The Six Pillars of a Subscription Business for Physical Products.
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One of the most frequently asked questions is how to get started with a subscription business and where to begin?
The answer is very simple: How you get started with a subscription and how your subscription business is set up greatly depends on the value proposition you want to bring to the market.
Everything revolves around the value proposition of your subscription business, from product and price to the customer journey and services offered.
Here is an example:
Your value proposition: an all-inclusive service.
Your subscription offering to support this value proposition: a product, delivery and pickup of the product, maintenance of the product and insurance of the product.
Your service blueprint In order to provide this value proposition: a website where your customers see the product and what comes with it, a tool or system to process orders, a logistics provider for delivery of the product, a repair partner for the maintenance of the product over the subscription duration and a medium (customer portal) where your customer conveys all their wishes to you efficiently and effortlessly.
As you can see the exact needs of your subscription business will be majorly dependent on your value proposition and will evolve with it. But in order to get started and have something to work with, we’ve highlighted the 6 pillars of a subscription business that can remove some guess work involved in launching a new subscription business.
The 6 pillars of a subscription business are:
- An eCommerce shop or website
- A seamless customer journey
- A platform for managing operations
- A subscription ecosystem with tools
- Product return and refurbishment
- Risk mitigation and subscription fraud prevention
Website or an eCommerce shop
Shoppers moved from brick and mortar stores to online shops a long time ago and now they’re looking for completely digital shopping experiences. Tradional sales based eCommerce has made the customers accustomed to a certain level of standard while making online purchases. They expect the online shopping experience to be fast, efficient and personalised. As a result eCommerce retailers have started investing heavily in building a stellar customer journey.
Subscriptions are not immune to the same rule. Customers may have changed the way they consume products, from ownership to usership, but they expect the same level of standard from subscription companies, that is fast, efficient and a personalised customer journey.
Read more about the subscriber decision making journey.
A website or an eCommerce shop is equally important in a subscription business as it is a sales-based business, specially given the fact how purchasing habits have changed in the past 2 decade. The majority of the people want the possibility to see a selection of products, pick the one that fits their needs and subscribe to it on their own and with minimum interaction with the retailer. Needless to say, a website is central in providing this to the customer.
Available possibilities in setting up a website for a subscription business
When it comes to setting up a website there are a few different options available. The option that fits you best depends on how you wish to proceed with the identification and branding of the subscription business.
Integrated with the original website - if you already have an existing website where you sell products, one option is to integrate the subscription option on the same website in the form of a button that says “subscribe now” next to the button that says “buy now”. This option is for retailers who only want to convey the message to their customers that there is also the possiblity to rent their products.
Example: Paceheads
Paceheads runs a subscription service for sports equipment. Their aim with their subscription service is to keep the financial barrier low for premium sports equipment and make sure that customer have the possibility to try out the product via a subscription before buying it.
Therefore the “subscribe” and “purchase” button are next to each other on the same website (as shown in the image below).
Separated from the sales model - another possible option while setting up a subscription service is to partially detach it from the sales model. This is often done either with a stand-alone website for the subscription offering or a stand alone landing page for the subscription model on the same website.
Example: Bugaboo
Bugaboo is a Dutch manufacturer of parental solutional like baby strollers. They launched a subscription service under the brand Bugaboo Flex in 2021. Bugaboo Flex has a separate website of its own but is still branded under Bugaboo.
Separated from the sales model with a separate branding - also commonly seen as an option of launching a website for the subscription model is to have it detached from the parent brand. The subscription offering can also be launched under a new brand and name and this of course requires an independent website or shop. This is the direction commonly seen in the car subscription industry.
Conclusion: all the options mentioned above have their benefits.The one that fits you best greatly depends on how you invision your subscription service.
A Seamless Customer journey
Every retailer knows what a customer journey is. A customer journey describes the different stages a customer goes through in the buying process. It also includes the interactions a customer has during the buying process with the business. Needless to say the customer journey is central to the success of any online business and can often be difficult to tackle. At the very least it requires contant improvements and rethinking.
For a subscription business the customer journey starts at the awareness stage (similar to the sales model) but goes beyond the purchase stage. The post-purchase stage is perhaps the most important stage in the customer journey for subscription-based products.
How the customer journey is designed also depends on the value proposition as discussed with an example above.
Example: Bugaboo Flex
Bugaboo offers baby stollers and other accessories on a subscription basis. Bugaboo Flex’s value proposition is the possibility to swap the products for different ones as the needs of the family changes.
An integral part of Bugaboo Flex’s customer journey is that the customer can request these product swaps in a fast and efficient manner.
Ideal solution: customer goes into a self-service portal and requests an upgrade by just clicking a few buttons.
Non-ideal solution: customer has to cancel the previous subscription and request a new one by placing another order.
Conclusion: design your ideal customer journey and create a service blueprint around it to see what tools and systems you’ll require to bring your ideal customer journey to life.
A platform for managing operations
A common mistake made by many companies is treating their subscription business like their sales-based business and integrating the subscription business into the processes of the sales-based business.
A subscription business, though working on the same principles of eCommerce, is fundamentally different and therefore requires different solutions.
Rental-specific operations such as product tracking, product return, product repair, rental asset management, transactional communication etc., cannot be tackled with sales-processes and require a solution that is capable of handling and automating rental processes.
A subscription management solution is a must have for any rental business to scale operations through automation and keep track of rental-specific KPIs.
A subscription ecosystem with tools
When setting up your subscription business think about the tools needed to run it. At the core you need a website (headless or attached to a CMS to catalogue your products), a Payment Servive Provider (to collect subscription payments) and a subscription management software (to manage subscription operations).
The rest of the tool infrastructure depends on the need of your subscription business.
Example: If you do not wish to indulge in rigorous data analysis then the most common high-level subscription KPI’s will do the trick thus eliminating the need for a data analytics tool.
Here’s how the typical infrastructure of subscription companies that use circuly for subscription management looks.
Product return and refurbishing
Perhaps one of the most important part of a subscription business is reverse logistics. Various subscription businesses offer their customers the possibility to change/swap products during the subscription period which requires retailers to formulate a sustainable strategy for reverse logistics to facilitate product returns.
But the process doesnt end there. Returned products need to be pushed back into stock after repair and refurbishment.
Companies have different approaches when it comes to product refurbishment. Some companies have an in-house solution while other companies partner with specialists in the field that have existing processes for refurbishment.
Risk mitigation and subscription fraud prevention
Since subscriptions lower the financial barrier of getting access to a product subscriptions business attract all sorts of customers putting and are at the forefront of risk and subscription fraud from non-paying and fraudulent customers. And since the price of the product is divided over multiple months, it becomes increasingly important to make sure that the customers have the capacity to pay their monthly subscription bills.
Credit checks provide the required filtering process and helps subscription businesses differentiate fraudulent customers from the regular ones.
A credit check solution can assess the credit worthiness of a customer in real time. Depending on how you want to set up your rental and how much manual effort you’re motivated to put in, you can either reject the customer automatically at the checkout step or have someone from your team access the assessment report and actively decide whether or not to accept the customer.
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