The Subscription Box Business Model 101
Entrepreneurs have a lot of different options for business models they can take on. One that’s become especially common in recent years is offering subscription boxes.
How Do Subscription Boxes Work?
Subscription box businesses offer to send their customers boxes filled with a certain type of product at set intervals. Most commonly, customers pay a set amount to receive a new box at approximately the same time each month.
Different companies sometimes tweak the model a bit though. You can offer more or less frequent deliveries, or give the customer an option to pay different amounts some months than others based on what will be in the box.
Benefits of a Subscription Box Model
Subscription box models are becoming more and more common for good reason. They offer some clear benefits to both business owners and customers that make them an attractive business option.
1. Consistent Sales
The main benefit of a subscription box business model is its consistency. With most businesses, you hope to gain loyal customers that will buy from you again and again, but you never really know when you can expect them to make that next purchase.
With subscription boxes, you usually have a pretty good idea how many customers will be making a purchase each month and for how much. You can predict your revenue for each month, quarter, and year with far more accuracy than most businesses, which allows you to make smarter decisions in how you allocate your budget throughout the year.
2. Committed Customers
Building relationships with customers is an ongoing challenge for brands. Attracting customers that like your business enough to commit to purchasing on a regular basis is any business owner’s dream. Subscription box companies manage to pull that off by offering the right type of product at the right price point in the right package.
3. Opportunities for Personalization
One of the benefits many subscription box companies provide is a personalized approach to the boxes. Personalization is something many companies hope to pull off, but have a hard time doing well. You need to know a lot about your customers in order to get it right and customers aren’t always prepared to be forthright with their preferences or personal information.
Providing that personal information means they’re more likely to like what they get in their box each month, so customers are quicker to offer more detail. That gives subscription box companies the ability to more readily please their customers and further build a positive relationship with them with each box.
4. Subscription Boxes are Exciting
All that explains why businesses love them, but what makes customers eager to make that kind of commitment to a company? There’s something exciting about the anticipation of receiving your box each month. Some companies increase that excitement by adding a surprise element – you won’t really know what you’re getting until you open the box that just appeared on your doorstep.
Subscription boxes offer a convenient way to access a type of product you either like or need on a regular basis, and they’re packaged in a way that makes receiving them fun and exciting.
How to Make Your Subscription Box Business Work
As with running any type of business, getting a successful subscription box business off the ground requires getting a few key elements right. If you’re considering a subscription model for your business, here are a few steps to help you make sure the work you put in pays off.
1. Find the right product.
For an ongoing subscription to make sense, you have to be selling something that people are likely to want or need more of every month. There are a lot of products that simply doesn’t make sense for – no one wants to buy a new blender or smartphone every month, for instance. Try to think of items people are likely to buy with some frequency.
With so many subscription box companies already out there, finding a niche that’s not already available in the space (or that’s at least underrepresented) can be important too.
There are loads of subscription boxes that provide beauty products, but not as many that focus specifically on vegan products. For vegans that like the idea of a beauty subscription box, but feel left out by other options, Vegan Cuts is an obvious choice.
Focusing on a niche makes it easier to cut through the competition and find a specific audience that will love what you have to offer.
2. Know your audience.
This is important advice for every type of business, but subscription box businesses depend on reaching the exact right customer who will love what you’re offering enough to commit to buying it with regularity. The most successful subscription box services show this clearly in the types of boxes they offer and the way they market their businesses.
Signing up for a subscription box service is almost like joining an exclusive club for people that share a particular passion or interest. The people behind BarkBox get this. The first thing you see when you visit the site is a tagline welcoming visitors into the club, in this case one for dog people.
The company knows their audience is made up of people who love dogs – enough to spoil and pamper theirs on a regular basis – so all their marketing is focused on reaching those people and trying to create a connection to them through their shared love of dogs.
3. Develop your brand.
Figuring out your product and audience should go a long way in helping you figure out what your company will be. Now you need to figure out how to communicate what you are to the world. Determine a brand name that both sounds good and communicates what you do to define your positioning in the space.
You want to be able to clearly to communicate to anyone who comes to your website what makes you unique and why your box is worth trying. Butcher Box has a name that tells you exactly what it is: a subscription box for meat.
The website makes the company’s positioning clear: you can get high-quality meat delivered straight to your door. Not all subscription boxes have positioning that’s this clear and straightforward, but your goal should be to give your potential customers a clear idea of what they can expect from the subscription within moments of landing on your website.
4. Set up a website.
Every business needs a website. Your customers need to be able to find you on the web to learn what you do and sign up for your service. If you’d like to do some dabbling in the subscription box business model before fully committing, you can list your subscription box idea on Cratejoy.
If you’d rather have your business stand on its own instead of piggy backing on another brand, then you should invest in building a website.
This gives you more opportunities for communicating your brand’s specific style and positioning, and provides an online space to point your marketing back to. It also signals to potential customers that you’re serious. Having your own online real estate shows you to be a more legitimate, established business.
5. Create a marketing plan.
The biggest hurdle any new business has to overcome is getting word out to potential customers that the business exists. To get your business on the radar of the people in your target audience, you need to develop a marketing plan. The best tactics and approach to take will depend on the audience you’re trying to reach.
If you’re not already familiar with common marketing techniques, then take some time to do some research into online marketing tactics like SEO, content marketing, email marketing, and social media. You’ll probably want to hire people who specialize in each tactic you decide to try and may want to hire a marketing consultant to help you craft an overall strategy, but it helps to understand the basics of good online marketing yourself first.
6. Customer service is paramount.
While marketing is important to attracting the new customers you need to get your business off the ground, customer service is the key to keeping them. Subscription models only work if your customers are consistently happy with your service month after month. Why would they continue to choose your business over and over again if anything about their experience was less than perfect?
For that reason, a key part of your business plan must be ensuring that your customer service goes above and beyond.
Field to Cup broadcasts upfront that they care about customer satisfaction.
They make it clear on their homepage that anything customers don’t like, they don’t have to pay for. They have a money back guarantee and free tea replacement anytime someone doesn’t like a tea they received.
That’s not cheap for a business to offer, but it gives customers the confidence that they’ll always be satisfied with the service.
7. Encourage referrals.
If you play all your cards right, your customers can become some of your best recruiters. A customer who loves your box enough to continue their subscription long term probably loves it enough to recommend it to their friends – especially if you give them a juicy incentive to do so.
The snack subscription service Try the World offers customers $15 off their next order if you refer a friend to check the service out. To sweeten the deal, your friend gets a free first box to see if they like it.
If you get enough committed customers happy to advocate for your brand, it cuts down on the amount of marketing you have to do to attract new business. For a business model that’s dependent on a good relationship with your customers, it makes sense to encourage those happy customers to help spread the word.
Start Your Subscription Box Business!
The subscription box model can be a great option for many types of businesses. It encourages a closeness between the brand and customer that most business models can’t manage and gives your customers something to get excited about each time you send a new package their way. With the right approach, your subscription box business can thrive.
Ready to start your subscription business, but don’t have a website yet? Get up and running fast with our reliable web hosting.
Kristen Hicks is an Austin-based freelance content writer and lifelong learner with an ongoing curiosity to learn new things. She uses that curiosity, combined with her experience as a freelance business owner, to write about subjects valuable to small business owners on the HostGator blog. You can find her on Twitter at @atxcopywriter.