This past week my team put together all the merchandising for a new beverage brand we are launching early next month, and as a part of it, we had some great discussions around subscriptions. So for today's email, we'll talk about all things subscription. After building an 8-figure subscription business, where it accounted for 50% of revenues, there are a few things I picked up that I wanted to share with you all.
When I think about the perfect business, this is what I think about:
- High AOV, low frequency of purchase
- Low AOV, high frequency of purchase
- Ships fairly cheap
- High margins in the product
- Consumption of the product to encourage re-purchase/re-fill (aka subscription)
- Easy ability to create new variants for exclusives & drops
When you put many of these traits together, you get a great opportunity to build a subscription business, or in the case of what we were doing this week, the perfect opportunity to build a subscription business. Some other categories of products that do great with a subscription model: beverages, foods/snacks, cosmetics, CBD, protein powders, or anything that fits into a routine.
Before we talk through the benefits for the brands and the consumers, let's talk through the technology around it. 99 out of 100 times, you're likely on Shopify, so we'll direct this to be Shopify-focused subscriptions. There are two main apps: Smartrr & ReCharge Subscriptions.
Smartrr just recently launched but has been taking the industry by storm with clients like Misfits Markets, Jolie, Sanzo, Behave Candy, and others. They put a strong emphasis on the backend subscription management portion, the part where ReCharge fell short leading to high churn and misleading analytics.
ReCharge is a long-time player in this space and hasn't innovated much on their capabilities simply because they didn't need to as the only player in the market. I've built most brands using ReCharge, which has made Smartrr even more enticing. The one thing ReCharge has is ElectricSMS, an SMS platform to help consumers manage their subscriptions.
As a brand, you have to make sure that you are creating something of value. At the end of the day, you can't expect a customer to purchase or subscribe to anything that doesn't feel like it's bringing them value. The trade-off to creating such value is that you have (almost) guaranteed recurring revenue and as a business, a much higher valuation, and not having to pay "rent" on ad platforms to acquire that order.
In exchange, you must:
- Create a reason/offer/discount to turn people onto subscribing
- Have reasons for people to subscribe who fit the sub-genre of "Superfans":
- Exclusive drops
- Exclusive flavors/scents/colors/variants/materials
- Priority access to new flavors/scents/colors/variants
- Discounts/Better pricing (10-20%)
- Free shipping (a given)
- Access to people/events through the brand
- Access to a closed community (Groups, IG Close Friends, etc)
There are tons of great ways to make a subscription great, but at the end of the day, if your product doesn't fit the bill of something people want on a subscription, there is no amount of discounts or perks that will turn it into a subscription business.
To a consumer, you have to remember that your subscription is one of many. If you're not fitting something into a routine and your subscription serves as being a convenient feature, first, you're fighting an uphill battle from the beginning.
What's one thing that you're yearning to know about subscriptions?
