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DEVELOPING AND INSTALLING A NEW SUBSCRIPTION MODEL FROM SCRATCH

Our Subscription Business Expert Consultants Help You Do It All Right

Developing & installing a highly profitable subscription model is best accomplished by expertise equipped to help you do all of the relevant parts as right as possible. Doing it right means avoiding wasteful expenses of time & money while setting up many parts to work together toward maximizing revenues & profitability. Those parts include many details of ideal business structure, product development, website development, legal matters, marketing, sales, planning & execution, accounting, infrastructure and so on. The Big Innovations team are expert at narrowly targeting markets of buyers

Our team has extraordinary strategic & nitty gritty experience in some of the best run subscription models in the world. For example, we are expert at helping you:

  • minimize cost of acquisition while maximizing revenue-per-subscriber & lifetime value,
  • correctly package your idea(s) as a wow subscription product or service,
  • put various Internet technologies together to simplify the demands on your business while maximizing subscriber benefits,
  • construct crucial website layers to help you maximize lead capture, customer conversion & retention, cross selling & upselling, lead qualifying, etc,
  • create your launch marketing plan and impressive marketing creative to motivate the targeted market to act,
  • identify cost-efficient sources of customers predisposed to buying your kind of offerings via subscription,
  • test into new sources of potential subscribers via low-cost means,
  • implement well-proven retention strategies to help you retain as many subscribers as possible,
  • install a best-in-class product development model to keep a steady stream of new offerings in your pipeline,
  • consult on best practices and insider innovations to help you with all of the rest so you do it all right,
  • Etc. (there are many more)

Could you try to do all of this on your own? Yes. But the reason to hire talent like ours is for the expertise to do it right which also means the experience to help you avoid making costly mistakes from best-guess approaches. In all new business thrusts you either hire "been there, done that" help to maximize your chances of success or take best guesses and rely on hope that it will work out to your satisfaction. With so many crucial variables in this particular kind of strategic thrust you are best served by engaging experienced talent rather than gambling too much on hope. We can help you both save lots of money (by avoiding common mistakes) and make big money by doing it all right.

Crucial Subscription & Membership Business Model Metrics To Monitor

In creating a business model one should always identify a list of crucial metrics to help manage the business. There are many vital variables to be tracked by the subscription business entrepreneur. For example,

  • Newly acquired subscribers: we often simplify this to the term "newstarts" as it represents how many brand new subscribers have been added (started a subscription) in the latest subscription period. Many companies measure subscription periods in monthly terms so this is often answering the question: how many new subscribers have joined us in the last month?
  • Cost of acquisition: average cost of acquiring each new subscriber across all mediums. Novices almost always imagine this to be considerably less than reality. Established enterprises often spend up to all of this to "buy" a new subscriber, knowing the real money is in the second transaction be that next year's renewal or additional product or service sales made to new subscribers this year.
  • Revenue-per-subscriber: this is average annual revenue realized from each subscriber which is the key metric to help you think about how much each subscriber is worth to your business in the short term.
  • Lifetime value: this is usually an estimation of the total average revenue you can make from each subscriber while they remain a subscriber though some companies use this term as a calculation of total revenue made from each subscriber to date. The former estimates value based on the future while the latter works only from today backwards.
  • 90, 60, 30 days to expiration: these 3 numbers are primarily used to focus final efforts on renewal campaigns as a good subscription model puts great effort into keeping as many customers as possible. Established enterprises know it is cheaper to keep a customer than to replace them with a new one so they give great focus toward renewing every single subscriber.
  • Active subscriber base: this represents your total number of active (currently paid) subscribers. This is sometimes more formally called "active paid subscriber base" to distinguish it from lists of names you may have in your database who haven't actually purchased anything (who are often called leads).
  • Cancels: the pool of people who purchased something but have since canceled their subscription.
  • Expires: the pool of people who have been subscribers but have let their subscription lapse. Expireds didn't cancel- they chose not to renew.
  • Lead database: the number of unique people in your database who haven't actually purchased anything. For example, a website might encourage visitors to register for something(s) in hopes of being able to promote those people in other ways to convert them into paying subscribers. These are better than unknown prospects (unique website visitors) because you have some contact information (and thus a better chance at selling them something).
  • Etc. (the above is a good sampling of important subscription business metrics but there are a number of others we can also share with you)

These kinds of metrics are the numbers that gauge the relative health of your subscription business. They quickly answer questions about whether it is trending in the right direction at any point in time. Growth in metrics like newstart quantities, average revenue-per-subscriber and active subscriber base will objectively reveal such answers at-a-glance. If the trends are moving in the wrong direction metrics like these can flag a problem early giving you maximum time to dig in and correct any weaknesses to turn things around.

Applications of Membership & Subscription Business Metrics

In applying the above metrics, the subscription model entrepreneur should be concerned about all facets of the relationship with their customers. You'll want to:

  • observe fairly steady growth in newstarts as they are both current revenues as well as your best upsell and cross-selling targets. They are also next year's very lucrative renewals (without a repeat of the typically heavy cost to acquire them). You have to do whatever you can to stay close to your subscribers so that you can maintain an intimate understanding of their ever-evolving wants & needs. A good mechanism for objectively gauging their experience with your company can help you intelligently grow your business. A documented model that lays out exactly what happens to each newstart is essential in a professionally-run subscription business. It should clearly present 2 things: how you motivate subscribers to 1) stick with you, and 2) buy other offerings from you.
  • NYSE building front work diligently to grow average revenue-per-subscriber ideally to several times your cost of acquisition to make each new subscriber very profitable in their first year. This will often involve making smart decisions about new product development and ongoing marketing creative so that you have a steady stream of new things to offer them as well as fresh, new ways to motivate them to give you additional revenues. So much of subscription model success is about the subsequent transactions you win from subscribers AFTER the first one. We are generally able to help companies achieve 3-6+ times their initial cost of acquisition with smart upsell & cross-selling solutions.

