5 Tips for Growing Your Subscription Business
Customers will be more likely to renew subscriptions from you if they trust you.
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As the SaaS industry grows, and even video games move closer to a subscription basis, this is a good time to take a look at subscription model-oriented growth strategies.
Remember, subscription-based businesses have their own unique benefits and pitfalls. Customer acquisition isn't everything, and you need to take extra care in order to nurture and build trust with subscribers. Here are five strategies for doing that:
1. Keep an eye on your competition; update your pricing model often.
If the price isn't right for the customer, then your business is going nowhere. Your offer must be priced at a level that feels right to your target audience. If it's too cheap, your customers may not value your offering. If it's too expensive, either they won't buy, or they'll become reluctant and remorseful buyers, the kind who ask for a refund.
As a subscription business, you should view pricing as a strategic and competitive advantage. So, if another business comes along with a different offer, be careful because you could be outpaced. To remain competitive, you need to be flexible.
Bear in mind your renewal structure. The average retention rates for most subscription businesses is around three months. With a monthly pricing model, your members can effectively leave at any time, so you want to drive people toward longer-term packages by offering incentives.
Note down the end date of subscription packages after you run a major campaign. Then prepare a reactivation campaign and further incentives to keep your customers from bulk-churning a year down the line.
2. Build a stronger connection with your customers.
With ecommerce sites, customers may land on your site once, buy the product they were looking for, leave and never interact with you again, even if you keep sending emails. This isn't to suggest that customer relationships aren't important in ecommerce, but nowhere are they more critical than with subscription businesses.
In a subscription business, customer retention is far more important than customer acquisition. Of course you need to create a steady flow of interest in your membership offer, but if you don't develop a strategy around keeping the customers who have already signed up, your churn rates will be high.
Upsells and cross-sells can be used on your long-term customers, and if you organize a live event, your members will be the first people to buy a ticket. If you launch a book, your customers will help it become a bestseller.
By taking advantage of customer messaging platforms and sending personalized video messages, you can ensure you are building stronger relationships.
3. Gain a better understanding of your financial metrics.
Your financial metrics say a lot about the overall health of your business. And, you need to pay attention to more than just whether you're trending upwards or downwards.
Gaining a better understanding of churn, lifetime value (LTV), and monthly recurring revenue (MRR) are important. LTV is the amount of revenue you can expect to gain from a customer over the course of his or her relationship with your business, possibly lasting years. MRR is income a company can reliably anticipate every 30 days. There are plenty of tracking tools to help you organize your subscriptions and gain insights into these metrics. Understanding why payments fail and what you can do to prevent this will also be crucial for your business.
Gut instinct can serve you well at times, but if you are keeping an eye on your analytics, you'll likely make decisions that are in alignment with your core objectives.
4. Create valuable content.
Business coaches James Schramko, founder of SuperFastBusiness, and Ezra Firestone, CEO of Smart Marketer, regularly publish engaging and valuable content for their audience, whether it's addressed directly to their membership or appears on their respective blogs.
From training videos to podcast episodes, the two men are prolific in the relevant tips, best practices, events and other helpful information they share. They interview known personalities in their space and gather their perspectives on a variety of topics.
Knowing how to distribute this content is key. Firestone is prolific with his video ads, while Schramko takes a shrewd approach with email. Whether it's blog posts, podcast episodes or video, the medium you choose has to be one you're comfortable with and can stick with.
Content is often the first thing to hook customers and the thing they keep coming back for after being converted.
5. Develop a referral system
According to Annex Cloud, referral marketing generates three to five times higher conversion rates than any other channel. Let that sink in. Yet, many businesses don't have referral marketing as one of their channels.
Getting referrals from family and friends, business contacts and customers is a great way to drum up new business, and much of it can fall under an affiliate marketing model. While referral marketing may not suit businesses selling cheaper products, it can be great for selling subscriptions. Word of mouth is important for subscription businesses, and leveraging the people who know you and your business best is an important growth strategy.
Make sure to attend conferences, and create some clear monetary incentives for people who can generate real leads for your business.
Building a product that people want to sign up for is great, but relationship-building should be a significant part of your growth strategy. Customers will be more likely to renew subscriptions if they trust you, and you will gain useful leads from the contacts you nurture.