Subscription Services | The Only Ecommerce Model with Predictable Revenue
Proficient in custom ecommerce development, ScienceSoft will help you implement and capitalize on a subscription-based business model.
Subscription Services in Ecommerce: Brief Summary
Subscription-based ecommerce is a business model implying that customers pay a recurring fee (monthly or yearly) to get scheduled product delivery or anytime access to a service. Key benefits subscriptions offer to consumers are convenience and lower cost (brands commonly offer discounts for subscribers). Businesses favor subscription ecommerce for the predictability of subscription-driven revenue.
The surveys show that the interest to subscription services is growing faster with Millennials among generation groups and men among gender groups.
The three types of subscription services are:
- Replenishment – provision of fast-moving consumer goods like food, care products, household supplies.
- Curation – offering personalized or themed selections of products in categories like cooked meals, beauty products, flowers.
- Access – granting access to limited collections or early access to new collections.
Features for Subscription Management
To enable a subscription-based model, ScienceSoft recommends adding the following features to standard ecommerce functionality:
by selecting SKUs available for subscription in the catalog.
Management of subscription plans
including billing cycle, discount, and trial period.
Pre-built product bundles
with a fixed price lower than a total cost of constituents.
Configurable product bundling
to let customers choose the contents of their subscription package.
Different pricing options
based on the quantity of items, subscription box weight, delivery frequency, duration of access to media resources, etc.
offering a smooth workflow to activate a subscription by a gift receiver.
Flexible subscription plans
allowing customers to choose open-ended subscription or set a fixed subscription period.
Self-service subscription management
to let customers pause, stop or change their subscription at any time.
when the system charges payments automatically according to the agreed fee and schedule.
to inform customers on recurrent billing, the status of payment processing and subscription.
to understand the share of subscription-driven profit and make financial forecasts taking into account this predictable income.
to capture patterns and assume why customers cancel subscriptions, modify the contents and price of subscription packages.
Subscription Payment Lifecycle
Commonly, consumers go for subscriptions to improve their routine: to avoid regular trips to stores or have guaranteed access to media resources they like. Keeping these needs of the target audience in mind, ScienceSoft automates the billing process to enable subscription prolongation with no need to disturb and involve a subscriber. If you want to offer such comfort to your customers, envisage two possible scenarios of recurring payment processing: when the payment is approved or declined (due to insufficient funds, card expiration, etc).
Key Integrations for a Subscription Platform
ScienceSoft recommends managing subscription processes with the help of:
- Marketing automation software used to send updates on the subscription status and new offerings via a preferred channel (by email, in messengers).
- Order fulfillment software to monitor recurring payment for subscription products/services and run a calendar of scheduled deliveries.
- Procurement planning module in ERP helping estimate the stock needed for subscription fulfillment.
- Accounting module in ERP where all financial transactions are recorded.
Types of Subscriptions
Customers schedule the delivery of goods that they use routinely. This helps avoid the hassle of re-ordering every time they run low on an essential product.
Product categories: food, pet supplies, care products, household supplies.
Customers benefit from: discounted cost, saved time and no risk of out-of-stocks.
Business benefits from: predictable income.
Tip from ScienceSoft: make it easy for customers to skip or reschedule a delivery with a button click.
Subscribing for curated boxes, customers get new arrivals or products handpicked for them specifically. This is an emotional type of subscriptions aimed to surprise, entertain customers but also to foster customer’s loyalty to branded products.
Product categories: makeup, fragrances, meals and snacks.
Customers benefit from: new and exciting experience.
Business benefits from: product promotion.
Tip from ScienceSoft: leave space for curated box personalization by asking for customer’s preferences and important notes (e.g., allergies).
Customers can use media resources or get membership perks for a monthly or yearly fee. Usually, access subscriptions are the expansion of a freemium model when customers can use certain content for free and pay for premium features.
Product categories: online resources (movies, articles, podcasts, etc.), advanced membership in any ecommerce category (fashion, sports, etc.).
Customers benefit from: membership-only perks.
Business benefits from: high-value loyal customers.
Tip from ScienceSoft: offer a trial period with delayed payment.
ScienceSoft’s Ideas to Encourage the Use of Subscriptions
A soft subscription model. Standard subscriptions come with a fixed price, which may be binding for customers. Alternatively, you can introduce metered billing and charge based on product/service usage. At the end of the month, you can choose to charge a customer’s account automatically or send them a bill.
Influencer marketing. Subscriptions are not about a particular product, rather a lifestyle. And that’s exactly what influencers sell – they may be a businesswoman managing a hectic routine, a mom of three starting her own business or an adopter of healthy living. Anyway, influencers attract an audience loving the way they live, and if you target the same lifestyle, you can reach tens and hundreds of thousands potential customers within one marketing campaign.
Loyalty-building pricing. Long-term customers are vital for subscription businesses. You can set up a pricing tier based on the subscription duration to build up lasting relationships with customers.
Key Metrics to Measure the ROI of a Subscription Business
ScienceSoft always encourages businesses to measure the ROI of new initiatives as it allows to see clearly most profitable trends and give up on failed ideas. For subscription businesses, we have narrowed down to three metrics you should analyze.
Customer Acquisition Cost
You will assess the efficiency of a customer acquisition strategy and decide if you need to price subscriptions higher.
Trial Conversion Rate
You will see how many trial users convert to paid subscribers and whether the rate ensures the viability of a subscription model for your business.
Monthly Recurring Revenue
You will make informed business decisions when you understand predictable revenue on a monthly basis. Also, you trace the progress of subscription sales and adjust the marketing strategy if needed.
ScienceSoft assesses the feasibility of the described implementation scenarios for each individual business case. However, the overview of typical business situations will help you understand what options you have.
Subscription management software
Subscription-only businesses (food delivery, gym membership, media subscriptions).
An ecommerce subscription platform to manage an end-to-end lifecycle of subscription-based products and services. Automates recurring billing procedures. Provides a customer self-service portal to activate, pause and cancel subscriptions.
Subscription module to an ecommerce platform
Businesses managing one-off and subscription sales.
A tool to add a subscription option to an ecommerce website. You can create different subscription plans and select what products are available for recurrent delivery.
An add-on to an ecommerce platform.
Tailor-made software created strictly for business-specific processes. Allows for the management of multi-tiered subscriptions.
Business requirements analysis and custom development.
Enable an Ecommerce Subscription Model with ScienceSoft
20 years in ecommerce consulting and development services, ScienceSoft is experienced to design and implement a subscription-based solution for your business.
- Studying your business model and products via interviews, quality function deployment (QFD) approach and surveys.
- Analyzing the subscription type you are planning to introduce: replenishment, curation or access.
- Compiling functional specification for a proposed solution.
- Choosing an optimal implementation approach depending on your business prerequisites.
Subscription solution implementation
- Implementing a subscription solution (custom or platform-based) following the requirements in the functional specification.
- Creating pricing plans and billing workflows.
- Configuring automated notifications to customers on their payment and subscription status.
- Setting up trial subscriptions if needed.
- Integrating the subscription solution with associated systems.
- Testing different scenarios of subscription activation, pausing and canceling.
ScienceSoft is a software development and IT consulting company with a vast expertise built on 3,600+ projects. As one of the strategic directions, we offer expert ecommerce consulting services to help businesses work in digital sales with success.