It’s no secret that subscriptions have been a huge success in recent years, with a growth of “more than 300 percent from 2012 to 2018” in the number of subscription businesses. This success has only continued during the Covid-19 pandemic, making subscription models the new go-to for many companies. Despite this success, creating a subscription business isn’t easy, and costly mistakes are still often made.
Here are 5 mistakes that you should make sure to avoid when launching a subscription business:
1. Pricing without the Subscription Model in Mind
Subscription pricing is often more complicated than pricing for the traditional product, and shouldn't just take costs into account. There is a lot more to consider with subscriptions, such as the pricing of upgrades and downgrades, the number of subscription options that you offer (in terms of ‘levels’ or ‘tiers’) and the length of these offerings. Whether you decide to use usage-based billing, tiered pricing, or another pricing model, you need to consider your use case, and how successful this pricing strategy is likely to be.
Check out our recent blog for further guidance on subscription pricing strategies.
2. Loss of Customers Post Free Trial
The ‘Free-Trial’ offering is common for SAAS subscription businesses as a tactic for greater customer acquisition, as it convinces a customer to try a subscription offering that may be seen as a risk to sign up for before trying. For example, some subscription businesses only offer their subscription products as 6-month or yearly sign ups, which would appear as costly for new customers who don’t yet know if the offering is a good fit for their needs. For other subscription businesses, such as those offering physical goods or ‘subscription boxes’, other strategies are often used to incentivise customers to try their products. For example, seasonal discounts, free shipping, or the choice of a ‘bonus’ product can work as a great way to push customers towards their first purchase.
Converting your free-trial customers to paying, loyal customers, or convincing customers to continue to purchase your subscription product after a discount period, however, is another task in itself. Planning your free trial offering and/or discount strategies, such as by comparing them to other offers in the market, is vital before launch in order to understand how you can keep these customers.
3. Failing to Focus on Other Areas of your Business
Offering subscriptions rather than traditional products is a big task, leaving you with a lot to juggle. The amount of time and energy put into perfecting your subscription offering could leave other aspects of your business lacking in quality, which will result in lower customer satisfaction over time.
Customer service, for example, is important for subscription businesses as they may need assistance at any point during their time as a customer. Attracting new customers is more costly than keeping customer retention levels high, which is why your customer experience should be as good as it can be.
4. Lack of Pricing Flexibility
Customers love flexibility, especially when it comes to pricing. All customers have differing needs and wants which is why a range of subscription options, including the opportunity to upgrade or downgrade, skipping a month of a subscription, or even pausing a subscription for a period such as the holiday season, is a great addition to your offerings. Inflexibility in your pricing is likely to reduce customer retention, as customers find themselves stuck with an option that they become unhappy with over time.
Rather than finding yourself with high customer churn rates, which can be particularly costly for your business in the long run, flexible pricing options can allow customers to stay loyal, whilst editing their subscription option as and when they need to.
5. Making a 3-Course Meal out of a Snack
Launching a subscription business is complicated enough as it is without the introduction of further challenges. Making your life easier is important when offering a subscription model as a lot of time will have to be dedicated to your customers and your subscription offerings.
Using manual systems for processes that can be automated is an example of overcomplicating- mistakes are costly, especially when it comes to payments, billing, or accounting, which is why automated systems are a great time and money saver even if it means a longer process of setting up your subscription business.
How Billforward Encourages your Subscription Success:
Billforward caters to a range of pricing strategies so that your subscription business can price its products as best suits your offerings and customer base. We understand that all business offerings are different, which is why we offer a range of flexible options for creating a subscription model that suits you, including invoice customization, the option for a headless approach or a hosted checkout option via our FlexCheck feature, and much more. A flexible billing and subscription management platform is an essential partner in your subscription journey.
Book a demo to see how we can help you meet your subscription goals, or try Billforward free for 30 days!