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Why You Should Try an e-commerce model that is subscription-based (and how to do it)

May 9, 2023

A lot of artists have begun shifting from a one-time payment pricing model towards a subscription-based pricing model. The reason for this is quite simple that the regular payment structure allows them to generate the revenue of recurring.

Look at a successful designer from Sew it! Academy: Mimi Goodwin as an illustration.

A typical one-time sales conversion rate in all sectors is between 2.35 percent to 5.31 percent. That means if you launch an online course with an upfront price arrangement, less than 5percent of the people who view your course would purchase it. Initial revenue might seem to be a bit high initially, but there's no way to determine how much you'll be able to make in the subsequent month -- especially if the traffic to your sales site is intermittent.

If you opt for the subscription model of business instead it is possible that the first payout will be less, however you'll have the ability to forecast how much money you'll make over the next few months. Therefore, instead of trying to find more customers, focus on improving your existing online courses for students.

It improves the learning experience, makes them loyal as well as entices them promote your coursethis, in turn results in a higher number of subscribers.

Find out:

What's a business model of subscription?

Subscription business models are one in which customers must pay a monthly, weekly or annual cost for access to your product or service. Depending on the length of duration they decide to choose the customer can renew their subscription the duration of utilising your service.

Business models that are based on subscriptions benefit both those who create the courses and also customers. If you are a course designer (and the business owner) you are able to leverage the existing relationships with customers to generate predictable revenue. This allows you to keep investing in your business and stops you from over-saturating your customers with your content too frequently. As a student, you'll have the choice to cancel your subscription anytime you like but without paying as much money as it would have been if you'd purchased upfront.

If you offer the right product/service in the right sector, a subscription model could be a lucrative way to generate revenue.

What is a subscription model of business work?

The mechanism behind a subscription business model is straightforward.

Your customers are charged regularly for your product/service and provide customers with the ability to cancel or renew at any time. Your customers decide for how long and how often they want to pay for your offer. If a client keeps renewing their payments (usually by using a credit or debit card), the offer is available to the customer. But once they fail to renew their account, they will be denied the access instantly.

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

The most well-known businesses that bill their clients by subscription include Netflix, Microsoft, and Spotify as well as Microsoft and Spotify. They have enjoyed the advantages of this model for years. It's good to know that the business model doesn't have to be limited to big companies. It can be used for creating your own product too.

Advantages of a recurring business model

A subscription business model has numerous advantages. These are just five:

    Predictable revenue stream    

One of the appealing benefits of a subscription model is the fact that it allows you to predict how much money your business will get each month (or every year). As your customers make payments repeatedly, you'll know how much they'll pay and the exact date they'll have to renew their subscription.

When you factor in your churn percentage when you factor in your churn percentage, you'll have the ability to determine your monthly recurring income (MRR) nearly exact.

Consider this example: Let's say you have a 7% churn rate and 2,500 students enrolling in your program for a fee of $20 per month. Even if there are no new students in the next month, you'll still achieve at a minimum of $40,000.

The longer your course is in place, the better you'll have the ability to estimate the amount of clients you will gain and lose in a given duration of time. This will help you predict your MRR as well as your annual recurring revenue (ARR).

    Improved customer acquisition    

Say, you earn $2,000 per month from your job that's part-time as a barista, and you're looking to upskill by taking an online course in project management. The one you're looking for comes with two pricing options: $1,000/one-time payment and $70/month. Which one of the pricing structures is more suitable for your needs at the moment?

My money's on the monthly subscription payment.

Sometimes, the cost of a product can be too expensive for potential buyers. Breaking down the price into weekly, monthly or annual payments make the product more affordable, and allows potential buyers to include the cost in their budget. This way, more people who can afford to pay per month are likely to convert and sign up into your program.

    Lower customer retention spends    

Because your students pay regularly to attend your class so you do not have to set aside as much cash to cater to them as it would be when your class was based on the basis of a single-time price structure. In addition, since they continue to pay their fees, it's possible to conclude that they are in a permanent relationship with your institution. This makes it less likely to lose them which means you don't need to spend a lot of money to retain them.

    Stronger customer relationships    

With a one-time payment structure, customers pay once for the program and then that's all they pay for. Except for a few who may contact you to tell you of their progress, most people won't communicate with your company much.

Subscription business models, however lets customers have access to you (and the reverse) for the duration of time that is possible. When your customer service team will be available to answer your students' questions and helping them solve their issues and issues, they'll begin to believe in your company's reputation. This contributes greatly to their decision to renew or cancel their subscription.

    Potential for upselling as well as cross-selling    

In 1968, social psychologist Robert Zajonc devised the mere exposure theory. This theory states that when an individual encounters an object, they acquire an attitude towards that stimulus.

In business, this means that the longer your customers are able to access your products and services, the more comfortable you'll be to them. As a result, your customers will be more likely to buy additional services or products that you provide.

Cross-selling is the process of making additional offers available to an existing offer with a price that is higher. As an example, if you were to offer your online course at $25/month, you could add your exclusive membership program to it and then offer it for $35/month.

With upselling, you're convincing current customers to purchase the product at a higher price. If you're selling the course for just $25/month you might promote your similar and higher priced course to your students at 30 dollars per month.

A new prospect may be reluctant to purchase the more expensive alternative right away. But someone who's subscribed to your course for six months is likely to increase their subscription (or purchase the more expensive course) because they know what value you can provide with your program.

