Many companies take for granted that they cannot sell their products and services without a long sales process. In this introduction to the article, we will explain how subscriptions have become an option for many businesses, including subscription box services like Birchbox or wine clubs such as Decanter Club. The companies with high recurring revenue have a large number of subscriptions. This is an effective way to generate income, as the company’s customers will be automatically charged for their subscription each month. Every company has to think of new strategies to increase sales. Sure, you’re generating money now, but how do you intend to make money tomorrow? What about in a month or a year? It would help if you considered adopting the subscription business model to create recurring revenue whether your firm sells a product or provides a service. Implementing a subscription business model has shown to be quite beneficial in the past. The adoption of this model has increased by more than 100 percent in the previous five years. Businesses that understand how to provide useful subscriptions have incredibly loyal consumers, so it’s such a successful customer retention approach. Ecommerce firms have used subscriptions to increase sales. This is due to the consumer market’s acceptance of the model, which has resulted in its increasing popularity over the previous year. You’ll obtain recurring sales monthly or yearly after you’ve gotten clients to pay for a membership. Consequently, your business will be in an excellent position for long-term success. However, you could find it scary if you’ve never used a subscription model before. So, where do you begin? If you currently have a subscription model in place, it may not be doing well. That is why I wrote this manual. I’ll discuss what you need to do to succeed in this arena, whether you’re new to the subscription idea or want to change your current model.
Steps to Generate Recurring Sales using subscriptions:
1. Charge nothing for your base bundle.
Make your most basic plan available for free. This may not be feasible for some of you. For example, if you supply apparel or accessories to your consumers regularly, you can’t simply give them free every month. On the other hand, having various bundles is a wonderful approach to pique people’s curiosity if you’re selling an intangible service. Here are several sectors where people may use a complimentary package to encourage clients to pay for your service finally:
- games
- Apps for mobile
- services for watching movies online
This method is a terrific way to increase the profitability of your small company’s mobile app if you have one. Consider the following Pandora bundles as an example:
Pandora is a music service that allows you to listen to music online. It offers three different listening packages, as you can see on its website. The most basic plan is completely free. This introduction bundle introduces users to the service. They would be less inclined to try it in the first place if they had to pay from the start. People are more willing to utilize something free since there is no risk involved. You’ll have a higher chance of persuading these free members to pay for your service now.
2. Make your premium services available for a free trial period.
So you’ve made your basic bundle available for free. Customers, on the other hand, have yet to update. Why not? They have no idea what they’re missing. It will be more difficult for them to return to the basic version if you give them a free trial of a paying service. Let’s utilize Pandora as an example once again. For its $4.99 bundle, the site provides a 30-day free trial. Customers will get tailored content without adverts for one month. They’ll be more willing to pay the monthly cost for the upgraded experience if they return to music that isn’t tailored and are forced to listen to advertisements. Approximately 60% of all firms can convert free trial users into paying customers:
Those conversion rates are just incredible. They may also use this method if you are selling actual things, such as a monthly package of goodies delivered to clients. Even if you can’t achieve this in the long run, you can still give out a month or two of your package for free. Here’s another thing to think about. The longer your free trial time is, the more costly your membership gets. Pandora will be used as an example once again. Customers who wish to sample its most costly option, which costs $9.99 per month, may get a 60-day free trial. If each subscriber can make $120 each year, it’s worth giving away for two months.
3. Create several membership plans.
Profitable subscription models have a variety of plans. This is due to several factors. First, not everyone can afford your most costly membership, but you don’t want to turn away paying clients just because they can’t afford it. Second, you want to provide programs tailored to the demands of various clients. Finally, people are hesitant to pay for a feature or advantage they are unlikely to utilize. However, if someone understands they need something, they will pay a higher price cheerfully. Consider the following Netflix membership plans as an example:
All of the options include a free month and the option to cancel. Customers may stream Netflix on PCs, tablets, phones, and televisions. On the other hand, the basic subscription does not include HD video and only allows you to view it on one screen at a time. This is a good alternative for someone who doesn’t have an HD television and won’t be sharing the account with anybody else. However, if you have a family sharing the account and want to watch on several HD devices simultaneously, you’ll need to upgrade to the most costly plan. Customers get a more customized experience when they may choose their own programs. Furthermore, we all know that customizing your website increases conversions. Analyze the qualities of your product or service and create a few alternative membership levels to cater to the demands of different clients.
4. Customers that pay in advance get a discount.
Obviously, you want your consumers to stay as long as possible as subscribers. That is how you profit from repeated sales. However, you don’t want to bind your consumers to a long-term agreement. People may be cautious about joining up as a result of this tactic. Consumers like the ability to cancel at any moment without incurring a penalty. It’s for this reason that monthly subscription options are so popular. The issue with monthly subscriptions is that if a consumer quits after a few months, you lose out on the opportunity to make a lot of money. Who knows what will happen. Maybe they didn’t have a chance to explore all your membership packages completely offered in that short amount of time. You may provide discounts for upfront payments if you want consumers to commit for longer periods of time. Consider the following example from Constant Contact:
As you can see, members who pay for six months or twelve months in advance get a 10% discount and a 15% discount, respectively. So even though you’re generating less money each month from each client, you’re keeping them for a longer period of time. This is more successful than requiring your clients to sign a year-long contract and pay a monthly fee. Allowing them to choose is beneficial to both of you. They’ll receive a discount, and you’ll be sure to earn money. It also provides a personal touch, which I’ve already discussed and will continue to do so throughout this book.
