A Subscription or Membership Model is a Simple Opportunity in Business or Sales Leverage
- This is page 3 of a 3-part article. If you landed here first, you might want to start on page one.
HIRE EXPERIENCED SUBSCRIPTION BUSINESS EXPERTS TO START YOUR RECURRING REVENUE ENGINES
Creating and installing a best-in-class subscription model is definitely an exercise for the experienced. If you lack that experience, you need to engage talent that knows subscription models inside & out... ideally professionals who have worked in high-performing models and very challenging environments for many years. Your subscription model architects should be masters of both the strategic and the nitty gritty. Capable subscription model consultants can help you rev up a successful business ASAP with minimal costs of cash & time. In short...
Engaging experienced professionals helps you race to lucrative, recurring profit.
Whether you plan to go it alone or use knowledgeable expertise, the optimal way to start is summarized (and over-simplified) in 3 key initiatives:
- Target a specific niche then develop the most mainstream-appealing product or service to dazzle that niche. This should involve incorporating "best of" features & benefits driven by customer research and competitor analysis, formalized into a tangible, final, "WOW!" form. The new product should be designed to be as broadly appealing as possible (aka "wide funnel")... yet include narrow detail elements that best address specific wants & needs of a pre-defined target market. Trying to stand out from the crowd with a quality product is always an important key to maximizing sales and subscriber retention. Using OBJECTIVE customer & competitor research is the best way to do this right. If you ask prospective buyers the right way(s)... and if you leverage what your market teaches you in incorporating "best of" elements from competitors... the resulting creation(s) almost MUST be a winner.
- Develop a bundle of timeless, quality marketing creative within an impressive website to effectively showcase these "best of" features. More simply, once you've built the better mousetrap (step 1), you capitalize on that work by promoting it as such. Prospects need to be able to easily see that your product is the standout offering in its class- THE crucial task of exceptional website promotional content. Metaphorically, your website & website promotional content become a "baited trap" for all of your "prey." It must be GREAT!
- Once that website is doing a good job of converting casual visitors to buyers, the next initiative is to jack up the volume of prospects flowing into that site. If a website gets 100K unique visitors and the "step 2" creative can move 3% of them to subscribe, you add 3K new paying subscribers. But if you execute some proactive, highly-targeted marketing such that you increase those inflows to 500K or 1M, that same baited trap can then add 15K or 30K new paying subscribers. 3K times your ARPS can be good. 15K-30K times your ARPS can be "WOW!"
These 3 steps are how many subscription business leaders drive initial, quick and significant growth. Expertly-crafted marketing (#3) moves relevant & narrowly-targeted prospects to discover your super-sharp website & product (#2)... made (obviously) "super sharp" by outstanding intelligence and effort in #1.
This subscriber "funnel" should be regularly fed by round after round of FRESH marketing campaigns (#3), perhaps leveraging some new revenue inflows to scale up each marketing campaign larger & larger. Do all of this exceedingly well and the results can dazzle.
THE GREAT LEVERAGE IN SUBSCRIPTION & MEMBERSHIP MODELS
If you seek to start this kind of business from scratch, (a number like) 3K-5K subscribers paying you your estimated ARPS may feel like hitting the ground running. For example, if you believe that whatever you produce could sell for- say- $250 per year, 3K-5K times $250 equals annual revenue of $750K-$1.25M. Some new subscription entrepreneurs are quite happy with that kind of early success. Of course, nothing limits you to $250 per year or only 3K-5K subscribers. What if your ARPS is $500/yr to 10K subscribers? Or $2,500/yr and 25K subscribers?
Your ultimate subscription growth potential is a multiple of volume of subscribers and ARPS... how many subscribers your business can acquire and how much each will pay for their subscription(s). This table summarizes some generally popular B2C ARPS levels for a variety of subscription businesses and subscriber counts...
| B2C SUBSCRIPTION REVENUE | |||||
| SUBSCRIBER QUANTITY | $75 ARPS |
$180 ARPS |
$350 ARPS |
$500 ARPS |
$750 ARPS |
|---|---|---|---|---|---|
| 10K | $750K | $1.8M | $3.5M | $5.0M | $7.5M |
| 25K | $1.8M | $4.5M | $8.7M | $12.5M | $18.7M |
| 50K | $3.5M | $9.0M | $17.5M | $25.0M | $37.5M |
| 100K | $7.5M | $18.0M | $35.0M | $50.0M | $75.0M |
| 250K | $18.7M | $45.0M | $87.5M | $125.0M | $187.5M |
...and in bigger models...
