How to Use a Subscription Box Business Model

Updated on 15 November 2024

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Entrepreneurs are acutely aware of one thing: They need to make money. More than that, they need to strive for profit. That’s why developing multiple streams of income is so important. A popular way businesses can ensure a steady stream of income is through the subscription box model.

According to Huify, it’s five times more expensive to gain a customer than to keep them. That’s why strategies that ensure repeat business is so important. One of these strategies is to give customers a subscription box service. Whether it is services or products, the subscription model ensures the business has a secure and steady income.

Chargebee indicated that subscription boxes are still popular, measuring a total value of over $33 billion in 2021. Furthermore, the market is expected to see a compound annual growth rate of 18,3% between 2022 and 2027. The average profit margin that businesses see from subscription boxes falls between 40% and 60%.

What is a Subscription Box Model

A subscription box model is marked by the charging of recurring payments for customers in exchange for a regularly delivered box of services. The model works by packaging several products together for one purchase.

For products, it looks like sending certain products collectively, but it is also possible to bundle services. Just think about your Wi-Fi packages.

Using this model is convenient for subscribers and helps streamline the production process by creating read-to-ship sets of products. Depending on the product and industry, subscription boxes can be weekly, monthly or yearly.

Benefits In a Subscription Model

When your business uses a subscription box to create a steady income, there are many other advantages that will be experienced too. These can be summed up as follows:

  • Introduce new products to your audience
  • Attract more customers with a more affordable price point
  • Create strong customer relationships
  • Lower your cost per acquisition
  • Predict revenue more accurately
  • Increase customer convenience
  • Easy to scale box offerings
  • Increases competitiveness due to the efficiency
  • Improved business forecasting

Types of Subscription Boxes

There are many types of subscription box models to choose from when you decide to implement one in your business. Your choice will centre around the costs of the products, customer needs and the industry you operate in. Beauty, health and fashion seem to be ideal for subscription boxes, but that doesn’t mean that you shouldn’t investigate the viability of it in your industry should your business be focuses on something else.

Curated collection subscriptions

These types of subscriptions look at a carefully assembles a collection of items that surprise them, but some individuals might not like the fact that they don’t know what they will receive

Personalised subscriptions

Presenting products that are personalised to the needs of every customer creates an individualised experience. Although you can charge more for these items, it requires a wide range of products to be available and sophisticated data collection that indicates customer preferences.

Replenishment Subscriptions

Ideal for long-term client retention, this model helps people automatically receive products they frequently use, and helps your business plan ahead. However, introducing new products and expanding the customer’s order might be difficult.

Access Subscriptions

These types create exclusivity around a particular brand and it works by offering customers exclusive access to products that non-members might not receive. Yet, the disadvantage can be justifying the membership cost and market differentiation between members and non-members.

How to Build a Great Subscription Box

Every successful subscription box model starts somewhere. If you are also considering implementing a subscription box for your business, follow these steps.

1. Start With an Idea

Your first step is to take a look at your target market. Will this model work for your existing client base? Develop your idea with your target market in mind. Some products or services that you offer might not work well in a bundled offering.

2. Look at Pricing

Next, you need to look at the pricing of your subscription box. Factor in the prices for the products, packaging, shipping costs, transaction costs, labour and marketing expenses for the boxes. You can also consider a tiered pricing model.

3. Test Before Your Launch

Before you officially launch the offering, test if you are able to compile the orders and ship it on set days. During this process, you need to ensure that it is loaded onto your system as a separate item that customers can order. You can also offer a select few customers the option to order thes products first to see how your market will receive this box.

4. Market and Prepare Orders

If successful, you can start marketing this new offering and taking orders.

5. Grow Subscribers

Your final step will be to continue growing your subscribers and encourage renewal. Your offering needs to be valuable and convince users to renew their subscriptions. The process needs to be easy and hassle-free.

By ensuring your subscribers receive a carefully curated parcel that was researched well, you can easily receive a regular and steady income. Use the information from this article to start today.

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