5. Customers will appreciate it if you provide them with additional perks.
Offering memberships solely may or may not be in your best interests, depending on your company. In addition to your subscription model, you may employ different business models. If you fall into this group, you must ensure that the advantages of subscription memberships outweigh the cost to your clients. Otherwise, there will be no reason for them to join. The Amazon Prime subscription is a great illustration of what I’m talking about:
To purchase anything on Amazon, you don’t have to pay a monthly or yearly fee. This ecommerce platform is open to everyone. Customers who purchase regularly and want their things delivered as soon as possible may be more willing to pay for an Amazon Prime membership. This subscription includes free delivery for two days. In addition to the shipping benefits, Amazon Prime members also get access to music and video services for watching movies online. As I previously said, the platform offers packages for everyone. Customers who solely want the video streaming service may subscribe for $8.99 per month. All membership services, including movie streaming, two-day shipping, music streaming, picture storage, unlimited reading, and free same-day delivery for some products, are available for $12.99 per month. If the membership isn’t terminated, the total will be a little under $156 for the year. However, if consumers want to save money and know they’ll utilize the service for a year, they may pay $119 and save around 25% on their subscription. Amazon Prime is also available for a free 30-day trial. Do you see how the corporation has implemented most of the methods I’ve discussed so far? Following the example of great organizations and applying their thoughts to your own company is always a smart idea.
6. Set your subscriptions to renew regularly.
Let’s imagine you convince someone to subscribe to one of your services. That’s fantastic news! You’ve obtained their credit card information and are prepared to begin processing their transaction. However, be sure that these memberships are set to renew automatically. Don’t worry; I’m not suggesting you do this to fool or scam your clients. Add this to the terms of service they agree to when they join up. You don’t want to bother them by asking for their monthly credit card information. Obtain them authorization to charge their credit cards every month from the start. This is a fantastic way to generate recurring revenue. Customers may choose to cancel if you provide them the choice to opt-out each month. However, if their card is charged without any notice or communication, they may decide to maintain the service regardless of whether they use it. How many of you have had a gym membership, for example? Whether you’re there every day or never, you’ll be charged every month. You don’t cancel it since going through the procedure and signing up again when you want to travel more of a hassle. This membership will be treated similarly by your consumers. Sure, you definitely want your clients to use the items and services you’re providing. But, since they’re already paying for it, does it really matter whether they utilize it or not? Not at all.
7. Make it possible for your consumers to personalize their membership.
In this tutorial, I’ve spoken about personalization a lot. Allowing your consumers to tailor their subscriptions completely will take this notion to the next level. Take a look at this Sirius XM Radio example:
Customers may select which stations they want on their accounts via membership choices. You may use the same principle in your own company as well. Imagine your company provides goods for men’s beard grooming and shaving. You sell things directly from your website, and you also offer monthly subscriptions that send a box of products. Allow each order to be customized by your membership subscribers. Some clients may need more razors, while others may require additional shaving cream and aftershave lotion. The membership cost will vary depending on the goods and amount of things the consumer supplies each month.
Conclusion
The subscription business model is quite lucrative, becoming more popular. The ideas and tactics will help you succeed, whether you’re introducing subscriptions to your company for the first time or making modifications to your current model. Provide your basic bundle for free. Then give clients a free trial of the pricier features. Create a variety of membership options to appeal to a larger spectrum of potential consumers. Your regular subscriptions should be paid monthly and automatically renewed. Customers will be more likely to pay in advance if you offer a reduced cost for an annual plan. Make sure your memberships are worth the money by providing extra bonuses. Focus on personalization and customization to get customers to subscribe to your service. You’ll be able to create sustainable growth in recurring revenue via subscriptions if you follow the recommendations I’ve provided in this tutorial. To generate recurring sales by implementing subscriptions, you need to have a solid strategy. The recurring revenue businesses for sale are the most reliable in generating recurring revenues.
Frequently Asked Questions
How do you generate recurring revenue?
A: We generate recurring revenue by charging a small fee for premium features. This includes blocking ads and using our data mining tools to see what content users want to create.
Do subscriptions generate more revenue?
A: Yes, they usually do generate more revenue.
How do you increase sales subscriptions?
A: If your company is a physical one, you should hire more employees. You can also increase the prices of items and services to boost sales.
Related Tags
- recurring revenue streams
- recurring sales example
- recurring revenue businesses
- recurring business examples
- recurring revenue formula