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Why You Should Try an e-commerce model that is dependent on subscriptions (and Steps for Implementing it)

May 13, 2023

A lot of creators are moving away from a one-time fee pricing system to an underlying subscription-based pricing structure. The rationale behind this shift is quite simple this: subscription-based payments allow them to earn recurring revenue.

Look at a successful designer by Sew it! Academy Mimi Goodwin as an example.

The one-time conversion rates in all sectors is 2.35 percent and 5.31%. That means if you create an online course which has an upfront price model that less than 5% of your audience will buy the course. Initial revenue might appear to be a lot at first, but there's no way to estimate how much you'll earn in the next month, especially if your visitors' number to the sales page fluctuates.

If you opt to utilize the subscription model of company instead, your beginning payout might be smaller and you'll have the ability to predict how much money you'll earn over the next months. Therefore, instead of looking to attract new customers, you should focus on improving the standard of your classes for students who are already enrolled.

It increases your students' satisfaction, builds their loyalty and encourages them to refer your program to their friends. This in turn leads to a greater number of customers.

Find out:

What is the exact business model for subscription?

Subscription models of business are that requires customers to pay a monthly, weekly or annual charge in order to access your service or product. Based on the duration they decide to choose customers can extend their subscription the duration of the time they use your service.

Benefits of subscription-based model are for the creator of the course as well as the customer. If you are a course designer (and an owner of a business) you can leverage your already existing relationship with your customers to generate predictable, regular revenue. This allows you to keep spending money on your company, while preventing them from being overly flooded with your information frequently. If you're a student you can cancel the membership anytime you want but without paying more than you would have if you had paid upfront.

If you provide the best product/service in the right sector, a subscription is a lucrative way to generate income.

What exactly is a subscription type of business?

The reason behind the subscription model for business is quite simple.

You charge your customers frequently for the service or product you offer and allow them to cancel or renew at any point. Your customers decide for themselves how long and how often they wish to purchase the services you offer. If the customer can continue to renew their monthly payments (usually with the debit or credit card) then the offer remains accessible to customers. If they fail to renew, they'll lose their right to access immediately.

The subscription model as a business model began to be introduced in the late 17th century, by publishers of periodicals and newspapers. With the advancement of technology, many websites, businesses, and software-as-a-service (SaaS) platforms use this business model.

Some of the most popular businesses who bill clients for their subscriptions are Netflix, Microsoft, and Spotify as well as Microsoft and Spotify. The companies have been reaping the benefits of it for many years. It's important to realize that this business model isn't limited to large companies. You could use it to creating your own products, too.

Benefits of a subscription business model

Business that subscribe to subscription models has many benefits. These are just five:

Predictable revenue stream

One of the most appealing benefits of subscription structures is the capacity to calculate how much your company could earn each month (or every year). Since your customers pay on a regular basis, you'll know how much they'll be required to pay in addition to the precise moment they'll need to renew their payments.

When you factor in the churn rate of your business and your churn rate, you'll know your monthly recurring income (MRR) very exactly.

For example: Say that you've got a 7 percent turnover rate, and you have 2,500 students are enrolled in your program for a fee of $20 per month. Even if you do not get more students next month, you'll have the ability to reach the minimum $40,000.

The longer the time your program is going over, the more you'll be able to forecast the number of customers you'll gain or perish over a particular period of duration. It makes it simpler to forecast your MRR as well as the annual recurring income (ARR).

HTML1 More effective Customer Acquisition

If you are earning an average of $2,000 per month working part-time as a barista and want to increase your skills by enrolling in an online class in project management. The most effective one that you can discover offers two price options which are $1,000/one-time payments as well as $70/month. Which of the pricing models is better to your requirements at the moment?

My money is on the monthly subscription payment.

Sometimes, the cost of an item can seem too costly to a potential buyer. Breaking down the price into weekly, monthly or even yearly installments makes it more affordable as well as helps potential customers integrate the costs into their budget. Thus, more customers who are able to pay monthly can afford to and enroll into the program.

Lower customer retention spends

Since your students are paying regularly to attend your class and it's not necessary to have as much funds to reach them like you would have in the case of a class that was built upon one-time pricing. Additionally, because the students continue to make their bills, it's probable that they'll be in a long-term partnership with you. This makes it less likely to have them constantly changing, therefore you do not have to put in a large amount of cash to keep your customers.

Stronger customer relationships

With a one-time payment structure the customer pays once for the entire course which is all they have to pay for. Except for a few that could contact you to inform that you about the progress they've made, most customers won't contact your company much.

The subscription model in contrast gives customers access to your company (and the reverse) during the length of period that they choose to allow. If your customer support team is available 24/7 to help students with their questions as well as helping them solve their issues, the students will grow to believe in your company's standing. It is an important element in deciding the time to either cancel or extend their membership.

Opportunities for upselling and cross-selling

In 1968, the social psychology researcher Robert Zajonc devised the mere exposure theory. It states that when people are exposed to something, they develop positive feelings towards the stimulus.

When it comes to business, this means that the longer customers are able to access your products, it's more familiar appear to the customers. As a result, your potential customers are more inclined to take advantage of more products or services that you provide.

Through cross-selling, you're creating an additional product to your existing offerings at a greater cost. In this case, for example for example, if you offer the online course for $25 per month, you could add your special subscription plan and make both available for only $35 per month.

Through selling up, you're trying to get existing customers to purchase an item that is priced more expensive. If you're offering an online course for $25/month You can promote an identical, however higher priced course for students to $30/month.

The new customer might prefer not to choose the more expensive alternative immediately. For those registered to your course for a period of 6 months could upgrade their plan (or purchase the more expensive course) because of the benefit your course can provide.