How to move towards a subscription model for business

If you're thinking of making use of a subscription-based business structure for your product here are 6 steps you should take:

    Figure out if your business is a good choice for this structure of pricing.    

Prior to establishing the subscription-based pricing system for your company, you need to figure out whether this is the best pricing model for your business. For example, if the product you offer clients require continuous access to for example, an online fitness course or online boot camp -- the subscription model will work great for your business. If it's only a once-off program, it won't be a great match.

If you're certain that the model of subscription-based business will make sense for your product, take another step.

    Set realistic goals for your subscription-based company    

Your goals that you want to achieve through your business will decide the prices and levels you decide to set. When you are deciding on pricing think about what do I want to accomplish with a subscription business model?

Are you looking for faster growth or greater revenue? Or is it better retention of clients and customers?

In addition, your goals guide you in determining prices that'll help you attract your ideal clients However, they'll influence the message of your sales page copy.

    Select a pricing method    

Now, it's time for the exciting part: designing your subscription plans.

If you're only trying the subscription-based pricing model initially, you can keep things easy by establishing either one or two plans. When you've measured your conversions and collect feedback from your customers, you can create more pricing levels that meet their preferences.

To do that, pay attention to the following factors:

  • How you convey the benefits of your product to your clients
  • The industry standards
  • The incentives to price your bundles

For a good idea of where to begin take a look at what your competitors are offering. It is important to tailor your products more appealing to your target audience.

If, for instance, you're giving Pilates to new parents then you can look at the price packages of different Pilates programs on the internet. If you find that the price ranges from $20 per month up to $60 per month, you could use this as your baseline.

Making your packages attractive doesn't necessarily mean pricing your products lower than competition. You could still charge in the same range, but provide slightly higher incentives or other perks. The price could be a bit higher over your competition, if you're offering perks that you don't.

The main point is that your clients should examine your pricing options and think that if they do business with you, they'd get the most value for their money.

    Make it easy for prospective customers to sign up    

The process of signing up for a subscription should be simple and straightforward. Your customer shouldn't to be lost on how to sign up after they visit your website. Also, you don't want them to spend an exasperating 30 - 60 mins navigating your sign-up forms.

Additionally, you should include a link to your pricing page on the menu navigation on your website so visitors can easily find it. The pricing page on your website, the subscription plans and prices should be clearly listed in a language that your target customers will be able to be able to comprehend.

Also, provide ways for subscribers to update their billing details, as well as change or cancel subscription plans.

    Grow your business by using the best technology    

Since the plan is to receive recurring payments from clients, you need to be sure the subscription system works with the right tools to accept and process those payments.

If you frequently deliver a variety of goods to your customers in one go using a bulk delivery service, it can help streamline the delivery process and cut costs.

    Offer exceptional customer service    

In your site, you should provide various ways for potential customers or customers to contact the customer support team if they need help or encounter issues. There are several options for contact, including chatbot and live chat as well as email, and phone calls.

The ease at which people can reach your support team and the quality of support the team provides could determine if they'll renew the subscription or not. So you need to ensure that you're delivering the best quality support possible to your customer base, and establishing relationships with the people they interact with.

Examples of products that use a subscription business model

The model of subscription-based business is utilized in a variety of ways by businesses across several niches. Here are five companies which have succeeded in using a subscription-based pricing structure.

    Online courses - Copy School    

Copy School is a comprehensive online class that instructs students how to write various types of strategically written copy- including copy for websites, social media advertising, and email -to companies. This course is intensive and has resulted in incredible copywriters that work for large corporations and are earning the highest amount of money.

This is why Copy School's price Copy School is expensive -- $3,997 one-time payment for lifetime access (or 1.998 once-off payment for an ad-supported program). But, Copy School has two subscription plans that make it easier for clients to pay for it: $348/month (ad-supported) or $697/month for six months.

    Streaming platforms - Netflix    

At the time it launched on the market, Netflix used to be a rental of DVDs. With the rise of smartphones, broadband internet and smart TVs Netflix rebranded to be the video-on demand (VOD) service. Today, it's a subscription-based streaming platform which allows viewers to stream films and TV shows using internet-connected devices.

Netflix's pricing plans are available from $6.99 up to $19.99. The plan you choose depends on the quality of your video and how many devices a user would like to connect to one account.

    Software-as-a-service platforms -    

    Memberships ClassPass ClassPass    

ClassPass is a membership program that caters to fitness and beauty lovers. By acquiring a ClassPass membership, customers are able to book appointments and classes at the top studios, gyms Salons, spas, and gyms around the world. ClassPass membership packages vary between $19 per month (for eight credits) up to $159/month (for 80 credits). ).

    Physical items - BirchBox    

Birchbox delivers its customers box that contain two to six beauty products every month. The beauty boxes are customized according to a questionnaire that the client takes at beginning. This allows customers to test different products as the exact product is never sent two times.

When a customer discovers a product they like the product, they are able to purchase it from the website of BirchBox. A monthly subscription costs $13 per month and discounts are available for 6-month, 3-month and 12-month subscriptions.

Make more money through a subscription-based business model

When you run a subscription-based business it isn't enough to create random pricing and expect customers to join. It's up to you to do your effort. Your customers will only renew their plans if they are satisfied that they're getting sufficient value for the money they pay.

In order to provide this benefit, you'll need to connect with your people, discuss with the people they're targeting about their issues as well as offer them tried and tested solutions. Only then can you ascribe prices to your product that your audience will happily subscribe for.