Subscription 101

Happy Wednesday!

For everyone around the world celebrating Xmas today, I wish you a very happy Christmas! And for the same reason, I wanted to keep today’s deep dive relatively shorter, but as I kept writing, I realised how much potential a lot of brands have that are missing out generating this amazing source of income via subscriptions, hence, today’s email is going to be a 10 minutes read, but if you sell a subscription product, I promise you, this will be worth your time!

Imagine you lived in the 18th century where news traveled by word of mouth and information about current events took months to arrive in your town. The news you consumed came in bits and pieces and you never had the full story or an ongoing/clear chain of events to follow.

That was until a guy named John Campbell launched The Boston News-Letter in 1704, making it the one of, if not the first continuously published newspaper in America. But John faced a challenge—How could he ensure repeat readership and reliable income when people weren’t used to paying for news delivery?

That’s when he implemented an important idea—a subscription program. Instead of relying on one-off sales of individual newspaper issues, he offered people the option to pay in advance for weekly delivery. Subscribers paid a fee for the convenience of having the news brought straight to their homes or businesses, guaranteeing them a regular update on the latest news in Boston and beyond.

Although this model did exist in Europe with publications like the London Gazette and various milk-man delivery subscriptions that were available elsewhere, John was still an early pioneer.

The subscription model was genius because it provided predictable revenue for The Boston News-Letter (not “newsletter!”) to cover their printing costs and plan for the future, and for subscribers, it meant they never missed an issue and were always up to date on important events.

Fast forward to today and subscription based business models have been used by countless brands across tons of industries since. Categories like newspapers and magazines, fitness classes and memberships, pet food, skincare, food and beverage brands, SaaS tools, Netflix, Costco, Sam’s Club, Amazon Prime, and more—they all rely on subscriptions.

So the goal of this email is pretty simple. I want to explain why subscription models are important, how to create one, and some tactics and strategies to make yours significantly better. Does that sound good?

Alright, let’s get into it..

Subscription 101

The Basics: Why Every Brand Should Consider a Subscription Program

1. Reliable revenue stream: As I mentioned above, unlike one-time sales, subscriptions offer a predictable, recurring revenue model that can protect your brand when off-purchases decline. I sort of think of subscriptions like a safety net, where you can build a solid base of repeatable revenue to catch your company if your one-off sales fall or fail.

If you ask any marketers or executive who works at a brand that relies on subscription, I bet they check subscription revenue before they leave the bathroom in the morning. It’s one of the most satisfying things to see.

1. Convenience for customers: The second reason is that offering a subscription for frequently purchased items saves people time, money, and mental energy. Whether it’s daily essentials or monthly or quarterly refills, a subscription can create a better experience and build customer loyalty. When I think about subscriptions, I think about the working mom who orders her favorite coffee every month. Before she subscribed, she often ran out of coffee at the worst times, leading to a lot of stress and low-energy mornings. Now, thanks to her subscription program, she wakes up to a fresh cup of coffee every day without ever having to worry.
2. It increases your valuation and access to capital: If you have a subscription component to your business, you have more leverage when speaking to investors, banks, and lenders to access capital. Want a line of credit or a cash advance or revenue based loan? Subscriptions will help you get more money, faster, at better terms. Subscriptions also increase the total enterprise value of your business. $1M in one-off sales isn’t nearly as valuable or durable as $1M in recurring or re-occuring subscription revenue. The business with subscription revenues is worth substantially more to investors and acquirers. I’d also argue that this makes the business more attractive to top talent, partners, vendors, suppliers, manufacturers, contractors, and employees as well.
3. Sampling Opportunities & Built-In Test Cohorts: Your top customers are the most likely cohort to become your subscribers and, as we know, those are the best people to sample products and ideas to when you have something new to launch. They will be the first group to try something (you can just add it to their box or offer it to them as a free promotion/surprise & delight, etc). Once they receive the product, they will also give you early reviews/content and advocate for what you have launching next. Or, if it requires improvements, they’ll be the first to give you critical product feedback and offer suggestions to make changes before you push this out as a public release.
4. LTV Increases/Extension: It’s no secret that your highest LTV customer cohort is likely your subscribers. Yes, they have a higher LTV due to a consistent pattern of purchasing, but they are also significantly more likely to buy other individual products from your store. In short, subscribers pretty much always stay longer and spend more. As you build your base of subscribers, and if appropriate (for example, you have subscribers on protein powder, but also sell creatine), then you should focus on leveraging email/SMS to cross-sell existing subscribers into new products. We build out flows to do this based on the most common patterns of what products people are likely to buy, based on what they subscribe to. Need help with setting this up? Let’s chat!

