It’s no secret that subscription businesses are hot, but Hitwise’s 2017 whitepaper on the subscription industry measures just how popular they are: The U.S. subscription market grew by 831 percent between April 2014 and April 2017, according to the report.
Clearly, the competition is anything but slim, no matter which audience a subscription targets. And today’s customers aren’t easy to please. They want it all: Simple transactions, free shipping, value and, above all, to belong to something unique.
Once a subscription brand clears those hurdles and gains ground in its market, it’s time to step on the gas. Brands can’t afford to let growth stagnate in today’s competitive environment — they need to learn how to continuously move toward the future.
Getting off the ground
In the first phase of any company’s subscription offering, digital advertising is ideal for testing the waters. At this point, it’s likely that the founding entrepreneur is still handling every aspect of the business, perhaps aided by a small team. During these tests, remember that it’s more important to garner a smaller base of loyal customers than to appeal to everyone.
Knowing when to kick subscription efforts into high gear requires a delicate balance of marketing intel, personnel, technology resources, product offerings and a sense of timing. You need to see measurable success with a statistically significant number of customers before accelerating your investment in the business.
Subscription boxes are popular because they’re fun. Entrepreneurs often start out lovingly packaging the boxes and ensuring that they offer great products. It’s common in the subscription box industry to incentivize people to give these boxes a try, so the first shipment generally provides the best value possible to get new customers interested in receiving the first box.
Overcoming every hurdle
But in the beginning, things can go off the rails quickly. It’s easy for entrepreneurs just starting out to overestimate future demand and overinvest in their inventory, especially when they’re emotionally connected to the business.
Additionally, it’s not uncommon to see low cost per acquisition at the start. This low cost is a function of inexpensive media paired with a pool of interested initial target customers. If the very first offer is a huge success, customer acquisition might seem affordable or even easy, but marketing will ultimately cost more and require more focus. Failure to anticipate the velocity with which the CPA can increase while you are trying to reach a larger or broader audience is a major hurdle.
One of the greatest hurdles entrepreneurs will face with subscription businesses, however, is financing. Lack of funding…
