How To Build A Subscription-Based Business

Are you looking to build a profitable subscription-based business model for your small business? Look no further!

In this article, we will explain the steps to creating a successful subscription-based business that generates consistent revenue and builds a loyal customer base.

Key Factors To Consider Before Starting A Subscription-Based Business

Before exploring subscription-based business models, consider these key factors. They will help you set realistic expectations and increase your chances of success.

Here are a few things to think about:

1. Market Research

Conduct thorough market research to identify if there is a demand for your offering and to understand your target audience. Analyse existing subscription-based businesses in your industry to learn from their successes and failures. Understand the costs associated with running a subscription-based business. 

2. Customer Retention Strategies

Focus on strategies to retain your subscribers and reduce the rate at which customers cancel their subscriptions. Ensure that your business can offer exceptional customer service, regularly communicate with your subscribers, and continuously innovate to provide value that keeps them engaged and loyal.

3. Scalability

Consider the scalability of your business model. Can your business handle the increased demand as your subscriber base grows? Ensure you have the necessary infrastructure, resources, and systems to scale your operations.

Advantages & Disadvantages Of Subscription-Based Business Model

Subscription-based business models offer several advantages for small businesses but also come with challenges. Understanding the advantages and disadvantages will help you decide whether a subscription-based model is right for your small business. 

Let’s explore some of the pros and cons:

Advantages:

1. Predictable revenue: Unlike traditional businesses that rely on one-time purchases, a subscription-based business model provides a steady stream of recurring revenue. This predictability allows you to plan and budget more effectively.
2. Loyal customer base: Subscribers are likelier to be loyal customers who value your products or services. They have committed to your brand and are more likely to stick around, providing a stable customer base for your business.

Disadvantages:

1. Churn rate: Subscription-based businesses are susceptible to customer churn, where subscribers cancel their subscriptions. High churn rates can impact your revenue and require constant efforts to acquire new customers.
2. Continuous value delivery: Unlike one-time purchases, subscription-based businesses must consistently deliver value to their customers to retain their subscriptions. This requires ongoing product development and customer support.

How The Subscription Business Model Works

To understand how a subscription business model works, let’s break it down into three main components:

1. Offering

Your offering is your product or service to your subscribers. It can be anything from a physical product, like a monthly subscription box, to a digital service, such as access to exclusive content or software.

2. Pricing

Pricing is an essential aspect of a subscription-based business model. You need to determine the right price point that covers your costs and provides value to your subscribers. Consider factors such as the perceived value of your offering, market demand, and competitive pricing.

3. Billing And Payment

In a subscription-based business, customers are billed at regular intervals, typically monthly or annually, depending on the subscription plan they choose.

Read More – How To Escape Over Reliance On A Single Customer

You need to have a reliable payment system in place to collect payments from your subscribers. If your business is based in Nigeria or Africa, some of the best payment platforms that support subscription-based models include Paystack and Flutterwave. You can easily embed a subscription payment form on your website with them.

How To Set Up A Profitable Subscription-Based Business Model For Your Small Business

There are steps you must follow to successfully set up a profitable subscription-based business model for your small business, either as the primary business model or as an add-on one.

1. Identify Your Target Market & Niche

Identifying your target market and niche is crucial for the success of your subscription-based business. Your target market is the consumers most likely to be interested in your offering. At the same time, your niche is the specific segment within that market that you will focus on.

To start, you need to gather insights about your target market segments. You can use surveys, interviews, competitor analysis and data analysis to understand their pain points, motivations, current offerings and preferences. This will help you tailor your offering to meet their needs.

2. Create An Attractive Subscription Offering

Without an attractive enough offering, whether for physical or digital goods, your subscription business will fail. Your offering should provide unique and clear value that differentiates you from competitors and keeps your subscribers engaged.

Here are some tips to create an attractive subscription offering:

• Clearly define your unique value proposition. What makes your offering different from others in the market? Highlight the benefits and value that subscribers will receive by choosing your subscription.
• Personalise your customers’ subscription experience by offering customisation options, personalised recommendations, or exclusive content. This will make subscribers feel special and valued.
• Continuously innovate to stay ahead of the competition and keep subscribers excited. Regularly introduce new features, products, freebies, subscriber events or content to enhance the subscriber experience.

 3. Set Up A Subscription Management System

Setting up a seamless subscription management system means choosing the right technology or tool to manage your subscriptions and subscribers.

A good technology platform will offer automated billing, customer management, and subscription analytics. 

Sometimes, small businesses prefer to build their subscription management system on their website to reduce costs. In such a scenario, ensure your website has a user-friendly interface that allows customers to easily subscribe, manage their subscriptions, and update their payment information.

Ensure that your site is secure and that your subscription management system integrates with secure payment gateways to protect your customers’ sensitive data from scammers and hackers.

If you want to offer a physical subscription-based model, you must set up a seamless process that helps you quickly assemble your products and ship them to customers without hassle.

Subscription Model Examples In Nigeria

Some successful subscription model examples in Nigeria include IrokoTV, Printivo, Eden Life, iFitness Gym, and Roving Heights Books.