, CEO of Truebill, at SubSummit 2022. “The likelihood to resubscribe goes up when it’s easier to cancel.”

It’s also important to communicate just how painless it is to rejoin your subscription in the event of cancelation or payment failure.

Sending payment notifications is just like any other conversion funnel, according to Max Mautner of Netflix at SubSummit 2022. Explore the subject lines and preview text, not just the email body content, to clearly articulate payment issues and solutions.

Should my Subscription Offer Add-Ons?

Add-ons are the most underutilized aspects of any subscription company, according to Patrick Campbell, CEO of ProfitWell.

When a subscriber interacts with an add-on option, they become more engaged and engrossed with your brand — ultimately increasing a customer’s lifetime value (LTV) by 18-54%, according to exclusive data ProfitWell shared at SubSummit 2022.

Likewise, ProfitWell data shows that offering free or paid samples increases a customer’s future average order value (AOV) by 15-25% and retains at least 10% of those subscribers. Adding free gifts also increases AOV by 20%.

What does all of this mean for your subscription?

Prioritize add-ons for your subscription business model. For example, if your subscription box provides customers with a monthly cadence of books, offering something like a bookmark can increase that AOV for you and leave subscribers wanting more.

What Should I do to Better Manage my Time?

Ask yourself the following questions.

1. What’s my biggest barrier to growth?

Sometimes, people think that “going big or going home” is the only way to succeed and grow. That’s simply not true, according to Jessica Principe of All Girl Shave Club and Becky Hoy of Brave Crate.

Your growth strategy needs to be intentional and come from educated decisions. Establish your brand’s foundation by starting small with organic social media posts and gradually transitioning to paid strategies, the SubSummit 2022 speakers recommended.

For example, start analyzing your site’s visitors, sales, and conversion rates to determine what’s working and what you need to ditch, suggests Principe.

2. What’s costing me the most money?

Identify where you’re spending too much money trying to solve a problem when you can instead implement a more useful and practical solution. For example, you might be able to hire someone to manage your customer service notifications or social media strategy.

“As you grow, more opportunities come your way,” said Dorethia Kelly, CEO of Work • Space • Spark, at SubSummit 2022. “You MUST reconcile your finances and organize your business in order to take advantage of them.”

3. What’s causing me the most stress?

Hoy and Principe swear by time-blocking your schedule instead of using an itemized to-do list. It allows you to identify tasks you’re consistently erasing and rescheduling. 

“Procrastination in your business is a data point,” said Hoy.

Luckily, Hoy and Principe launched the Subscription Box Planner to equip subscription entrepreneurs with the tools they need to manage their time and relieve any stress and overwhelm.

Do I Have a Referral Strategy?

One thing is for certain, according to Jay Myers, Founder of Bold Commerce: You can’t acquire your way to growth, you can’t save your way to growth, but you can refer your way to growth.

Alongside add-ons, a strategic referral strategy is a necessity in your subscription business model. 

Your subscribers are your best brand ambassadors, according to John Haji, Co-Founder of SUBTA. They are the ones using your product, so how can you leverage their knowledge and love for your brand to increase sales? 

A referral program needs to create scarcity, intimate social proof, and be so incredibly valuable that your subscribers are intrinsically motivated to share.

“A subscription signup is not a subscriber, it’s only a lead,” said Myers at SubSummit 2022. “You need to educate them on your business and mission so they feel empowered to get you more customers.”

There is a missed opportunity for subscription brands, according to data from Bold Commerce: 82% of subscription brands spend time on acquisition, 15% on churn, and less than 3% on referral. 

Your number one source of sales needs to be “Referred by Friend,” according to Myers. 

Referral programs can also be leveraged to build brand loyalty. Nearly 60% of brands that have a loyalty program in place reported an average LTV of one year or more, according to a report by Bold Commerce.

So, What’s Next for Your Subscription Business Model?

After spending three incredible days learning how to shift strategies and discover new opportunities for growth, it’s time to implement these insights into your subscription business model!

By catering to each segment of your customers’ needs, incorporating add-ons and a referral option, and even managing your day-to-day with time-blocking, your customers and your business will thank you.

“Our ability to make shifts and adaptations will allow us to discover what’s next and what’s possible,” said Paul Chambers, CEO of SUBTA, at the SubSummit 2022 Opening Ceremony.


Want to connect with industry-leading experts and gain more actionable insights to enhance your subscription? Get your SubSummit 2023 ticket today and join us in Dallas, Texas on May 31-June 2!