The subscription economy is currently booming. 75% of DTC brands plan to have a subscription-based offering this year, and the industry overall is predicted to spike to $1.5 billion by 2025. Newcomers and already-established eCommerce businesses are both understandably looking to make the most of this lucrative industry. Between the opportunity to lower customer acquisition costs, create a stream of recurring revenue, and boost customer retention, it’s pretty clear why this model has taken off. Luckily, as a Shopify subscription app, we've had direct exposure to what makes a successful brand. Whether you’re just starting out or aiming to scale, we’re covering everything you need to know to build a thriving subscription business.

What is Subscription eCommerce?

Before we dive into the nitty-gritty, let’s start with the basics. Subscription eCommerce is a business model where customers pay a regular fee to have access to a range of products or services. Typically, subscription businesses offer a wide variety of choices that are selected and delivered regularly, ensuring that consumers always have whatever they need at their fingertips. The routine nature of subscriptions makes them successful in a variety of industries that help fulfill daily needs — such as food & beverages, cosmetics, health & wellness, pet food, and CBD, to name a few. 

The subscription model has become increasingly popular mostly due to the ease and convenience it offers customers — especially with the pandemic still close in our rearview mirrors. Since the model operates on a recurring billing system, subscribers don’t need to go through the hassle of making new purchases each time they need something. And as an added perk, subscription services often offer discounts and special deals for those who sign up for long-term memberships. 

Overall, subscriptions are an efficient and effective way for businesses to provide real value to their customers while satisfying their bottom line.

The Many Types of Subscriptions

The decision to utilize subscriptions is only the first of many choices you’ll need to make for your eCommerce brand. Of course, you’ll also need to choose the type of subscription model that makes the most sense for your business. Subscriptions can either be for a fixed term (like a year) or they can be open-ended. 

There are several different types of subscription models, including finite, prepaid, build-a-box, sequential, and standard. What you select will ultimately come down to which type best meets the needs of your consumers. 

Let’s break this down with some examples of each subscription model: 

• Standard Subscription: This model is the one you're probably most familiar with where a Shopify merchant offers a product or service every week, month, or year for a recurring fee.

• Prepaid Subscription: Just like the name suggests, prepaid subscriptions enable Shopify merchants to generate upfront revenue for a set time period. Horsham Coffee offers 3, 6, and 12-month prepaid subscription options, which are great for anyone looking to set themselves up for a period of time with a product they know they’re going to continue needing (like coffee!).  
• Sequential Subscription: Shopify merchants can offer a bespoke sequence of products, prices, and/or gifts (ex. refills) after a certain number of deliveries with this model. Take Filterbaby, water filters that help remove toxins from tap water. After the initial purchase of the Filterbaby, it triggers a follow-up order of replacement filters that get sent to your door every 90 days. Brands that sell baby clothes or diapers with sizes that grow alongside your baby are also another great candidate for sequential. 

• Finite Subscription: In this subscription model, a merchant sets a subscription end date after a certain amount of time or encourages shoppers to gift a subscription for a certain number of billing cycles. Scott’s Flowers offers 3 or 6-month giftable subscription options where a bouquet gets sent monthly to the recipient, and the subscription concludes at the end of the set period of time. 
• ‍Build-a-Box Subscription: Here, Shopify merchants offer customers the option to regularly curate a recurring delivery of products from your Shopify store. This is a great choice for anyone who wants to give their consumers a sense of control over what they receive. HoldOn Bags, a compostable bag company, lets subscribers choose between a 2-pack or 3-pack bundle, where they can then select between big garbage bags, small garbage bags, or two choices of zipseal bags to ensure they’re getting the exact products they need. 

Subscription Model Advantages 

As we’ve discussed, there’s a reason subscriptions are so on the rise: they’ve proven to provide a variety of benefits for eCommerce businesses. In fact, subscriptions actually have a reputation for being one of the most recession-proof models out there. Between creating predictable recurring revenue, avoiding high customer acquisition costs, boosting customer loyalty, and the ability to effectively cross-sell or upsell, subscriptions help brands thrive during good economic times and (more importantly) stay comfortably afloat in a bad market. 

