What is a Subscription Business Model?

A subscription business model revolves around customers paying a recurring fee—either monthly or annually—in exchange for ongoing service or product delivery. It's a popular model across various industries, including fitness, e-commerce, and streaming services.

• Subscription models benefit businesses by providing a consistent revenue stream and increased customer loyalty.
• Examples include gym memberships, monthly beauty boxes, and streaming services like Netflix.

Should You Build a Subscription Business?

Building a subscription business can be highly rewarding but requires careful consideration. Assess whether it aligns with your industry and existing infrastructure.

• Industry Analysis: Examine your competitors' approach to subscriptions. Have they tried and abandoned the model or is there a gap in the market for a subscription-based offering?
• Infrastructure: Ensure you have the necessary resources to fulfill recurring orders, like stock availability or systems to manage product delivery and service delivery.
• Value Proposition: Clearly define the additional value your subscription offers to customers. Is it unique and superior to free alternatives?

Steps to Build a Subscription Business

If you decide to venture into the subscription business model, follow these steps to lay a strong foundation for success.

Step 1: Identify Your Target Audience

Understanding your target audience is crucial. Define their pain points and desires related to a subscription service.

• Utilize customer data and research to gain insights into your target audience's needs and preferences.
• Leverage existing customer communities for feedback on potential subscription offerings.

Step 2: Conduct Market Research

Analyze competitors' subscription models and identify their strengths and weaknesses. This research will help you define your unique value proposition and pricing strategies.

• Evaluate competitor pricing structures and subscription tiers.
• Identify gaps in their offerings and areas where you can provide unique value.

Step 3: Define Your Unique Selling Position (USP)

Differentiate your subscription service by identifying your USP—what makes your offering unique and compelling to customers.

• Combine insights from customer pain points and competitor analysis to find your niche.
• Clearly articulate your USP in marketing materials and messaging to attract your target audience.

Step 4: Source or Develop Your Offering

For product-based subscriptions, establish reliable suppliers to ensure a consistent supply of products to meet demand as your business scales.

• Negotiate favorable terms with suppliers for pricing and delivery.
• For service-based subscriptions, continuously update your offerings to provide ongoing value and remain competitive.

Step 5: Set Up the Back End

Before launching your subscription business, finalize the back-end infrastructure to ensure financial sustainability.

• Estimate setup and ongoing costs, including production, shipping, customer service, and marketing expenses.
• Conduct thorough market research to determine optimal pricing for your subscription tiers based on value and competitor analysis.

Step 6: Create High-Value Free Content

Generate valuable free content to attract potential subscribers and establish your expertise. Showcase the quality and value they can expect from your paid subscription.

• Develop blog posts, social media content, and videos that demonstrate your knowledge and provide valuable insights.
• Offer free resources such as checklists, templates, or mini-courses to incentivize subscribers.

Step 7: Invest in Customer Support

Excellent customer support is essential for subscription-based businesses. Ensure a system that effectively addresses inquiries and resolves issues.

• Develop a comprehensive FAQ section and knowledge base to address common questions.
• Implement live chat, email, or phone support to provide timely assistance.

Step 8: Test and Learn

Your work isn't done after launching. Continuously monitor and analyze key metrics to identify areas for improvement.

• Collect customer feedback and use it to enhance your product or service offerings.
• Experiment with pricing strategies, features, and marketing campaigns to optimize results.

How to Know if Your Subscription Business is Successful

A successful subscription business thrives on a combination of subscriber growth and customer retention.

• Subscriber Growth: Analyze the rate at which new subscribers join your service. A steady increase in subscribers is a positive indicator.
• Customer Retention: Track the duration customers remain subscribed. High retention rates suggest your subscription model is delivering value and meeting their needs.

Tips from Subscription Business Founders

Learn from the experiences of successful entrepreneurs who have built and scaled subscription-based businesses.

• Jessica Rolph, Founder of Happy Family & Lovevery: "Obsess over your product and test, test, test. Remember, launching is just the beginning of the product development process. Continuously iterate and improve based on customer feedback."
• Suneera Madhani, Founder of Stax Payments: "Leverage white-label solutions to quickly create an MVP and test your hypothesis. This can help you refine your model before committing to full-scale development."
• Lynda Weinman, Founder of Lynda.com: "Customer churn is a natural part of subscription business. Don't always attribute it to a bad product. It may reflect shifting customer goals."
• Michael Dubin, Founder of Dollar Shave Club: "Only launch a subscription business if it genuinely enhances the customer experience. Focus on making their lives better, not just your recurring revenue."
• Tobi Pearce, Founder of Sweat App: "Subscription business economics are different from traditional e-commerce. Combat churn by building an engaged community and fostering customer loyalty."

Get Ahead of the Competition

Ready to build your own subscription business? Learn from experts, connect with a community, and get access to the tools and resources you need to succeed.

• Join our subscription service to gain access to comprehensive training, coaching, and a supportive community of entrepreneurs.
• Unlock valuable insights and frameworks to help you build a successful subscription-based business.