Creating Reoccurring Revenue: A Beginner’s Guide to the Subscription Model
If you were around in the 1980’s, you probably remember the “CD of the Month” clubs that were just about everywhere (and absolutely impossible to cancel once you’d started). Monthly subscription services have come a long way since then, and have now infiltrated the food industry. From the wine clubs advertised in every in-flight magazine to the Blue Apron model of providing meal kits to your home, a subscription model is a unique way to convert one-time purchases into reoccurring monthly revenue.
Before talking about how to build a subscription service, let’s understand the market and what a subscription service is. This McKinsey article takes a deep dive into the industry as a whole, not just in F&B. They split the category into three types of subscriptions:
- Replenishment: In this model, you’re replacing the same or a very similar item once the customer runs out. For example, Copper Cow Coffee offers a monthly subscription of their pour-over Vietnamese coffee to office buildings. They have scheduled monthly deliveries so offices always have a full coffee station.
- Curation: Instead of replacing the same item, you provide a varying product or bundle of products on a monthly basis. To keep the coffee theme going, an example of this is Coffee and a Classic. They provide a monthly box that includes a hot beverage, a book, a snack, and other rotating items. They curate the offerings and send a different box each month.
- Access: In the final category, the subscription service gives special or discounted access to a set of products. This typically comes in the form of sample sizes of products, or custom products that are only available through the subscription services themselves. An example in the coffee world is Bean Box. They provide beans from four Seattle coffee roasters each month, but at a size smaller than would be available in stores. This allows the customer to try coffee cheaper than they would otherwise be able to.
Creating a Subscription Service
Now that we’ve talked subscription basics, let’s move on to making one yourself. While Cratejoy’s How to Start a Subscription Box Business in 8 Simple Steps is far from simple, it does give an excellent guide on how to create your subscription. Also, the word ‘box’ can be applied very loosely. Whether you’re a restaurant like Katz’s, mailing pastrami around the country or a daily lunch subscription like MealPal, the thought process is about the same. Cratejoy breaks down the process into these steps:
- Start with a great subscription box idea
- Price your subscription box
- Put together a prototype subscription box
- Begin your prelaunch phase
- Set up your website, marketplace listing, or both
- Start taking orders and ship your subscription boxes
- Success! (And getting the hang of subscription box operations)
- Grow your subscriber base
If the information above has opened your eyes to the possibilities of subscriptions, you should continue the research with Subscribed by Tien Tzuo. This book goes well beyond food, but it also starts you thinking about how subscriptions can change the world.
¡Vive la Revolución de las Suscripciones!