The Complete Guide to Creating a Subscription Service

July 27, 2022
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Setting up a subscription service can generate recurring revenue, customer loyalty, and a steady stream of business. What is the reality for the likes of Netflix, Spotify, and Dollar Shave Club can be a reality for your online business, too.

In fact, the subscription economy is making its lasting mark in every industry, with expected growth to hit $1.5 trillion by 2025. Knowing how to set up a subscription service will become a crucial practice for any online business of any size.

This post will serve as your guide, teaching you how to create a subscription service, illuminating the challenges that come with that practice, and showcasing the platforms like SamCart that you can use to set up a subscription service and maintain it for years to come.

Step-by-Step Guide to Creating a Subscription Service

In this article, you’ll:

→ Understand the way subscription-based pricing works

→ Unravel the process of identifying a profitable niche

→ Learn to choose a fitting subscription model for your business

→ Discover tools for building your subscription website

→ Find out how to price your subscription services effectively

Step 1: Learn How Subscription-Based Pricing Works

Rather than making a single payment in exchange for a product or service, customers will make recurring payments, often to access a higher volume of content at a lower rate than the upfront purchase price. There are a few different types of subscription models available:

  • Unlimited Subscription: Perhaps the most common subscription form, unlimited subscriptions let customers sign up for a recurring service that continues to renew until the customer cancels.
  • Limited Subscriptions: Often used to create payment plans, limited subscriptions charge recurring payments for a limited amount of time.
  • Free Trials: You can offer a free trial to boost buying confidence by letting interested customers try your subscription for free. Why offer a free trial? Researchers at the University of Washington tested the effectiveness of these promotions. Their study found that 7-day free trials boost customer retention by 6.4% and increase a subscription’s revenue return by 7.91%.
  • Paid Trials: Perhaps you want to give your customers a way to try your services and a discounted rate? A paid trial is the solution you are looking for! The paid trial feature can also work in reverse—letting you set a higher upfront cost before unlocking a lower subscription price. Higher upfront trial fees are often used by businesses to offset set-up costs and onboarding labor.

SamCart supports all of these subscription models to help online sellers create their ideal subscription service. Read on for our 4-step guide to creating a recurring subscription service, or watch below as SamCart Co-Founder, Scott Moran, builds a mock membership subscription for an online course business in the guitar training industry.

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Step 2: Identify Your Niche

Established sellers know having a unique niche is critical. This will help you not only stand out from the competition, but also attract a focused set of potential customers with specific needs and preferences that only a subscription-based model can solve.

But you’re not just identifying a profitable niche – you’re looking to create a niche offering within your own vertical. Subscriptions aren’t new-fangled products, but you want to deliver something nobody else can, so thorough market research is a must. Look for trends, check the competition, and most importantly, understand your target consumers' needs and demands. Use online tools like Google Trends or SimilarWeb for insightful analysis, then drill deep to find a more specific audience that’s looking for solutions.

Step 3: Choose Your Subscription Model

Subscription models vary, from the more-common (like monthly or annual flat-fee) models to more complex or tiered-pricing models. Choosing the right model for your business depends on the nature of your products or services, your target audience, and your business objectives.

Keep in mind that the subscription model you choose should, above all else, offer value to your customers, so use them as a sounding board to understand the best options for their needs.

Step 4: Set Up Your Subscription Website

In order to boost conversions on your subscriptions, it’s important to think about every aspect of your subscription website or sales page. This includes thoughtful design, user-friendly navigation, and reliable security. The content you share on those pages should reflect your brand's identity and purpose while being engaging and relevant for your audience.

In addition to our Subscription services, SamCart’s drag-and-drop sales page builder and suite of checkout-automating features offer the perfect starting point for creating a profitable subscription model.

Keep reading for a how-to on setting up a Subscription in your SamCart account as a user or a free trial member.

Step 5: Pricing Your Subscription Service

To price your subscription service, you have to consider a number of factors: costs, competition, customer base, and business goals, to name a few.

It's not just about covering expenses or gaining profits – you need to price your subscription service to match your customers’ perceived value of your product or service. Here are a few pricing strategies that may be worth considering:

  1. Tiered pricing: Customers can access different subscription plans at different prices, with ascending cost based on the plan and its offerings.
  2. Flat-rate/fixed pricing: Customers pay one flat rate on a recurring basis (weekly, monthly, annually, per use, etc.) to access your subscription-based service or product.
  3. Hybrid pricing: Customers pay a flat rate for access to your subscription-based service or product, with offerings available to add-on for an additional cost.

Step 6: Launching and Marketing Your Subscription Service

Once you identify your niche, create a subscription website or sales page, and accurately price your offering, you’re ready to start acquiring a subscriber base. 

Leveraging social media advertising, influencer marketing, and email marketing can help reach a broader audience. Referral programs, discount codes, and promotional offers can also be highly effective for driving subscriptions.

Subscription businesses thrive on customer retention. Maintaining a positive relationship with your subscribers, offering timely customer service, and consistently delivering quality products and services are key to avoiding large amounts of customer churn.