| LARGER MEMBERSHIPS | |||||
| SUBSCRIBER QUANTITY | $24 ARPS |
$60 ARPS |
$100 ARPS |
$250 ARPS |
$500 ARPS |
|---|---|---|---|---|---|
| 500K | $12M | $30M | $50M | $125M | $250M |
| 2M | $48M | $120M | $200M | $500M | $1B |
| 5M | $120M | $300M | $500M | $1.2B | $2.5B |
| 25M | $600M | $1.5B | $2.5B | $6.2B | $12.5B |
| 75M | $1.8B | $4.5B | $7.5B | $18.7B | $37.5B |
Where do you get 10K or more subscribers? 10K subscribers is an acquisition goal of only about 834 per month if you want that kind of revenue in only one year (less if you have a longer timetable). Hire talent like our own and we can bring proven acquisition models that have yielded new subscriber volume of better than 2,500 PER MONTH at an ARPS of better than $550 per year. Desire more than 2,500 per month?
Marketing budget is much of what sets the pace of acquisition. Marketing budget + experienced marketing talent can work wonders for your business.
Whether you are targeting 3K or 3M or 300M subscribers, the fundamentals of how to achieve- and rapidly grow- this kind of business are the same. What works at the micro level can generally be leveraged to work just as well at the macro. It's typically a matter of "penny pinching" testing at the micro level to get a campaign or tactic working profitably, then applying cash + time + energy to scale it up. For a startup, this norm fits nicely, as it is very much (relatively cheap) testing your way into successful growth model.
Cash is the ultimate fuel for rapidly growing subscription models. Time + energy represent the application of that cash to make it happen. Each profitable test can contribute to
good subscription model growth when cash + time + energy are increasingly applied by experienced professionals.
Can you grow a subscription model on your own with little-to-no cash? Yes, but such growth is typically much SLOWER. WITH a marketing budget, you can rapidly buy your way to target volumes of subscribers. WITHOUT a budget, all of your growth must be realized from only time & energy, which usually translates into you having to expend a WHOLE LOT of energy (working really hard) over a LONG period of time (years) to grow the business up to a reasonable level of success.
Nevertheless, many subscription businesses start with little-to-no budget. The Internet is heavily populated with such businesses. Most spend many years trying to reach revenue of even $200K per year. We've been approached by a number of companies that have been at it for a decade or more without growing to even $1M per year.
Not directly addressing "it takes money to make money" is the most common reason why sizable growth is hindered.
Even Apple Inc. spends more than $1 BILLION dollars each year marketing products that pretty much everyone already knows very well. Why do they do that? Not to waste a billion dollars each year.
Does that mean you need a billion dollars for marketing? Of course not. You're not Apple Inc. The point is more about the following section title...
MARKETING DRIVES THE PACE OF BUSINESS GROWTH
No marketing typically means no growth... or trickle slow growth at best. Think of a marketing budget as the fuel for your car. In lieu of fuel, you can work hard pushing that car all over town. Or you can spend some money on fuel to get to your destination(s) faster.
Do you ever see marketing for commonplace products & services... even from brands you already know very well? Oil changes? Haircuts? Food? Soda? Weight Loss? Clothes? Home Improvement? Gyms? Toothpaste? Lotto? Gasoline? Even Water?
Of course you do! Why are commoditized products & services from brands everyone probably knows spending ANY money on marketing? Because that works better than NOT spending money on marketing. Visibility drives business. Opting to be relatively invisible NEVER works as well.
So many startup entrepreneurs ignore the marketing piece... either because they don't have the spare cash or they've deluded themselves to believe it works like it does in the movies: just open the doors and an overwhelming volume of orders pour in.
Movies need the plot to advance quickly. The Starship Enterprise or the Millennium Falcon need to move between planets at warp speeds, else those movies become boring if we have to watch for decades before Captain Kirk or Han Solo travel from only one planet to the next one. Businesses that don't use marketing are like those ships MINUS their warp drives.
If the issue is cash, there are plenty of ways to raise marketing funds for sound business concepts. Pretty much every "rags to riches" startup story had/has financing/backing... be that self-funding (otherwise known as investing in yourself), angel investors or using debt.
Dig into the startup story of ANY company that has risen to big successes in your lifetime and their origins will almost certainly involve funding sources. It is very difficult to find a big modern success built upon organic growth alone. It DOES take money to make money... unless your money dreams are small and/or you have years or decades of patience to very slowly progress from this planet to the next one sans warp drive.
