With the social distancing people shift to online life. This caused an increased demand for subscription products like well known to us all Netflix, Disney, HBO, and other streaming services. The share of Amazon Prime members increased by 16% from 59% of all shoppers last year to 75% nowadays.
But the automatic billing model doesn’t limit to entertainment SaaS, people want to get their cosmetics, toothbrushes, dog food at the same time every month.
From the buyer’s standpoint, this frees us from the need to worry about a good part of household chores. From a business perspective, this can help you get your business back in line after the unprecedented days.
Let’s see what products and how you can sell at a subscription model today.
- How does the subscription model work?
- How does automatic billing help your business?
- How to add subscription payments to your Magento 2 without writing a line of code?
- How to evaluate the results of Magento 2 integration with subscription payments?
How does the subscription model work?
Say, you have a dog, and you need to buy food for it every month. So you come to the same store and make the same purchase every month. But it would be much easier to automate this process and get the dog food delivered each month on the same day:
So you don’t need to remember about it, you don’t need to spend time shopping whether offline or online, and your dog will always be fed.
How does automatic billing help your business?
Unconditional basic income
This e-commerce model gives you a stable minimal revenue no matter what. Subscription has proven to be trendy even during the times of social distancing and unstable economics.
Cost-effective customer retention
This model also helps you retain customers at the lowest cost. According to the CEE Ecommerce Report, repeat customers bring 4 times more revenue than newcomers. And at the same time, attracting new clients is twice as expensive as retaining loyal regulars.
Monthly product subscription allows you to spend money only on the first steps of the marketing funnel and create the “loyalty loop” automatically repeating the last steps of the funnel.
Money-saving stock management
Finally, the predictable demand allows you to manage your supply avoiding dead stocks and best-selling out-of-stocks. Also, you can sell more upsell and cross-sell goods by offering discounts for more items in a “box”.
Of course, we can’t but mention that, as well as any other sales strategy, this one has its cons:
- Decreasing margin. When you offer a discount for clients who sing up for recurring payments, you lose a part of your potential revenue. Here you need to ensure that the number of subscribers will cover these costs.
- Subscription boredom. Customers may be bored of getting the same product every time. To overcome this issue, you can put different surprise gifts in each box or let your users subscribe to “mystery boxes” with the latest novelties.
- Supply and product quality issues. If you get a defective batch or your supplier has problems with delivering goods on time (for example, because of lockdown), it will affect all your subscribers and can ruin your reputation.
How to add subscription payments to your Magento 2 without writing a line of code?
Choose what type of subscription you will offer:
- Replenishment. Customers get the same or similar items.
- Curation. Customers get a box with a surprise product that they can partly control.
- Access. Customers get access to primary goods or services.
According to the McKinsey study, the most popular among customers are the 2 first types. They get around 87% of subscribers. And all of them you can add via M2 Subscriptions & Recurring Payments extension.
Use case for replenishment subscription
Say, you trade personal hygiene goods. Dentists recommend changing the toothbrush every month to stay healthy. You can add the subscription option to all toothbrushes in your store. And deliver toothbrushes for the whole family every month.
Our extension allows you to do add a subscription option to all toothbrushes in the catalog in bulk. For this, set up the general settings:
- billing cycle;
- initial fees;
- free trial
- discount amount.
Then move on to the product list and choose the needed items from the catalog.
Once done, extend the Actions dropdown and choose Make Selected Products Available via Subscription.
As a result, all the chosen items will be assigned the general subscription settings you’ve chosen at the first step. If you need to customize subscription conditions for any of the products, click Edit in the Action column and make it under the Subscription Settings tab.
Use case for curation subscription
Now, suppose that you have a cosmetics store. To amuse your targeted audience, you can create mystery beauty boxes with the latest novelties inside.
This extension allows you to set up the curation subscription under customized conditions. In so doing, you can let shoppers manage all their subscriptions right in their personal accounts. Also, to establish a free communication channel with your clients, you can enable the automatic email notifications and inform subscribers of all the important events, offers, changes in the program without wasting your managers’ time.
Use case for access subscription
Say, you want to offer premium services for customers who bought special membership. You can offer them fast shipping options, special discounts and more. For this, you can also use our extension. Create a virtual product and make it available only by subscription. Then simply add all the customers who purchased this product in a separate customer group to display additional shipping methods and other features to them.
Supported payment methods
The extension complies with the PSD2 and supports:
- Cash on delivery.
How to evaluate the results of Magento 2 integration with subscription payments?
After implementing the auto-billing model, you will need to collect and analyze the raw data. What dimensions and metrics to take into account?
- ARR or MRR (Annual or monthly recurring revenue) to see the total revenue you get from all your subscribers per month or year.
- CAC (Customer acquisition cost) to see how much money you spend to attract one new user.
- Churn Rate to understand how many users cancel the subscription.
- ARPA (Average revenue per account) to learn how much money each subscriber spends with their subscription plan. Knowing the stats, you can increase ARPA by offering upsells and cross-sells.
- CLV (Customer lifetime value) to predict how much profit you will get from one customer in total for the given period.