Even if you do all of these steps effectively, there are challenges you could run into as part of creating a subscription service. We’ll dive into some of those challenges and how you can avoid or overcome them:

Overcoming Subscription Service Challenges

Even the most successful subscription-based products or services run into the occasional challenge. These might include:

→ Customer churn

→ Stopped or lost payments

→ Managing recurrent billing systems

→ Keeping subscribed customers happy

Dealing with customer churn can be a challenge for digital business owners, but much of the process can now be automated:

Dealing with Customer Churn

Customer churn – though it’s naturally unavoidable – can weigh significantly on your business. Not only can churn result in lost revenue, but it can drive up acquisition and other marketing costs.

And, while some customers leave immediately, most exhibit a slow, gradual disengagement. This gives you an opportunity to mitigate that churn by:

Encouraging customer engagement

Facilitate collaborations, cultivate relationships, and promote a sense of community.

Listening to customer feedback

Customers often voice their frustrations before churning. Pay attention, and you’ll have the power to change their minds.

Offering flexible plans

Tailor your service to meet varying customer needs, or offer Pay What You Want pricing to give customers more freedom.

Managing Recurring Billing

Recurring subscription-based products or services, naturally, require recurring billing to pay for those products or services. A good billing system or payments platform can impact the customer experience, which directly affects your revenue stream. 

Recurring billing tools or eCommerce platforms like SamCart that make creating and managing subscriptions a breeze are a must-have for anyone that sells subscription-based offerings. These provide solutions for invoicing, payment processing, and even automatic timely reminders. We even have a new feature, Subscription Completed Trigger, that can automate these tasks once a customer's subscription ends:

Recurring billing is a time-saver and a money-maker, but only if your customers’ payment information is up-to-date and correct. Using a dunning sequence (ours is built in with Subscription Saver) to ping your customers when their payment information needs to be updated or it’s outdated, stolen, or lost ensures you can recoup at least some of what would have otherwise been lost sales.

If all goes well, your business will reap the benefits of subscription-based services and products (of which there are many)!

Understanding the Benefits of a Subscription Service

Subscriptions bring in steady income, build customer loyalty, and provide scalability for your business. Let’s break down some of these – and other – benefits:

Predictable Revenue Stream

Subscription models offer a reliable income stream that can add significantly to your bottom line.

A subscription model makes cash income predictable, as you can know immediately based on the number of subscribers and the cost of your product or service exactly how much you’ll net each month. This stability allows not only for better forecasting but also the ability to invest in resources or projects with more confidence. 

Customer Loyalty and Retention

Repeat business is crucial to profitability and growth, and a subscription model works to develop this loyalty by providing ongoing value to the customers. 

Plus, a subscription service offers businesses a way to continuously engage with their customer base, thereby fostering customer retention. By providing customers with ongoing value, businesses can keep customers from straying to competitors.

Scalability of Subscription Services

A subscription service model allows businesses to scale effectively. As your customer base grows, your revenue increases accordingly. This means that if you want your business to grow, then your subscription service needs to be flexible enough to scale with it.

Create Your Own Subscription Service with SamCart

SamCart’s innovative checkout platform helps online sellers create and manage subscription services. You can use SamCart to sell digital products, subscriptions, memberships, services, online courses, and more. 

Get started with a free trial today to give our Subscription solutions a try, free for 7 days.

Frequently Asked Questions about Subscription Services

What is a Subscription Service?

A subscription service involves charging customers a periodic fee, generally monthly or annually, for access to a product or service. In the past, we associated subscriptions primarily with publications such as newspapers or magazines. Fast forward, and subscriptions have taken on a new life, allowing customers to rent, power up their entertainment stack, or make regular, scheduled purchases of everyday items.

But subscription services aren't limited to digital platforms or consumer goods. They also answer the needs of various industries, from software and cloud storage services to personal care packages and gourmet meal deliveries. Essentially, this model is a part of our daily lives. It could be your monthly gym membership or, more recently, your work from home package.

How Profitable are Subscription Services?

Subscription services, when efficiently managed, can lead to a steady cultivation of long-term customer relationships, resulting in consistent revenue streams and improved profit margins.  

However, the critical aspect driving profitability is the retention rate. The longer a customer stays, the more profitable it becomes to serve them, offsetting the initial customer acquisition costs.

How Should You Handle Customer Service in Subscription Businesses?

Subscription services rest on the promises of reliability and convenience. Thus, customer service plays a pivotal role in fulfilling these promises and ensuring customer satisfaction. Poor service often means a quicker churn and a cascading negative effect on profits. On the flip side, an excellent customer support experience can drive loyalty and customer retention, boosting the overall profitability and reputation. 

Subscriptions services, simply put, are about continuous value exchange. From understanding its essence, profitability potential, to the monumental role of customer service, you're now well-equipped with the foundational knowledge needed. Armed with this, shaping and refining your subscription business plan becomes empowering and a bit less daunting.