How the subscription sales model works
A classic online store is a catalog where the customer selects the desired products, pays for them and waits for delivery. This is what he does every time he wants to buy something.
But there are some products that are bought regularly. For example, socks, razors, diapers, guitar strings, pet food, and so on. The same thing, in the same volume, with the same frequency. In this case, the subscription sales model works well.
How it works
The customer buys a subscription for a long period: six months brazil phone number data a year – for the right to receive goods with delivery “on schedule”.
Pays for the entire period at once, all batches of goods.
Receives the goods with home delivery with a certain frequency: once a month, once a week, depending on the product.
A subscription product is usually cheaper than a simple product in the catalog – the seller negotiates with the supplier on a reduced price, making a profit on the volume and guaranteed “payment in advance” of a large batch of goods.
The customer gets a good price and regular deliveries of a product that is also needed with a certain frequency.
Are there certain types of companies that this model is more suitable for than others? How can companies use this to increase profits? How do subscription customers differ from regular customers in terms of long-term profitability?
Of course, the subscription
model itself is nothing new. We subscribe to newspapers and magazines, TV channels, buy memberships to fitness clubs, and so on. But the number of products sold under this model is growing. And this format is profitable for both the buyer and the seller.
Customers get their favorite product without leaving home. In an environment where employment is constantly growing, it is not surprising that this sales model is gaining momentum.
The figure below shows the LTV (total profit from a customer over his or her life cycle) ratio of subscription customers and regular customers (by transactions), the sample is retailers that work with both of these visitors to right information sales models. A value above the green line indicates that subscription customers of these companies have a higher LTV than regular customers.
Ratio of LTV for subscription customers and regular customers
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Here and below: Compass data
Stores with an average basket value of up to $25 have kuwait data LTV that is 1.78 times higher for “subscribers”. Similarly, stores with an average check of $25-50 and $50-75 are in a better position. Stores with an average check exceeding $75 have a higher LTV for regular customers than for subscription customers.