Subscriptions for goods and services have been rapidly gaining popularity in e-commerce in recent years in the US and European countries. Today, more than 50% of online shoppers regularly subscribe to receive goods from online stores. It’s more convenient and more cost-effective than buying each time. Experts predict that by 2025 the global market for subscription goods and services will reach $473 billion. Given these trends, launching a subscription model can be an excellent growth and scaling opportunity for your online business.
In this detailed article, we will walk through the entire process from scratch of launching a subscription model for your DTC brand.
The Benefits of a Subscription Model for Your DTC Brand
A regular subscription to receive goods is convenient not only for brand customers but also profitable for the business itself. Customers get a simple and convenient way to automatically receive the goods they need on a regular basis without extra effort to order them each time. The money is simply debited from their card or account.
For example, some brands like Nutrafol don’t even offer to buy the product one time - only via subscription.
Implementing subscriptions brings a number of significant advantages:
- The ability to reduce the cost of acquiring new customers, since retaining existing customers is cheaper
- Predictable and stable monthly income that can be accurately planned, unlike strong revenue fluctuations in the regular model
- It’s much easier to plan procurement and manage inventory, knowing demand and the number of subscribers exactly
- Higher likelihood of positive cash flow, since subscription fees are often paid upfront
- Increased loyalty and average order of regular customers who chose a subscription
- More opportunities for cross-selling additional products and building long-term relationships with the audience
Types of Subscriptions for DTC Brands
Currently, there are 3 main types of subscription business models for a DTC brand, each with its own specifics. You should choose a specific subscription type based on the specifics of your product range and overall business goals:
Replenishment model
This subscription type is suitable for online stores selling CPG (consumer packaged goods) that need regular replenishment. Customers subscribe to receive such consumable products automatically on a scheduled basis with a discount.
A bright example is the Dollar Shave Club service, which allows you to set up automatic monthly delivery of shaving products. Grooming products for men, Dr Squatch. One-time purchase is not available.
Subscription box model
This subscription model involves monthly delivery of a set or selection of products tailored to the subscriber’s specific preferences and tastes. It is also often called a subscription box model.
It is most common in segments like clothing, cosmetics, and groceries. An example is the Birchbox service or fabfitfun.com, which sends a package with a selection of personalized cosmetic samples to each subscriber every month.
Trial model
The trial model is primarily seen as a way to attract new customers by providing them with the ability to try a product or service before making a full subscription. This method is often used by DTC brands so buyers can verify the quality of the product or service offered without any obligations. The trial period usually lasts from a few days to a month.
This is a common technique among nutra and supplement brands. For example, the white label brand Qualia with their funnel.
This approach not only increases brand trust, but also allows potential customers to learn more about the product or service. At the end of the trial period, the customer is offered to switch to a full subscription. To increase conversion after the trial period, many companies offer special discounts or bonuses.
The choice of subscription model is very individual and depends on the specifics of your brand, product, and target audience. Regardless of the model chosen, the main thing is to create a high-quality product and provide customers with an exceptional experience. And remember that Sirka is always ready to help you with this!
We will soon release a detailed article about the trial model. We will share insights.
Step-by-Step Guide to Launching a Subscription Model for a DTC Brand
Now that we’ve covered the benefits of subscriptions, let’s move on to a detailed step-by-step guide to launching your own subscription model:
1. Choosing a suitable product or product line for the subscription
Your first and key step is determining which products or services will be offered via subscription. At this stage, you need to answer three critical questions:
- Who is your ideal target customer for this subscription?
- Who are your main competitors in this segment and what is your unique advantage over them?
- What can you “borrow” or learn from competitors to improve your approach?
Based on market analysis and target audience needs, these answers will help you properly position your offer in the market.
2. Creating a subscription prototype and testing it
Before launching something full-scale, it is advisable to conduct a trial “launch” among a smaller number of people. Prototyping allows you to test and refine your idea:
- Develop a test set of products for your subscription.
- Pay attention to branding and packaging – first impressions often play a decisive role.
- Send prototypes to your target audience.
- Collect feedback, analyze it, and determine what changes need to be made to your model.
3. Choosing payment solutions and integrating a payment gateway
The right payment solution is key to the efficiency and security of the entire subscription process. Some apps for Shopify provide recurring payment solutions, but their functionality may be limited. To properly build a subscription, you need to make custom solutions. It is important to choose a payment solution that will best meet your needs and requirements.
Recharge is one of the tools for Shopify.
4. Automating, retargeting, and personalizing customer interactions
To continuously attract and retain customers, it is important to provide them with a personalized experience. Consider implementing a CRM system or other automation tools to segment your audience and send personalized offers, promotions, or news about your brand. Personalization will allow you to deepen relationships with customers and increase their loyalty to your brand.
Testing at an early stage will help properly adjust the concept and avoid costly mistakes during a full launch.
Key Recommendations for Launching a Subscription in Ecommerce
In addition to the detailed subscription launch plan, let’s also consider some important recommendations to help make your service successful:
- Create a convenient and profitable set of products for your customers. Put your best-sellers there.
- Choose a narrow niche and original offer. Don’t just duplicate common subscriptions like a “Box of cosmetics”.
- Pay increased attention to customer service quality and packaging aesthetics. This creates subscription value.
- Incentivize long-term subscriptions (3, 6, 12 months) with discounts.
- Communicate regularly with your audience and continuously optimize the service based on customer needs.
- Carefully track key metrics like customer lifetime value (LTV), customer acquisition cost to lifetime value ratio (CAC/LTV), etc.
Outro
The main conditions for launching your own subscribtion model are a constant focus on customer needs, high service quality, and continuous optimization of the subscription model. Considering these nuances and following our recommendations, you have every chance to build a thriving DTC brand business. If you need help, please reach out! We do this for black hat, white hat, and Amazon brands.
