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3 Types of Subscription Models

  • 5 min read

 

Offering a subscription service to your customers could be one of the best decisions you make for your company. It probably seems like a fairly straightforward service, too. But according to Shopify, there are actually three different business models you can use.


If you want to maximize profits and customer satisfaction while avoiding unnecessary costs, you need to make sure you pick the right one for your company.


There are three different subscription models you can use to add a subscription service to your current business.  We’ll discuss these as well as the pros and cons of each.



Curation Subscription Model

                    

The first business model I want to cover is also the most common.  


The curation subscription model is used by popular companies like Blue Apron, Birchbox, Stitch Fix, and countless others to deliver subscribers an array of products based on their market. For Blue Apron, this means ingredients for different recipes their subscribers choose. For Stitch Fix, it’s clothing based on style preferences subscribers submit after a short survey is concluded.


But while curation has proven to be a popular subscription model for the food, beauty, and apparel industries, 15% of this market is made up of companies that focus on specific hobbies.


For example, Bloomin’ Bin is a popular subscription service for people who love gardening. Yarn Bits is a popular option among crocheting enthusiasts.


So, there is a ton of opportunity out there no matter what industry your company is in.


Like I said, the biggest pro about this approach is that it’s the most common. 55% of all subscription services fall under this category. There’s a good chance you already have customers who would be interested in a curated subscription service – or already have experience with them and are comfortable with how they work.


Another benefit that the Shopify article points out is that these kinds of subscription services are also a great way to promote new products. So, customers may sign up because they’re interested in products they’ve purchased in the past, but you can also use this opportunity to introduce them to others they would have never considered.


And keep in mind that, with the Dominate checkout extension, you can easily test the waters to see if there are any takers in your market. You don’t have to radically shift your current business model. Just use your extension to see if your current market includes any customers who would sign up for a subscription.


Amazon did this with their “Subscribe and Save” feature back in 2017. They didn’t dramatically change how they did things. They just gave customers the option to receive regular deliveries of their favorite products.


The only real drawback of this subscription model is that you may need to invest in some personalization depending on what you sell. If your products are technically non-essentials – like certain clothing items or beauty products – tailoring the experience to each customer may be essential to selling the subscription.


Replenishment Model

 

The second most popular business model for a subscription service is the Replenishment model, which makes up about 32% of the market.


It works best with the kinds of essential products that customers need to buy again and again. For example, Dollar Shave Club will replenish your supply of razors every month. If customers need more of your product on a regular basis, then a Replenishment model is probably a no-brainer.


Instead of returning online every month or so to go through the order process, you can offer them the convenient alternative of signing up to have your products delivered on time right when they need them.


This kind of convenience has proven extremely valuable, too. A replenishment model may be the second-most popular subscription service, but it takes first place for conversions. 65% of customers who consider this model sign up for it.


And 45% of people who are signed up for one of these services have been subscribers for more than a year! Once people get used to receiving their necessary products without lifting a finger, they don’t want to go back.


That being said, your specific customers may need a bit more incentive to sign up for a long-term subscription. In that case, you’ll probably need to offer your product at a discount to clinch their commitment.


Again, look at Dollar Shave Club. It’s right in the name. If they sold razors at the regular price, door-delivery probably wouldn’t have been enough to make the idea profitable.


That leads to the second potential drawback, which is that this subscription model tends to operate on fairly thin margins. That means you’ll need to convert a lot of subscribers in order to see a little profit.


Access Model


          

 

Finally, the last option you can use to sell subscription services for your business is called the “Access Model.”


Subscribers pay a monthly fee to gain access to lower prices, special perks, or some combination of the two.


Thrive Market is a popular example of this model. For a Monthly fee, customers get access to affordable foods shipped directly to them. 


JustFab is another. Subscribers gain access to five different fashion brands that you can’t find anywhere else. They’re available to members only. 


Keep in mind, this is not even the purchase of a product yet. Just exclusivity to their products


Aside from charging for access, a lot of companies have also taken advantage of this model to build online communities behind their paywall. Utilizing things like forums and Facebook groups give customers the opportunity to talk amongst themselves, share information, and ask the experts questions.


Another great thing for businesses utilizing this model, is it gives them the opportunity to learn more about their customers.


But what about your business? Would this model work?


Well, there are a few factors to consider.


Can you provide subscribers access to experts who will help them make buying decisions on a regular basis? This means you probably need a diverse product line – the kind that customers would want help perusing before making a final decision.


This model wouldn’t really make sense for a company like Dollar Shave Club as they only offer a few different types of razors, and most people probably don’t need an expert’s help to choose one – much less on a regular basis.


But if you frequently receive questions about your product line or even if you’ve found that answering popular questions on your blog has brought lots of traffic, it might be worth considering how you could combine expert access with exclusive products to add a subscription service to your current business model.



If you’re considering offering some kind of subscription service, check out the Dominate extension. It’s the easiest way to figure out if a subscription will make sense – and dollars – for your business. Just choose the model you want, add the extension to your site, and start accepting subscriptions.


Like a lot of companies, you might find that subscribers quickly become your best customers.

Get Started with IWD Today!

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