    One (lone) product models are often capped (upside revenue) models. Similarly, models that try to use the same old, tired marketing over and over are boring to a high opportunity cost fault. Good, fast growth models have new products and new messaging steadily developed to both woo prospects to become new subscribers and motivate a higher quality of customer as measured by revenue-per-subscriber.
  • make every effort to keep as many subscribers as possible. A common metaphor used in this business model is the leaky bucket. Some companies get overly focused on pouring new customers into the top of the bucket and ignore the growing holes in the bottom. There always comes a point when even the biggest marketing budget cannot pour enough new buyers into the top to compensate for the volume of subscribers being leaked away.

    Efforts to save every sale is of paramount importance as it is much cheaper to keep a subscriber than replace them. Some holes cannot be plugged (for instance, when a subscriber dies there is nothing you can do to motivate them to remain a subscriber). However, many leaky buckets have holes you can close or significantly shrink by simply choosing to do so (though it is always surprising how often even very successful subscription business entrepreneurs don't maximize this particular opportunity).

    Key is doing the work to understand what motivates cancels & expires. Is it product quality? Is it an expectation gap between what the marketing promised and what they actually get? Is it a competition-driven issue? Packaging? Pricing? Delivery? Etc. Great, ongoing market research- like our collective brilliance model- can help you do this exceptionally well.
  • establish a marketing model that consistently casts new lines in fresh ponds in search of new sources of profitable buyers. Each of those lines should be baited with some fresh creative being tested against established (proven) "control" creative. The biggest finds will only be realized if most of this work is considered a failed test. What???

    You can't get big returns without taking some bigger risks. No one finds massive pools of new business without suffering through some failures along the way. If you demand failure-free prospecting in your business you are unlikely to find any major new sources of subscribers (those in charge of your prospecting won't be able to take the necessary chances). Had Edison insisted a lone try at the light bulb succeed you might be reading this on a piece of parchment via candle light. Too many entrepreneurs make the mistake of expecting every marketing test to be a winner; even world class marketers with relatively endless resources and deeper pockets than your company (like P&G and Apple) roll out flops some of the time. Reward requires risk. Big rewards requires bigger risks.
  • You want to keep up with trends and many other factors that can affect your prospect pool. Your lead streams are tomorrow's paying subscribers- the better you can understand them, the easier it becomes to motivate some of them to become newstarts. All subscription models must evolve with the times, changing trends and the overall market. Too many models get locked into old ways of doing things which always limits their full potential to how well something that worked 5, 10 or 20+ years ago can still yield today. An eager willingness to change with the times is crucial to growing- instead of just trying to maintain- this kind of business.

    When Netflix launched it was a DVD subscription business; now an ever-increasing amount of its revenue is attributed to digital streaming. Eventually, the DVD rental business will decline away to generating next to nothing in subscriber revenues. If Netflix clung to what worked back at its beginning, it would eventually work its way right out of business. Regularly evolve and you can prosper. Clinging to the old ways- even if they were once THE ways- leads to stagnation & decline. If you think you may have been clinging, we can help you step back out front.
  • Etc. (there are many more than this small sampling)

First Year Subscription Business Pains Give Way to Second Year Wow Growth

In general, the first year of a new startup is the hardest. Why?

  • All the business establishment fundamentals must be created- and paid for- from scratch. This includes product development, website development, branding, marketing plans & promotional creative, etc. (all the things just about any business must assemble & do before it can go to market).
  • You'll have to invest some cash in your business if you want to proactively promote good lists of prospective subscribers (and you need to market proactively if you want to grow it quickly).
  • You have no upsell or renewal revenues from existing customers (because you have no existing customers yet).
  • You have an unoptimized business model (because it's brand new) so typical industry costs will probably be a bit higher and typical industry ROIs will probably be a bit lower in year one. Only time and measured testing through quality marketing execution gets any new model optimized to industry norms.
  • Your website is not indexed or ranked for a chunk of the year. It's almost (search engine) invisible to global prospects that would be interested in your offerings. Imagine opening a retail store in the middle of nowhere and not telling anyone how to find it. That's a good analogy of how it is until the majors index your site. There are ways to accelerate this visibility; otherwise, it can sometimes take several months before even some of the majors index your website.
  • Etc. (there are many more)

Things evolve for the (much) better by year 2+...

  • All the business establishment stuff is history; you don't have to create the business fundamentals again in year two.
  • You should have a building database(s) of leads and (paid) subscribers which can be leveraged to reduce list rental expenses. More simply, you can do some list swaps instead of having to pay all cash for good lead sources. You can even make surprisingly good money by discreetly renting your list.
  • You should have producing upsell and renewal models... both of which involve much less expense than new acquisition marketing. They yield very high-margin cash (some of which you might use to further ramp up new acquisition).
  • After testing and measuring through several campaigns and developing a good marketing rhythm, your marketing model should be considerably more optimized than where it started. By this point, you should also have a fairly strong base of more proven promotional creative and be well aware of a great selection of lists to promote again. All this really adds to your profit potential: optimization expands your margins.
  • Your well-established website should be fully indexed and ranked on all of the major search engines providing a no-cost flow of interested prospects and customers.
  • Etc.

Basically, many very lucrative business lifts begin to show up later in year one. Many of these continue to improve throughout year two+ as your knowledge grows and the various models are further refined toward optimal performance.

Again, Big Innovations principals are deeply experienced in all facets of subscription business models at both the strategic and nitty gritty levels. We doubt you could find any other subscription model consulting help with a richer base of knowledge on how to structure a new subscription business startup in the best possible way. Contact us for a free consultation.




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