The Setup | 7 Things You Need To Do To Get Subscription Right

Here are 7 things you must do if you want to stand up a successful subscription program for your brand. In general, I would do all of these in order from 1-7:

1. Identify your subscription offering and nail the positioning First, you need to pick a product that makes sense for subscription. The goal for this product is to solve a real problem for the end consumer by offering a subscription. Weekly refills of pillows or sweatpants don’t make any sense. Bi-weekly refills of energy drinks that you consume daily or products like Salud hydration packs do**.**

Next, you need to nail the positioning. With Salud, it’s positioned as a daily supplement vs something you only take when you are out partying, which lends itself to be a better fit as a subscription vs something like Pedialyte which is a similar product, but mainly positioned as a kids health supplement, or for adults, it’s become the go-to impulse buy at 2am or the morning after a big night out.

How you message your product is how your consumers see it. My advice is to always have some evergreen messaging that is more universally lendable (i.e.. Salud being a daily hydration mix) but then layer on campaigns to focus on niche audiences. For example, for people who party hard on a Saturday night, Salud can run a campaign to clear brain fog, dehydration and promote better sleep with their packet, but if that was evergreen, the average person wouldn’t see it as a subscription. Make sense?

1. Decide on the cadence of your subscription program Is it weekly, bi-weekly, monthly, quarterly, annually etc .and why does that make sense? Having options that replenish too soon is actually net negative and will cause churn. In SaaS, they tend to offer a free trial (because the server costs to add another user are close to nothing) then they have monthly or annual pricing. If you want a bigger discount, you purchase an annual plan. For CPG it’s different. No one wants a gallon tub of protein powder showing up at their door every week. A new toothpaste every 2-3 weeks or a restock of Lemme sleep gummies every 2-4 weeks makes a lot more sense. From almost every business I’ve looked at, the best cadence is 30 days, but most subscription apps let you choose 15, 30, 45, or 60. When you analyze shipping costs, usage, and how often consumers actually use and need the product, in most cases you’re better off doing monthly shipments and (if you previously were doing 2 week shipments) it’s better to double up the product and make it monthly. The key is not to overload or overwhelm your consumer with too many options that restock too frequently because they’ll churn. The other thing to keep in mind is churn reduction, when you’re choosing the cadence. For example: What would be extremely helpful is to push the subscription out by 1 week or 10 days, and by text. Maximizing convenience helps you lessen churn and will lead to customers who want to keep supporting you. Otherwise, we all know how easy it is to find another intro offer from another pet food company.
2. Select your technology partner There are a number of great options for what technology to use that work well with a variety of platforms + Shopify. The questions you should ask each subscription technology vendor you talk to are:
   • How customized can the platform get, per order?
   • Do you want this platform to be something you can run like a growth marketer (i.e., the ability to run A/B tests for upsells or add-ons in the subscription portal as well)?
   • Does your engineering team like the way the platform works with your own site’s customizations?
   • Does the way orders are processed match your needs as a brand?
   • Does the subscription tool integrate with all the other technology providers you need to connect with?
   • If you don’t have an engineering team, is it possible for them to help you get it up and running on your own?
   • If choosing a newer subscription platform: Will this platform be around 1-2 years from now?
   • What do support SLAs and response times look like (an SLA is a “Service Level Agreement” aka how fast do they need to get back to you, contractually, when you need help)?
     • P.S.: — Don’t ever sign an agreement without understanding SLA (response time for support) and out clauses (how fast you can get out of a contract when needed).
3. Create a landing page that explains the program, benefits, and value props Next you have to create a well designed landing page that explains your subscription program and the benefits and value props for subscribing. Here you can highlight why it makes sense, the options a consumer has, your offer (i.e., do you have a subscribe & save discount model where subscribers save 20% with you?), and any other relevant info (additional perks, early access, discounts to other brands, events, etc.). Next you want to add reviews, testimonials, social proof, a comparison chart showing life before and after they subscribe, and other content blocks that are similar to what you’d find on a landing page, but remember, in this case, it’s entirely around the benefits of being a subscriber. Someone, on this page, is likely already familiar with your brand and the products, so now you need to sell the subscription, not the product. You also want to include information on how to cancel and FAQs for anyone reading. This is all in line with what I share on how to make any great landing page no matter what the product is. Having one for your subscription program is no different and all of the same principles apply.