Here are some of the perks and advantages that a subscription model can offer: 

• Predictable Revenue: One of the biggest reasons that subscriptions have a durable reputation is that they provide a stream of long-term recurring revenue, which puts you in control of sales forecasting. This means that you can comfortably count on a certain amount of earnings each month, making it easier to predict your finances and plan for future growth. Plus, it’s an attractive model for potential investors. 
• More Cash on Hand: Relatedly, because a subscription-based business model generates more revenue than one-time purchases, it can translate into having more cash on hand. Not only is this helpful in an emergency (we’ve all heard of a rainy day fund for a reason), but it can also be highly useful when reinvesting in your business. 
• Lower Customer Acquisition Costs: Acquiring new customers can get expensive fast. In fact, it can cost up to 7X more to acquire new customers as opposed to selling to your existing audience. There are several ways to lower customer acquisition costs, but subscription models are one of the most effective. By switching to a subscription model, businesses can encourage customers to keep coming back — which can help to reduce costs over time.
• Customer Loyalty: Not only do subscription services tend to cost less than traditional one-time purchases, but they can also help build customer loyalty. By giving customers the ability to access a wide range of products on an ongoing basis (and guaranteeing regular use of your products), subscription models create a sense of convenience and familiarity, leading to long-term engagement.
• Cross-Selling and Upselling Are Easier: Another main benefit of subscriptions is that they make cross-selling and upselling much easier. For one, by monitoring your brand’s analytics and subscriber engagement, you can get a sense of typical user trends to then make informed suggestions to other subscribers. In general, if a customer is already paying for a subscription to a particular service, they are much more likely to be interested in purchasing additional features or upgrades — and you can be strategic about what these suggestions are to maximize your AOV.
• Lengthen the Customer Journey: Subscriptions are full of untapped potential for leveraging relationships beyond the initial purchase. DTC eCommerce brands that utilize subscriptions help provide a much-needed post-purchase experience for consumers. Paired with a robust customer account portal, you can continue to engage and build trust with your most important customers: your subscribers. 

Building Brand Loyalty From the Ground Up

When consumers are regularly interacting with your product, it naturally cultivates a sense of brand loyalty. Even though a subscription model organically lends itself to building brand affinity, there are certain strategies you can employ to further encourage this affiliation. 

Here are some tips for the best ways to build brand loyalty: 

• Provide transactional and experiential rewards for the most profitable customers to acknowledge their actions that help in building your brand. This is a great way to help make your most loyal customers and best brand champions feel integral to your business. Treat them like VIPs, because when it comes down to it, they are. Reward them for reaching certain milestones, interacting with your content on social media, responding to helpful surveys, or whatever else has been important in building your brand. Loyal customers spend about 67% more than new customers, so anything you can do to make your best consumers feel special will ultimately help your business.  
• Create a program strategy that focuses on customer service at the core of it. We all know how frustrating it is to have a bad customer support experience (especially when you’re paying for the product), but great support can actually do a lot of beneficial work for you as well. As many as 62% of customers will recommend a brand to a friend if they receive great service — so if you want your subscribers to support you and feel great about your brand, you need to be sure you’re supporting them as well. Plus, by enabling flexible subscription management options such as send now, skip, gift, pause, swap, etc., you can decrease the number of customer support tickets significantly. This means your Client Success team can have more bandwidth in general and a better chance of creating a positive experience when customer support is actually needed.‍
• Reward your customers for writing reviews and referring friends and family. Not only does this help spread the word about your brand through some good old-fashioned word-of-mouth marketing, but it also helps create a positive feedback loop between you and your customers. The more they get rewarded for their brand advocation, the better they’ll feel — and the stronger the brand loyalty will be as a result.

Minding Your Subscription Business: Tips & Tricks

We’ve covered why subscriptions are a win-win for both your brand and your consumers. (You’re meeting your audience’s daily needs at a comfortable price, they’re providing you with a recurring revenue stream that you can count on — you get the concept.) However, the subscription eCommerce landscape is fiercely competitive, and it’s more important than ever to go the extra mile to differentiate your brand. The best subscription businesses utilize similar strategies to give themselves an edge, and we’re diving into what those look like. 

