Is a subscription model right for your brand?
Don't just assume it will
Hi there,
Some products simply scream to be a subscription product: laundry detergent, meal kits, and supplements, to name a few.
However, that’s certainly not an exhaustive list, as I’ve been surprised by others which are now growing on me, like healthy drinks, coffee beans and dog food.
But some situations may be a push too far… I saw a Skio (subscription tool) case study on Simulate, which seemingly offers plant-based chicken nuggets on subscription. Wait, what?!?
At the time of writing this, Simulate is out of stock… so perhaps I’m wrong, and people were racing to subscribe to plant-based chicken breasts, nuggets and tenders. More likely than not in the world of D2C, there were stock issues—we’ve all been there.
So, nuggets aside, subscription and even subscription-only DTC brands are on the rise. Smol offers just subscriptions on their website, and a few years back, already raised $34 million to continue to take DTC subscriptions by storm.
So, should you focus on subscription and double down? Is that the solution to rising CACs?
When should you double down on subscription?
Here are the types of products that I would encourage brands to double down on a subscription model:
It is used at least a few times per week
It has ongoing long-term usage
It is a hassle to run out and have to reorder it
Subscription is not a tick box for your brand if the habit and usage aren’t built into your product. Rather, it is a way to push retention and brand loyalty.
Other prerequisites
But as always, there are some prerequisites for doing this. Here’s what I recommend:
You need to offer a decent discount. Spoiler alert: 5-10% is not enough, as customers experience subscription fatigue
You need to be able to invest in a strong setup to support them around that subscription, so think: high flexibility in changing their subscription, FAQs, explicit emails on managing their subscription, guidance on getting into the habit of using your product, easy to use subscription portal, subscription page on your website, etc.
Be able to offer additional benefits for subscribing beyond a discount, e.g. VIP treatment or support, welcome gift, etc.
I believe subscription is the future for DTC but not for all brands, and it needs to be done well to get it working and grow your subscription base.
Recommendation
When conducting research for a subscription-based app, I stumbled across a RevenueCat report, which provided me with some really important data to base my suggested experiments on.
It goes into depth on the state of subscription apps this year, including how many offer trials there are, what the length of the trial is, price points for subscription, and subscription LTV. If your product is digital, it’s a great inspiration for coming up with new experiments to push people over to subscriptions.
Recently I had a success which involved the subscription base growing from about 8% to 42% of monthly revenue in the last eight months with a continuation to keep increasing. Moreover, returning revenue has increased, resulting in better lifetime value and a healthier business.
However, it required work on the areas I mentioned and continuous experimentation (as always).
So if your brand is suitable for a subscription model, don’t be afraid to double down and give it a go. But make sure you have those key elements in place first.
Daphne