5. Marketing the subscription program

After you have your landing page, you need to create email flows (or even just dynamic blocks that populate when you know a recipient is NOT a subscriber yet), SMS flows, organic social posts and ads about your subscription program to drive awareness to your offer. A lot of the organic social and ads can also be the way you talk about the order arriving on subscription or autoship, it doesn’t have to directly tell people to subscribe.

If you’re launching subscription as a new thing, treat your subscription program just like a new product launch and do all of the same things to promote it. This means constant promotion for weeks or months to make people aware of the offer and hopefully get them to convert and subscribe. Marketing your subscription program is a never ending process. Think of it like your new hero product which needs evergreen content and campaigns every week/month.

6. Setup your custom subscriber email sequences

Before you press publish on your content, emails, or ads, you also need to design your automated email subscriber flows. At a minimum, this should be an automated thank you for subscribing flow, welcome to your subscription flow, new subscription box on the way/delivered flow, upsell into subscription, cross-sell for existing subscribers to other products, etc. You need to design and implement all of these emails in Klaviyo (or your platform of choice) before you promote and push your subscription offer live.

7. Implement customer churn analysis and surprise and delight

Next, I would recommend adding a tools that help you analyze the health of your subscribers and help you predict potential churn before it occurs. This will ensure you take proactive measures to mitigate churn before it happens. Your subscription platform should have some of this built in, but you can add on additional software to bulletproof your churn.

The Tactics | How to Support a Successful Subscription Program

When it comes to specific tactics to support the ongoing success of a new subscription program, here’s what I think about:****

1. Nailing The Offer/Discount Structure: Most brands offer a 10-20% discount to incentivize subscribers. You could also have a free gift with purchase, early access to new SKUs, some kind of VIP or members only benefits, a points or punch card style rewards program or something else. The key here is that you never want to have a discount that’s too low to where it prevents you from running promotions on your site. For example, if you normally run 10% or 15% sales on your site, your subscription offer should be an always-on 15 or 20%. Outside of a major holiday like BFCM, you don’t want to have on-site offers or promotions that are greater than the subscription discount—That’s how you lose subscribers. Pro Tip: You can also update your churn surveys when someone is canceling to ask them if they’re leaving because of a better offer, and then if they say yes, you can just allow them to apply that offer with one-click to their next order, so they don’t miss out on the discount and they don’t leave the subscription. In general, you should be experimenting with different offers and angles and you can make multiple ads and LPs to see what actually performs and gets folks to subscribe.
2. Ongoing Content: IMO, setting up and launching a subscription program (even if you market it well) is not enough. You need ongoing content to nurture and re-engage existing customers and subscribers by continuously sharing the benefits and reminding them of the WHY, so they stay subscribed.
3. Customer Service: Subscribers should get white-glove support with any issues or concerns they might have. Tag and prioritize subscribers over regular one-time purchasing customers. If nothing else, you should have a separate auto-responder email for subscribers vs one-time purchasers. You just need them to know, that you know, that they need help… does that make sense? With subscribers, you need to always think about how to make their life easier, not how you can generate more revenue. The better you make something for them, the more they will want to stay and continue to support.
4. Surprise & delight and adding new benefits over time: You should also be thinking about how you can make your subscription program better over time. Maybe you add new perks or milestones, early access to new sales (or another brand’s sales), new products and variants, an occasional sample or free gift with every 3rd month or seasonal promos that are only for subscribers. If you want them to stay, you need to continue adding value throughout the entire lifecycle of their subscription with you. You can enable this in the subscription portal itself where you can offer free gifts, incentives, etc. and you can have marketing emails that go out to remind and incentivise people to go into their portal and choose their free gift, or free sample when it makes sense. An easier way to think about this, is as if it’s a community that you have. How would you continue to nurture the community and keep them excited? For most, it’s around programming, access, events, etc. Not all your subscribers will want to participate more from your brand, but continuing to build more to your subscription than just the product at a discount is how you extend LTV.

