If you’re a regular listener you’ll know I have a fascination with subscription eCommerce, and we’re going to be diving deep into this model today.
Stefan Pretty is a Scottish-born, US-based entrepreneur. He has launched and run a number of businesses, and since 2014 his focus has been on building Subbly, an eCommerce management platform for subscription businesses.
Stefan was running a digital marketing agency when a client came in who wanted to start a subscription box for juice cleanses when juice cleanses were popular. The client was seeking an affordable solution for their modest budget, but there was nothing on the market. Stefan became excited when he realized there was an opportunity, and began pouring every waking minute into Subbly. Since his job at the time was to give solutions, technical design, and marketing to clients, and since he’d always been obsessed with computers, marketing, and programming, Subbly wasn’t far off from what he was already doing.
Listen to learn why subscription boxes are difficult to implement and sell.
Marketing a Subscription Box
Facebook is great in terms of general marketing, and using bots to make it a bit more personal is a good strategy. A lot of customers are sitting on Facebook, and the targeting methods are unbelievable. If you’re able to strike up a conversation with them, it can work well. You can have a conversation directly with a customer through your Facebook page, or you can use a bot to answer general questions and provide the customer with a link.
Listen to learn why Stefan believes that bots are a short-term strategy.
Elements of a Good Subscription Business
Just like with any business, a subscription business should provide a high-quality product that adds value, and excellent customer service.
The product must be high-quality because a customer who is subscribing to a box wants to feel like they’re getting their money’s worth and then some.
Customer service must be excellent because it becomes even more important with subscription businesses, as it’s what differentiates you from another subscription service or a regular business. You’ll have the constant contact point with your customer, and the goal is to have a strong lifetime value for the customer and retain them for as long as possible. It must be a relationship.
Subscription Box Models
The discovery model of subscription boxes is fun and it makes a great gift. The spike in discovery model subscriptions at Christmas is insane. However, it’s a difficult model to implement because you constantly must find new quality products. The continuity consumable model is easier, more scalable, and more automated, but it may be more difficult to get customers.
Challenges of a Subscription Box
Starting out, it can be a challenge to find suppliers who will do small quantities for you. As you grow, it can be a challenge to find a supplier who can get you enough quantities. Healthy margins and shipping prices will be consistent challenges. As you scale and grow, your challenges will evolve, but embrace that. It means you are growing.
Churn, or the customer retention, is very important. If you are looking for marketing methods to bring in traffic, you must look not only at conversion rates but also at how long traffic gained via that method is retained.
Listen to learn what the ideal churn rate is, and why many newer entrepreneurs and businesses don’t have the statistical significance of data to analyze which methods are best.
Communicating with your customers to learn from them is the number one way to help with retention. Find out why they are cancelling their subscriptions so you can mitigate that next time. Have a cancelling flow to collect data. Dive into your data to see when people are likely to cancel. If they cancel on the third box, then give them the third box for free to get them over the hump. Randomly reward them. Surprises and gifts for customers can be very effective.
Listen to learn why your front funnel can also have an impact on retention.
Advice for Starting a Subscription Box with No eCommerce Experience
Pick up the book [easyazon_link identifier=”0670921602″ locale=”UK” tag=”ecommmaste-21″]The Lean Startup[/easyazon_link] by Eric Ries. Lots of people think you need to raise a lot of money and have investors, but Stefan is a big believer in bootstrapping. If you want to get started, just get started. Take your first step, do some market research, get educated. Figure out what you want to sell and who you want to sell it to. The goal is to validate your business as quickly and cheaply as possible. You can perfect it later, but done is better than perfect.
Advice for Starting a Subscription Box if You Already Have an eCommerce Business
If you already have an eCommerce business and are wondering if you should start a subscription box, though it depends on your niche, it’s worth considering. If you look at your data and notice that your customers are repeat customers who buy every month and a half or two months, can you get them to repeat the purchase on a monthly basis instead? The model is fascinating and can be extremely rewarding, but it’s not applicable to every niche.
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eCommerce Book Top Tip
- The Lean Startup by Eric Ries
eCommerce Traffic Top Tip
Listen to hear a comparison of technical SEO and chatting about your site off-site.
Tool Top Tip
- Basecamp for the team
- Cloud App for personal use
Listen to learn how the Cloud App saves Stefan so much time.
Growth Top Tip
Test extensively. Find repeatable, scalable marketing strategies. Once you find one that has a good ROI, you can scale it up.