Lowering Overhead: Subscription Products vs. Subscription Services

A subscription platform can be successful for a wide variety of businesses, but how to keep costs low will depend on the product or service offered. Netflix and a subscription snack food box need to utilize different tactics to lower overhead. Establishing a program plan before signing up the first subscription is vital to long-term success. Look to existing successful programs for tips on how to keep costs low and begin a successful subscription business.

Service Updates

A company offering a recurring service has an easier job at creating subscription billing programs. Content updates are the key to attracting and retaining subscribers.

Netflix is a prime example of this model. For a monthly subscription, customers get access to either DVD rentals or instant streaming — or both. The streaming service is more profitable for Netflix, due to the lack of physical product, and the company has promoted instant subscriptions by changing up the movies and shows offered. Content cycles on and off of Netflix, which means that customers need to watch a favorite program before it goes away. And the fresh content keeps customers coming back for more.

Tailored Products

Product-based companies have a tougher brainstorming period than services. The presence of physical products requires careful planning to keep inventory down and subscription retention high.

NatureBox is a subscription snack box. Each month, subscribers are sent a box of five or six full-sized snacks. Choosing food for others is dangerous due to a wide variety of preferences — and food allergies — so NatureBox allows customers to design the box ahead of shipment. The company can still limit the number of products offered to keep down inventory but also deliver exactly what a customer wants. NatureBox can use Netflix’s model of cycling by doing away with unpopular products and promoting seasonal or limited-time snack options.

Combo Approach

Companies with both services and products can create a cross-promotion plan without alienating customers by seeming too pushy. One aspect of the business will usually be in the forefront while the other is an optional or supplemental aspect. ProWritingAid is an advanced online grammar and spell checker that can act as proofreader for text pasted into the interface. While the scan offered will help most writers edit a work, ProWritingAid offers another option for those who need more help. Users can press a button and get a price quote on having a human proofreader work on the text. Many users won’t use that option, but by using freelance proofreaders rather than full-time employees, ProWritingAid could keep its overhead low while picking up the occasional service customer.

Setting Up Subscriptions

Billing provided by a software as a service, or SaaS, places the day-to-day payment maintenance in the hands of a capable third-party processor. This leaves the subscription company more time to develop programs and cycle through new products or content.

Not sure where to start when it comes to finding a subscription billing company that fits your needs? Download our free Six Must-Haves guide, which covers the features you need in a subscription billing service, why you need them, and comes with a bonus feature checklist: