Welcome back to our series on how to start a successful subscription box! In Part 1, we discussed the Pre-Launch phase in great detail. The focal point for Part 2 will be the most fun and rewarding part of the business, The Launch Phase.
Congratulations, you made it this far! 90% of ideas never get to the ‘launch’ phase so you have achieved something special. Keep your foot on the gas as it is time to gain momentum. Because you are now officially a start-up business you need to act like one continuously. Here are some key things to keep in mind as you try to move your start-up to a scale-up:
Communication
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- Customers – Make sure you have all your customer touchpoints mapped out and tested.
- Website
- Email capture pop-up. Offer a discount or incentive for the customer to provide you his/her email address
- Clean and clear Frequently Asked Question (FAQ) section
- Easy to find multiple ‘Contact Us’ form fills
- Chat Pop Up (optional but valuable). Free software like Pure Chat exists
- Cart Abandonment pop-up. If a customer is getting ready to exit your website you can have free software like Bolt offer them an incentive to convert. Even if you get only 5% of these conversions that is great.
- Email
- You’ll want to have touchpoints for your customer’s journey with your company.
- Welcome message
- Order confirmation messages – received, shipped, canceled
- Renewal reminder message
- Renewal successful message
- Cancellation confirmation message
- Refund confirmation message
- Feedback review request message
- Have a dedicated customer service email that is monitored continuously.
- Create a Key Performance Indicator (KPI) for yourself on email replies (I.E. – answer all emails within 24 hours)
- Treat all customer emails with the same respect. Whether it is a product inquiry, a positive review, or an irate customer, if you treat them all as equally important it will serve you well.
- You’ll want to have touchpoints for your customer’s journey with your company.
- Social Media
- You should be very active here. You just need to find the right social channels for your business as it varies
- Instagram
- Use Posts and Stories to frequently communicate with your customers.
- Follow back and like/comment on new users’ posts. Try to make a connection so your followers stay engaged
- Giveaway contests are a great way to gain new followers. Be sure your requirements and contest rules are clearly stated. Also, be sure to announce the winner in each place the contest was mentioned!
- Frequently tag wholesale partners for your box. This helps build community and trust amongst your suppliers.
- Facebook
- Create a Facebook Page for your business. This is a contact point for many individuals as there are more than 2 billion users on Facebook.
- Depending on your business, create a Facebook Group. If you can provide value to your customers through a group and not be too ‘salesy’ you should. This is really where you create your social community. If done correctly, eventually the other members of the group will provide most of the content.
- Other Social Sites
- Again, it really depends on your brand and your niche. Maybe Twitter, Pinterest, LinkedIn, or another social site makes sense. A lot of time they do not and that is perfectly alright. Look where your competition is and make sure you are there, at a minimum.
- Wholesale Partners
- This is the lifeblood of any good subscription box business. You need items to fill your boxes continually. Spend an inordinate amount of time researching potential partners.
- When you decide to move forward with a wholesale partner don’t treat the relationship as transactional only. Focus on building true relationships, especially if this is a partner with a wide assortment of items that could fill your boxes for multiple months.
- Establish agreed-upon pricing. You won’t have much leverage to negotiate for ‘off-sheet’ pricing for quite some time so expect to typically pay 50% off MSRP.
- Create a tracking sheet with all of the key details you need about your suppliers:
- Contact information
- Name, email address, phone number preferred contact method
- Pricing
- Save your wholesale pricing on a separate tab of the sheet. Date the sheet as the pricing will change eventually
- Payment Method
- Some vendors will take credit/debit card while others prefer check or ACH to avoid fees)
- Lead Time
- This one is crucial. Nothing can sink a subscription business more than a vendor with an inconsistent lead time. Sometimes delays are unavoidable (think COVID-19), but most of the time you should be able to nail down an agreed-upon lead time for the products you are purchasing. Remember, you are the customer in this relationship.
- Routing Guide
- Since you will be doing the fulfillment at first most likely you need to give your vendors routing instructions to your house or commercial space that you have leased out. You can provide guidance on the packing lists, labeling, and shipping requirements. Vendors are used to having routing guides and usually will adhere to your requirements.
- Contact information
- Website
- Customers – Make sure you have all your customer touchpoints mapped out and tested.
Marketing
From Part 1, we learned the importance of trying to build demand for your new subscription box during the Pre-Launch phase. Having a landing page for email capture is a must-have for new boxes to the market. When you enter the launch phase you want to turn up the marketing blitz. Here are some ideas:
- Launch Letter
- Tailor a ‘thank you’ letter for everyone that has been involved with your business up to this point. There will be plenty of individuals to thank! In this email you can announce you are now ‘live’ and remind your customers that have been waiting for this day that now is the time!
