Given our current climate, those already signed up to a toilet roll subscription seem to be ahead of the game.

On top of subscription services for consumers such as craft beers (Honest Brew), nuts (Graze) and fresh food boxes (Hello Fresh), this business model is increasingly common in other sectors.

While subscriptions are not new, how organisations such as charities and small businesses use them is undergoing an evolution.

Younger consumers with different buying habits

A key driver behind the growth of these services is how younger consumers have embraced subscriptions as a way of life. There is a whole generation that has grown up paying Netflix-style small monthly payments.

According to research by YouGov and Zoura, 89% of 16 to 34-year-olds say that subscriptions make life more enjoyable, and nearly half of 16 to 24-year-olds and 25 to 34-year-olds agree that subscriptions are the future.

Another Zoura report cites that 74% of adults believe that in the future, people will subscribe to even more services and own fewer physical goods. This ‘rent, not buy’ trend is changing many market sectors with far-reaching impact.

Is it right for me?

Rather than asking yourself ‘are subscriptions suitable for my business’, it would be better to ask ‘where can I use subscriptions to add value?’.

If you want to introduce a subscription product or service into an existing business, you will need sufficient agility to change your mentality, your approach and your business model.

Some market analysts predict that in 10 or 20 years, the majority of businesses operate with some subscription element to their business.

Rethinking business models

Along with the popularity of subscriptions and changing lifestyles, the current global health crisis is encouraging many businesses and charities to rethink how they approach revenue generation.

For many organisations, packaging up your goods or services under a subscription model is attractive. It gives the customer the ability to sign up to a rolling contract, creating a valuable new revenue stream that sits alongside other more traditional sources of income, and can remove longer contract commitments that may not be easy to get out of.

Conversion

The biggest challenge is how to convert a customer into becoming an ongoing subscriber.

A good starting point if you’re selling a product or service is to encourage initial sign-ups with a risk-free or reduced rate trial. Which model you go for depends on your business, but don’t automatically assume that you can’t charge for it. In many ways, asking for a minimal financial commitment will result in a more motivated trial sign-up, e.g. a discounted cost in the first month.

An important point to remember is that you need to demonstrate value from the start of the relationship to benefit you when it comes to retention.

Charities develop subscriptions in different ways

A risk-free or discounted trial is not an option for a charity. However, charities are having success with different types of subscription service. The Blurt Foundation, a mental health charity, launched a monthly subscription box (the BuddyBox) containing products designed to promote well-being. Above increasing revenue through this service it also raised awareness of the charity’s aims.

Scope launched its Mindful Monsters subscription service after audience research identified demand for a product that helped children’s emotional resilience in a fun and engaging way. The ROI it has generated from this subscription revenue over the last five years is comparable to face to face fundraising income.

The WWF has taken yet another approach. Its subscription aims to last a year after which the charity is planning to convert subscribers into regular donors.

Recurring revenue opportunities

You don’t want to cannibalise traditional income sources. You need to look at your potential target audience to see if you can create a new service that sits alongside what you already offer.

Careful targeting and positioning will be needed to make sure that your subscription is genuinely complementary to your current activities. To achieve this, you will need a detailed understanding of your customer to design the right product and find the proper pricing structure.

Companies that are making a success of subscription pricing need strong customer service ethos. In the event of an error, a goodwill gesture can work wonders for restoring confidence – and customers that have complaints resolved can become more loyal and spend more.

The crucial role of technology

As the UK’s favourite payment channel, Direct Debit is a logical choice for supporting a subscription service. They offer a reliable and low-cost way of collecting recurring payments which help to avoid the challenge and inconvenience of late payments.

Direct Debits should be part of a multi-pronged payment strategy that also supports secure credit card payments. Businesses need the ability to set up payments online, take them via a call centre or even face to face.

Therefore, a centralised platform like that offered by Bottomline can give you the ability to collect all of your payments efficiently from Direct Debit, invoices, card payments or online payments.

Flexible pricing options

Subscriptions can differ, as discounts and preferential rates can be used to reward consistent payment.

With any recurring payment, there will also be natural opportunities to upsell customers onto a more valuable price plan.

Monthly or quarterly payments lower the initial price point and reduce the risk to the customer of signing up. Consider testing a discounted annual payment subscription – but be mindful that while this locks in the customer, it can work against you as subscriptions tend to be favoured by those looking for flexibility.

The online platform Zoom provides customers with a free, monthly or annual payment option. It offers complete flexibility, allowing movement from an open plan to a paid plan to unlock additional features. Customers are allowed to downgrade to a free plan again after a month.

Conclusion

Subscription services are a great way for small businesses and charities to achieve multiple goals. You can build stickier relationships with customers which drive long-term relationships to fuel business growth.

The acceptance of subscribing as a way of obtaining goods and services extends beyond traditional consumer markets into the B2B or charity sector, and innovations will fuel continued growth on the business offering.

It is crucial that organisations align with the benefits of subscription services, and pay attention to how they will collect the subscriptions. In essence, care must be taken not to detract from existing commercial relationships with customers or donors.

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