How Data Can Help You Grow Your Subscription or Membership
When I say the words “subscription” or “membership”, what comes to mind first? I’m guessing Netflix, your gym membership, or maybe a monthly subscription box that delivers health and beauty products to your door.
Subscription-based businesses are becoming more popular by the day. If you run a subscription or membership, or you’re hoping to launch one for your business, you’ve got great timing.
Why are subscriptions and memberships so beneficial for small business owners? And how can you build or scale one successfully? The answer is in your data. That’s what we’ll dive into in the blog below!
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How a membership or subscription business model works
The subscription-based business model is pretty simple. Users pay a fixed amount monthly or yearly in exchange for an ongoing service.
Memberships are similar in that they grant access to a group or content on a monthly, quarterly, or yearly basis. This model is popular in the online information product space. Prices can range from less than $10 per month to hundreds or thousands of dollars monthly.
Netflix, Hulu, or Disney+ might’ve been your first thought, but subscriptions are no longer limited to streaming media these days. You have plant subscriptions. Custom clothing deliveries. Wine-of-the-month clubs. The list goes on and on!
And of course, you have subscriptions and memberships for your business as well. Project management software, internet service, website hosting and domain subscriptions, annual memberships to professional organizations…get the idea?
The pros and cons of having a subscription or membership
Why are subscription-based businesses booming, though?
The pandemic certainly played a role when we were all quarantined in our homes. Everything we needed — entertainment, groceries, work from home tools, fitness classes — was available to us after signing up for a membership or a subscription.
Here’s just how popular subscriptions are today. (I can’t resist an opportunity to share data!)
The typical consumer in the United States now has two to three subscriptions. Plus, a financial services firm predicted that “the subscription economy” will grow to $1.5 trillion by 2025. That’s more than double the $650 billion it’s estimated to be worth now.
Benefits
Let’s think about how this business model could benefit you.
Subscriptions and memberships bring in recurring revenue, letting you build strong, long-term relationships with your customers and serve them in ways that may not be possible with a one-off pricing model.
You also have more opportunities to nurture leads or upsell. It’s easier to predict customer behaviour (which we’ll talk about in a moment), budget for your business, forecast sales, or maintain inventory as well.
Challenges
A subscription-based business or membership is not perfect, however. The subscription economy is booming, which means subscriptions and memberships are in demand, but that also means you’ll likely have stiff competition, even if you’re serving a small niche or industry.
Maintaining customer satisfaction can be challenging, too. Customers already expect high-quality service, and those who stick with your subscription might expect new products, better services, or content regularly.
And finally, even though these offerings are becoming more common, some people are experiencing subscription fatigue. With so many options, people may choose to cancel those that don’t seem like they’re worth the cost. So, how can you take advantage of the benefits of a subscription or membership business model? How can you meet these challenges head on? By using your business data.
1. Learn all about typical customer behaviour
The first step in launching or growing your subscription or membership is to learn all you can about customer behaviour. I highly recommend outlining what you want to learn first so you can gather the relevant data that will help you answer your questions.
Not sure what data to analyze? In my experience working with membership and subscription-based businesses, some of the most helpful data we’ve compiled and analyzed includes information like:
- Total monthly revenue, plus revenue broken down by subscription or membership level.
- The number of months the average customer stays active, and after which month they tend to cancel. This is such a crucial number! For example, if you know that you lose a large percentage of your people after 4 monthly payments, you can dig into why that’s happening. This number also enables you to get an accurate picture of your customer lifetime value so you understand what a reasonable customer acquisition cost would be.
- Comparing how free trial vs. low-priced paid trials impact longevity in the subscription or membership, as well as the customer’s life-time value. Honing in on the best on-ramp into your product can have a huge impact on your retention rates!
You have a lot of data at your fingertips! Identifying your questions first and then determining how to best find your answers will help you analyze your numbers more effectively and stay focused!
2. Deliver a curated experience
Once you’ve learned about your customers and how your subscription or membership is currently performing (if you already have one), you want to ensure you’re delivering a curated, one-of-a-kind experience.
Using your customer’s first name in marketing emails isn’t enough anymore! You need a strategy that aligns with your brand goals to provide an experience that will keep your members or subscribers around.
Here’s an example. Netflix will recommend you content you think you’ll like based on what you watch and what you rate as a “thumbs up.” This recommended content shows up in a separate section whenever you browse the app. That’s just one small way Netflix uses its knowledge of your preferences and behaviour to personalize your experience.
How you deliver a curated experience depends on your business and brand, of course. We can’t all base our strategies off of Netflix’s content recommendations! But no matter what industry you’re in, however, you can use your data to your benefit to provide a curated experience.
Look at data such as:
- Patterns in customer behavior
- Patterns in new sign-ups or cancellations
- Source of site traffic
- Churn rate
- Upgrades or downgrades
Most importantly, look at your direct customer feedback!
Whether it’s in survey results, customer support requests, or social media messages, make sure you understand what your customers want…or don’t want. There’s a goldmine of information in your customer feedback. Take advantage of it!
3. Upsell and cross-sell when you can
Finally, I encourage you to look for opportunities to upsell and cross-sell existing members or subscribers. It can cost five times as much to attract a new customer than to keep an existing one, so nurturing the relationships you have with your current customers can make a big difference for your business!
Let’s say you have two or more options for your subscription or membership. A basic plan and a premium plan, or a monthly, quarterly, and annual option. A simple way to grow your revenue is to persuade customers to upgrade their plans.
You might use A/B testing and the customer behaviour data you already have to invite upgrades. Send upsell emails to different segments of your email list. Experiment with sending your emails on different days and times.
Or, play with exclusive discounts for your current customers to see which offer attracts the most upgrades. Try a free month of membership, a percentage off an annual plan, or free exclusive content as a bonus. You might be surprised at what performs best!
As for cross-selling, look for patterns in your customer purchase histories. Do your customers typically buy certain products together? There are opportunities to cross-sell each one…or you might even sell them in a bundle together.
Alternatively, you might see that more of your customers sign up for your subscription or membership after they purchase product A than after product B. With that in mind, you can set up email sequences after the purchase of product A that encourages them to eventually buy something else.
Use your business data to grow your subscription or membership
You have so much data at your fingertips that can help you grow your subscription or membership-based business.
I recommend first learning everything you can about your customers through your data. It’s essential that you understand where your business is right now so you can grow, scale, and reach your goals. Look at behaviour patterns, churn, revenue, signups and cancellations…that’s just the start of it all!
To increase your revenue and grow subscriber or membership numbers, you have to deliver an amazing, high-quality experience that sets you apart from your competition. Look for opportunities to upsell and cross-sell, too. It’s cheaper and more effective to nurture your existing customers than to convert a brand new one.
There’s a membership or subscription for anything and everything nowadays, but the business model isn’t going anywhere soon! You have a chance to join the fun and scale your business with a subscription or membership. Just remember to use your data to your advantage!