Here are some tips to help you run a successful subscription business:

Tailor the Subscription Program To Your Brand

When implementing a subscription model, it’s extremely important that you’re thoughtful and intentional about your early decisions. Be sure to pick a subscription program that is conducive to both your product's intended use and your end-consumer's habits, because any misalignment here will have a negative impact on your business. It’s a good idea to offer multiple frequencies to choose from so your consumers can mold your brand into their lives. If you have multiple products that are often purchased together, you can add custom-build offerings to try to boost your AOV. Be strategic about your choices, and remember to always keep your consumer at the forefront of your decision making.

Create a Strong Customer Account Portal

A customer account portal has become essential for many businesses. It helps improve communication between you and your consumers, gives your audience control and transparency over their experience, and provides another touchpoint for deep engagement. But it goes without saying that simply having a customer account portal isn’t enough. You need to be thoughtful about its design, user-friendliness, and overall purpose. When designing this self-service dashboard, make sure it includes clear product documentation, shipment tracking, an obvious spot to change the subscription frequency, and other resources so customers can easily find what they need with one click. And we recommend being open to customer feedback. At the end of the day, you’re providing a tool to meet the needs of your consumers — so their input should carry a lot of weight. 

Focus on Flexibility 

This is an important one. No one wants to feel trapped by their subscription; as such, it’s crucial to show your subscribers that they are in full control of their experience. Within your customer account portal, empower your consumers to manage their customer journey with flexible subscription options such as skip, gift, swap, send now, pause, and cancel. Even though you probably don’t want your subscribers to opt to skip or pause, ultimately giving them the power to choose will improve your customer retention and overall experience in the long run.

Connect With Your Customers

Just as we recommend listening to customer feedback, staying in touch (and thus, top of mind) with your audience is important. One way to do this is by creating a personalized welcome email for new clients to let them know you value their business and explain what they should know about your brand. Keep a strong social media presence and stay on top of the comments section. Responding to positive comments (and negative ones as well, if handled tactfully) can not only help you learn more about your followers but also create a strong connection between you and your consumers. 

Sending emails (and maybe perks) for birthdays along with a company newsletter are also great ideas for building your community. Our one warning is to just be mindful of how often you’re communicating — as you’ll start to have the opposite effect if you go overboard. Being the brand that inundates its customers with ten emails a day usually doesn’t end well.  

Be an LTV Goalkeeper

All of the best business decisions are made with clear goals in mind — and maximizing your LTV is no different. After setting your LTV goals, be sure to track your number of subscribers, churn rate, AOV, and other relevant metrics to ensure you are pacing for your LTV goal. 

Prioritize Personalization

Personalize, personalize, personalize is the location, location, location of eCommerce. 83% of consumers are willing to share their data in exchange for a personalized experience, and 74% of marketers say that eCommerce personalization has either a strong or extreme impact on online retailers. Going the extra mile to add a personal touch to your messaging and recommendations makes your subscribers feel special and cared for — and this ultimately reflects back positively on your brand.  

Learn From Your Churn

Understanding the “why” behind your churn is key in improving your retention rate and customer experience. One great way to do this is by asking your customers why they want to cancel with a cancellation survey, which will enable you to effectively incentivize them to stay with perks that counteract the reasons they were canceling in the first place. Understanding the reasons customers leave can be crucial to creating a solid customer retention plan as well. Learn from the patterns and see if you can make any key changes to help prevent future churn. Since returning customers are proven to be so valuable, doing whatever you can to increase your customer loyalty will be a lucrative investment.

If you’re ready to start building or scaling your subscription business and need a strong Shopify subscription app, our team at Smartrr is here to help. We have helped hundreds of brands grow their subscription revenue and increase their LTV, and we can guide you through the full process of creating a thriving subscription business. 

Want to chat? You can schedule a demo with us here.