On Churn Reduction and How To Keep Subscribers Longer:

When it comes to churn reduction, here’s a few things that I like to do:

1. Flexible Subscription Options

IMO, ****customers are more likely to stick around if they have more control. With this in mind, you should be offering flexibility around delivery frequency, product swapping, or even pausing their subscription or skipping a month when needed.

On this note too, leverage channels like SMS to communicate with subscribers about when their shipment is coming, if their card fails to run, or even make sure that they’re ready for their subscription to arrive. For the last 2, you should be able to automate SMS flows to capture replies and help costumers navigate their subscription.

1. Churn Prevention Offers Just when someone is about to cancel, offer them a bigger discount or a one-time exclusive deal to stay with an automated pop-up or email sequence that hits them when they click on your “Cancel Subscription” button/link. Sites like The Wall Street Journal do this exceptionally well (in fact, if you’re a subscriber, go try it out—try to cancel it, and they’ll offer you a discount to stay).

3. Addressing Pain Points

Throughout the process, if you see subscribers churning, you need to understand why they are canceling. Reasons often include the price, they are getting too much product, too often, or they are not using the product enough, etc. You should be using this feedback to adjust your strategy moving forward. Also, make it easy for people to submit “Other” feedback, in case there’s something obvious to them that you are missing outside of those main options.

1. Surprise & Delight: Alongside what I said above, you should consider ****offering occasional surprises, like a small freebie or a personalized thank-you note every so often to keep subscribers delighted with small gestures and perks. This always goes a long way and is how you drive word of mouth.
2. Create WinBack Flows: If a subscriber does cancel, you want to wait some time (depending on what you know about your churned subscribers who come back) and then follow up with an automated win-back campaign to get them to resubscribe. You could also offer a 1-time special discount to get them back in the door.

When does subscription not make sense?

IMO, you should not do a subscription business model if:

1. You have a high AOV product that doesn’t make sense for subscription (i.e Mattresses, luxury apparel, shoes, appliances, etc) or it’s a product you use, but off a routine schedule. For this, I think about a product like the Miracle Balm by Jones Road Beauty. You never know when you’re going to run out, so a subscription might not make sense there.
2. A subscription does not solve a real problem for someone (i.e., no one needs a subscription to bath slippers every week)
3. If a product doesn’t run out on time—for example, Osmo Salt is a tough thing to subscribe to because it takes so long to finish a jar of salt.

Many of the best subscription items are in the home with items people frequently use. Things like beauty products, vitamins, sleep gummies, bodywash, dog food, etc., all make a lot of sense for subscription. It has to be something that is regularly consumed where a subscription model makes sense.

What are some of the key questions you have about building a great subscription based business? I’d love to answer some of these questions. You can use this form to ask your questions.

Alright folks, that’s it for today!