5 IMPORTANT TRUTHS FOR SUBSCRIPTION ENTREPRENEURS
What drives growth? For those wanting to get into this space (or those wanting to push the accelerator for something already established) here's 5 important truths for subscription businesses...
- Like any business, investment or endeavor, it's very challenging to create great profit from nothing and no risk. The entrepreneurs who can use cash to help them grow this kind of company tend to realize their big picture objectives much sooner- and to a much higher level- than those who choose to utilize little-to-no budget. Trying to shift the risk to others (partnering, affiliates, etc) will also shift the upside potential to those others. More simply, those who take the bulk of the risk harvest the bulk of the rewards. This is a universal truth in all entrepreneurial endeavors and this particular kind of business is no different.
- In general, this is NOT a "build a better mousetrap and the world will beat a path to your door" proposition. While we certainly endorse developing the best possible product, it takes an aggressive, PROACTIVE marketing model to go out and woo new subscribers in volume from established competitors. You should not fool yourself into believing that your product is so superior to all others that you won't need to do anything more than hang an e-shingle out on the world wide web. And you can't be passive about the marketing hoping subscribers seek you out. In both scenarios, a few subscribers will come from nowhere at no expense... but never in volumes to make you feel very successful. Quick & big subscription model success involves you having to go get them. We are expert at this. Use us to help you do it right.
- Trying to put all of the pieces together on your own is likely to waste much money & time. Hire subscription model experts like us to shortcut the path to success. In most subscription models, there are logical next steps that will completely fail and illogical thrusts that will deliver big gains. An experienced guide knows the correct path because we've "been there and done that" before. The pure DIY-ers have to guess & hope... inevitably guessing wrong on several-to-many key parts that can take their business way off its optimal track. There's no reason to make such costly mistakes.
- Unless your subscription product(s) is likely to generate a massive number of followers (think tens of millions as a good general target), a model that keys its revenue on advertising dollars is unlikely to yield anywhere near expectations. Most good subscription businesses consider advertising as ancillary- NOT PRIMARY- revenue. It's much harder than novices realize to make a lucrative subscription business around advertising revenue alone. For planning purposes, put much mindshare on SELLING your offering as the main source of revenue. An ad model might be a way to add some additional revenue. But for the vast majority of newer businesses, it is NOT going to deliver close to what is often imagined.
- Odds are exceedingly high that YOU are NOT your market. Building a product to your own tastes exactly how you would like it might limit your total market size to as little as one: just you. A very common mistake made by startups is believing that customer & competitor research is not important. Successful business launches rarely work when the market research is based on how ONE person thinks the product should be. Instead, a great deal of good work is in packaging expertise or ideas for the masses, which is best driven by good market research. We can show you how to get your impending buyers to explicitly tell you what they want to buy from you... then how to use that base of valuable market intelligence to layer competitive innovations into your mix too. Building on customer intelligence AND competitive analysis can yield a best-in-class offering(s). Buyers covet greatness. Be great!
HOW MUCH CAN I MAKE WITH A SUBSCRIPTION BUSINESS?
There is no fixed answer to such a question. It's a classic "what if" proposition using some very simple math...
The tables shared earlier on this page illustrated a range of possibilities for this estimation. Most subscription opportunities generally offer upsides well beyond what is initially imagined. There are MANY informational, entertainment, software and service concepts that can be packaged within a membership model wrapper. It all starts with one good idea.
Many new to subscription models tend to UNDER-estimate just how large their subscriber base can be... thinking in dozens or hundreds when the real opportunity might be tens-to-hundreds of thousands... or higher.
The world is a BIG place. The human population now exceeds 8 BILLION people. The Internet connects you to potential subscribers all over the Earth. There's a tremendous abundance of buyers looking for desirable things to buy. If you could sell about one half of 1% of them, you would have 40 MILLION subscribers.
Use the following, interactive calculator to estimate potential revenue for your own concept. For starters, it shows $300/yr ($25/month) and only 200K subscribers. Try a variety of numbers to get a sense of your possibilities...
Big Innovations principals have MANY years of experience in all facets of subscription model businesses. We can confidently claim mastery-level expertise of all topics therein. If you want to grow a subscription business as efficiently as possible and set yourself up to make as much as possible in the short and long terms... look no further. Contact us for a FREE CONSULTATION
We can definitely help the subscription-minded business break into the space the right way. Already there? Fresh minds can always see some new opportunity to improve an existing model too. Even one new idea can lift an existing model to new highs. Try us.
This article naturally flows into another focused on creating a subscription model business from scratch...
