January 24, 2014

How to Build a Subcom

Posted by Janna Leyde Category IconConversions & UX Category IconMarketing

The concept behind a subcom is simple: a subscription service meets e-commerce. From the very beginning, both Birchbox and ShoeDazzle nailed this personalized, innovative business sales model that fosters long-term relationships with customers and a consistent revenue stream. Today, subcoms range anywhere from companies that mail out full-sized boxes of wine, jewelry, pet toys, and salted meats (not all together, mind you)  to digital products like software, music, games, and movies (Netflix falls into this gaggle, if you were wondering).

As simple as offering a subscription service may sound, there are must-haves and must-dos in order to guarantee that this business model will work well for an emerging company. So don’t send out that container of goodies to the doorsteps of the subcom hungry just yet. First, consider the following five concepts to ensure a subscription-based service model that maintains a consistent revenue stream, avoids high churn (the un-subscribers), and takes customers beyond the sale.

Pertinence

It goes without saying that companies must pick and choose products that address a new, unfulfilled niche to satisfy the needs of their subscribers; however, a personalized experience is just as important as the quality and singularity of the product. A subcom creates the element of surprise and illustrates the originality of the company’s offerings. Well-made subscription boxes contain expertly curated products and samples that fit the profile of the customer, but are generally offerings that the customer would not have otherwise chosen due to product knowledge or availability.

Think: BarkBox

Exceptional Customer Service

Since a subcom requires an extended level of trust from the individual subscribers paying in advance for products or services they haven’t experienced yet, this model must provide a higher level of service. The key word is convenience. Make everything related to the sale and delivery easy for the customer. Guarantee that the return process is quick and painless, because, yes, there will be hits, but there will definitely be misses when it comes to handpicking products for people. Every wonder why Netflix includes the return envelope, pre-labeled with postage paid? There you go. Also, subscription suspension needs to be readily accessible. In terms of long-term profits, it is better for a company to punctually lose a sale rather than definitively lose a customer.

Think: Adore Me

The $45 Price Divide

The same people who are signing up for subcoms are also the people who are paying monthly mortgages, rent payments, utilities, and credit card bills. Over time, the subcom will fall into the same budgetary category of monthly expenses, and for this reason, must not exceed prices past $45. Seeing month-to-month deductions of less than $50 is less jarring than those that run closer to $75. Another advantage of sticking to a lower price point is that it leaves more room to upsell other products to the same customer.

Think: Shoe Dazzle

Opt-out Access

For most subcoms, the strategy is to delight subscribers with consecutive packages filled with pre-selected merchandise, designed to surprise their tastes with a new experience on a consecutive schedule. Yet, there will always be a portion of those subscribers who will feel more comfortable when they (generally) know what products they’ll be receiving and are given the option to decline those that do not interest them. This deletes the element of surprise, but it also eliminates the challenge of handling returns. Another pro is that when giving customers the choice to opt-out, a company can gather more detailed information on spending patterns and demand, which can be used to forecast future demand and habit.

Think: Bespoke Post