- You don’t have to be promotional in this letter but it certainly doesn’t hurt. You want to get enough customers in the door on the initial launch to help dry-run test that everything is working how intended.
- Paid Ads Strategy
- Not all businesses need to use paid ads, but it is a tried and true method to bring traffic to your website
- Its very important to set goals and track accordingly to be sure you are utilizing a paid ads strategy in a meaningful way. The goal should be to drive the right traffic to your website. Your website should then convert this traffic to revenue.
- There are a host of ways to do online adverting
- Google/Bing/Other Search Engines
- To target subscription box customers traditionally your strongest platforms to start would be Google and Facebook. On both platforms, you need to set a budget (see CAC below), set a target audience (your key customers), and a set of keywords your customers are using when searching for your product or like product. The magic to this process is refinement. Is your process working? Are you getting a return on your advertising investment? As you are getting increased traffic to your site- is it the right audience? Are your keywords too broad or too specific? The more data you collect on your results the more you will learn- not only about what works but also about your target customer.
- Organic
- In the pre-launch phase, you should have done a fair amount of work on SEO (search engine optimization) for your website. Your content should be written in an easily consumable way that resonates with someone searching for your product or service.
- Blogs – Writing blogs is an excellent way to improve your SEO while also helping to educate your customers. You do need to be sure you are writing relevant copy to your product or service. If you don’t have consistent and concise messaging in your blogging it can actually hurt your SEO
- Video – If you have the budget consider having a video shot describing your product or service. Customers love seeing these on splash pages. They shouldn’t be longer than 60 seconds. These videos can help a wondering customer convert quicker than scrolling through your website trying to learn about you.
Financial Measurement
Hopefully, orders are now starting to flow in. You will need some time to get a good read on what is working and what is not working. However, you can start putting the structure together for the KPIs (key performance indicators) you want to measure with your subscription business. Here are some common KPIs you may want to measure:
- Churn
- One of the most critical measurements in the subscription box industry. Churn is defined as the rate of attrition in which customers stop doing business with an entity. It is most commonly expressed as the percentage of service subscribers who discontinue their subscriptions within a given time period.
- Obviously, you need to be adding more subscribers than you are losing over time. If not, you are just spinning wheels and will never scale.
- For example, if you have 50 customers and lose 5 customers that month, your churn rate is 10%. To actually grow, you’ll need to sign up more than 5 customers in the next period. Otherwise, your churn rate will chip away at your subscriber base. For subscription businesses that ship physical products, anything over 10%-20% churn is an indication that your value prop may be missing something.
- Don’t be too discouraged by churn the first 90 days. You are going to have friends/family/first-time supporters that probably are not your ideal long-term customer. This could artificially spike your churn rate when you are first starting out as a lot of these customers are predestined to churn.
- Average Revenue Per User (ARPU)
- The average revenue per user is the average dollar amount you’re collecting from your customers. To determine it, divide total revenue by your active subscribers.
- For example, if you have $5,000 in revenue for a month and 200 customers, then your ARPU is $25. This is also referred to as average order value (AOV) or even average sales price (ASP).
- This is a great metric to help you plan for your business. You know just how many customers you will need to reach your revenue goals.
- Finding ways to raise your ARPU is always encouraged. You more valuable you make your existing customers the fewer new customers you need to acquire.
- Customer Acquisition Cost (CAC)
- Speaking of acquiring customers, this is the key metric here. CAC is simply defined as how many dollars you are spending to getting your paying customers.
- For example, if you spend $1,000 on advertising and net 40 new customers your CAC would be $25.
- This is a metric you are always trying to drive down. This can be done with better copy, better geo-targeting, and continual measurement, testing, and refinery.
- Most times your CAC will be much higher when you start out as a business vs. being one or two years mature. There can be large testing windows needed to really hone in on the right marketing strategy so don’t get discouraged.
- Customer Lifetime Value (LTV)
- This is my personal favorite metric to track. This looks at how much an average customer is worth over his/her spending lifetime.
- For example, if you determine your average stays subscribed for 6 months, and your ARPU is $25, you can assume an LTV of $150.
- It is very simple; the longer your customers stay subscribed the higher the average LTV becomes. Your LTV should be going up month-over-month.
- Again, don’t get discouraged based on initial readings within the first 90 days. This metric needs several months to be flushed out.
The Wrap
Starting a subscription box is a lot of work. However, it can be incredibly rewarding and you can be your own boss. Hopefully, you can find a few helpful nuggets in the above that you can apply to your subscription business. Just remember to be patient and don’t overanalyze things in the first 90 days. It takes time to get a good read on your KPIs.
Stay tuned for our next and final part of this blog series: Refinement and Expansion
We love talking to potential customers. Reach out to us below if you have any subscription or fulfillment questions.