What steps do I take to transition my business into a subscription business model

If you're contemplating the implementation of a subscription model for your service, there are six steps you should follow:

 Check what your business's needs are and if it fits in with this pricing structure.

Prior to establishing a price structure based on subscriptions for your company it is important to decide if it is the right pricing model for your company. If, for example, your product or service users require constant access to, such as an online fitness course or online boot camp then the subscription model would work great for your business. If it's only a once-off training session, it will not be the best match.

If you're certain that the model of a subscription-based company will be a good fit for your product, take your next step.

Create realistic targets to your subscription-based enterprise

The goals you intend to achieve with your venture will be the basis for the price points and levels you decide to set. So before you pick prices consider: What do I hope to achieve with the subscription model of my company?

Do you want to see increased revenue growth or faster growth? Are you looking for better customer acquisition and retention?

Furthermore, your business goals help you determine prices that'll aid in the acquisition of ideal buyers, however they also determine the tone of your sales page or website information.

 Choose a cost for subscription strategy

After that, you'll be able to begin the fun part creating your subscription bundles.

If you're only trying an underlying subscription-based pricing system initially then you'll be able to keep it straightforward by making either one or two plans. After you've evaluated your conversion rates and gather the feedback of your customers, you'll be able to create additional pricing packages that are tailored to your customers' preferences.

For that take note of the following aspects:

  • The method you use to communicate your product's value to customers
  • Industry standards
  • Price incentives to your package

To know where to start consider the options offered by competitors. It's important to make your product to be more attractive to the people you want to reach.

If, for instance, you're teaching Pilates to parents who are new then you can check out the cost packages for other Pilates programs on the internet. If you discover that prices range from $20/month to $60/month, you can apply this as your base.

Your packaging's attractiveness does not necessarily have to be a factor in pricing your products lower than competition. It's possible to offer the same amount and offer incentives or perks. You can charge an extra amount over the competitors if you're providing perks you aren't.

It is essential that customers should look into your pricing options and believe that, if they did business with you, they'd get an excellent value.

It makes it simple for prospects to sign up

A subscription program is a simple, easy to understand. It isn't a good idea for your prospective customers to not know what they should do once they visit your site. You also don't want users to spend 30 to 60 minutes navigating your registration forms.

Add a link to the page that lists pricing within your navigation menu to allow customers to locate it quickly. The pricing page on your website, subscription plans and prices should be clearly listed so that visitors can recognize.

Also, provide the option for customers to alter the billing information, as well as change or cancel their subscription plan.

Expand your business with the right technology

If the aim is to get recurring payments from clients, you'll want to make sure that your subscription billing system works using the correct devices to accept and process these payments.

If you frequently deliver a variety of goods to your customers in one go A bulk-shipping service will help you streamline your delivery process and lower the price.

Offer exceptional customer service

In your site, you should provide various ways for customers or potential customers to contact your customer service team in case they require assistance or have difficulties. Chatbots are a good option for communication. or live chat, as also as phone or email calls.

It's how easy customers can get in touch with your customer support as well as the quality of service that your team offers will determine whether they'll continue to renew their membership or not. Make sure you're giving the top quality service to your customers base as well as establishing connections with your customers.

Websites which use the model of subscription

The business model of subscriptions can be utilized in a range of ways for companies in a variety of areas. Below are five businesses which have succeeded in using the model of subscription to determine price.

Online courses - Copy School

Copy School is an incredibly powerful online program that shows individuals on how to write different types of strategically written copy. This is content that can be used on websites, social media, ads and emails, which are for companies. This course is intensive and is producing incredible copywriters that work for multinational companies and who earn a premium.

This is why the cost of Copy School Copy School is expensive -the single-payment of $3,997 per month for unlimited access (or $1,998 once-off payment for the ad-supported course). However, Copy School has two subscription packages that allow clients to purchase the course -- 348 dollars per month (ad-supported) or $697/month over 6 months.

streaming platforms - Netflix

At the time it came out on the markets, Netflix used to be the rental of DVDs. With the development of broadband internet, smartphones, and smart TVs, Netflix changed its name into a video-on-demand (VOD) system. It's now an online streaming platform that has subscriptions that let users view movies and TV on Internet-connected devices.

The pricing levels of Netflix vary between $6.99 all the way to $19.99. The decision to choose a plan is based in the standard of your video as well as the amount of devices that the user would like to join to one account.

Software-as-a-service platforms -

Memberships with ClassPass

ClassPass is a service that provides members of fitness and beauty fans. By acquiring the ClassPass membership, members can schedule appointments or classes in the most prestigious salons, gyms, studios and spas across all over the globe. ClassPass membership packages vary starting at $19 per month (for eight credits) and up to $159 a month (for 80 credits). ).

Physical objects - BirchBox

Birchbox provides its customers with boxes containing two to six beauty products every month. These boxes are designed based on a quiz that users take at beginning. This arrangement allows the customer try different items, as the same item will not be sent twice.

If a customer is able to locate a quality item and decides to purchase the item, they are able to do so through the BirchBox site. A monthly subscription begins at just $13 per month and includes discounts for 3-month, 6-month and 12 month subscriptions.

Profit more by implementing the model of subscriptions for your business

When you run a business that is subscription-based You can't make up prices randomly and wait for people to join. You must put in the work. Customers are only likely to change their plans if they feel like they're getting enough value for their money.

To give this benefit, you'll need to get close to the people you want to reach, talk to them about their issues and pain issues and provide tried and tested solutions. After that, you'll be able to determine the price of your service that your clients will be happy to join.

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