Make Money Selling Subscription Services

In the starter article I identified seven ways in which you can make money online and defined subscription services as a setup where clients are charged a reoccurring fee for time based access to a product or service. This setup is most commonly seen with information and entertainment products such as newspapers, cable television and sporting events.

The Benefits of the Subscription Model

1. Secure Money

Since most subscriptions are prepaid you get your money upfront as well as being assured a constant stream of revenue for the duration of the subscription period.

2. Recurring Sales

Customer loyalty is built through their use of the product and therefore increases the likelihood of recurring sales.

3. User Base

Subscription sales make it easier to keep track of the people who use the service which in turn can be used for other, non evil, purposes such as the sale of non-subscription products and advertising.

4. Ease of Entry

Depending on the product sold the ease of setup is simple to moderate in difficulty.

The Drawbacks of a Subscription Model

1. Some people are put off by monthly payments and others are put off by upfront fees. Be sure to offer a pricing structure that will appeal to a wide variety of users.

2. With some products such as magazines and newspapers there may be a greater impact on the environment via waste especially if customers are receiving issues they don’t want. With virtual products, however, this is not much of a problem.

3. Sending out renewal reminders will sometimes increase the likelihood of cancellation however there are laws that regulate notification policies regarding automatic payments so you want to make sure you remain in compliance.

4. Of course you are competing not only with other subscription based businesses for your client’s discretionary income but other products on the market as well.

How to get started

1. Decide what you want to sell

2. Understand your demographics

It is important that you know who is going to buy your service. This will not only help you market to them but also help you set your pricing and can make all the difference between success and failure.

3. Write up a marketing plan

Since you took the time to study the people you will be marketing to, you should also take a moment to come up with a plan on how to reach them. This will reduce the instance of wasting marketing dollars.

4. Setup your subscription terms and pricing

Pricing is always going to be a tricky one and this is where your research pays for itself. Look at the expected income available to your users as well as what your competition is charging. Don’t set your prices too low or you may give the impression that your service is not valuable. However if you set them higher than the competition make sure your marketing materials make a strong case as to why they should pay more for your service.

Your pricing structure should also reward those who commit to the service long term, purchase more products or order other services.

5. Setup your payment terms

There are several different ways you can setup your payment options. The most common is to require upfront payments for the entire subscription. Another option is to allow monthly payments but to bill at the beginning of the month for the upcoming month of service.

You must also decide what forms of payment are acceptable and whether to use a manual or automatic renewal option. A manual renewal system means that you notify the customer that their service is about to end and let them approach you to renew their service. Automatic renewal is just like it sounds. The client is renewed automatically for another term usually accompanied by the billing of a credit card.

6. Decide on a cancellation policy

In some states in the US it is mandatory that customers be given an option to cancel within 72 hours without penalty. Beyond that, you need to notify a customer on how they can cancel their subscription and what refund of moneys paid, if any, they are entitled to.

7. Balance free vs. paid access

This is going to be another tricky area. Freebies attract people to your site or service where you can sell them on signing up. On the other hand, you don’t want to give so much away that people don’t feel compelled to buy.

Tips on making it great

1. Brand your business

Business branding is something of an art but one that is extremely important to learn how to do. The goal of business branding is that when people think of a certain product or service, the image of your business should be the first thing to come to mind. It’s sort of like search engine marketing to the mind.

For example when you think of pizza what is the first thing that comes to mind? Probably one of the big three; Pizza Hut, Dominoes or Papa Johns. This is because these companies have made it their priority to associate the “search term” pizza with their business.

Brand building, of course, encompasses more than that. For more information, check out this article from Entrepreneur magazine.

2. Have a better deal for longer term commitments

Offering a discount or extra perks to customers who sign up for longer terms accomplishes two things. First it makes you more money and second it begins the process of creating user loyalty. If a client makes the commitment to your service for a longer period of time, then they obviously think you’ve got something worth committing to. You job from that point on is to reaffirm that belief.

3. Choose software that makes it easy to compete in the search engines

The first place people usually go to find stuff on the internet is one of the major search engines. This is why it is vitally important that pages of your site rank well for the search terms connected to your website.

When it comes to search engine marketing, not all software is created alike. Do your research and look for software that offers, at the very least, SE friendly urls, supports sitemap creation and allows articles to be indexed under their own title and description.

4. Your site should continuously market itself to members and visitors

This does not mean that you have a “Sign up now” ad popup on every page a user navigates to on your site. Instead, this means that if you have different levels of membership place a reminder to those at lower levels that they can sign up for increased benefits. A link to your subscription page should be on every page of your site.

5. Offer a free newsletter to everyone

A newsletter is a great way to keep existing members up to day with what is happening on the site. It can also serve as a way to draw inactive members back to the site as well as sell the site to non-members.

On top of that you can also monetize a newsletter with advertising so that it pays the cost for itself.

6. Get members to sell for you with an affiliate program

An affiliate program turns your existing members into sellers by offering them added perks for referring new members to the site. Usually the perks come in the form of money but other perks, such as a higher membership level or increased privileges work just as well.

7. Focus on the end user experience

The best marketing you can do is to make sure your existing customers are happy. Happy customers renew their service and refer other customers to your business. So you should always make sure that your customers have a good experience with your service. This includes making sure you have good web hosting, that the site is easy to navigate and that they are able to gain access to and use the service without too much trouble.

8. Have a plan for cancellations

It is an inevitable part of the subscription business that people will cancel the service. This will be for any number of reasons including signing up with your competition. You should some type of plan in place that follows up with canceled and non-renewed memberships and tries to convert them back to the service.

A good example of this is when you go to cancel your cable or internet service. Usually the customer service agent will ask why and depending on your answer will try to resell you on the service.

9. Offer a freebie

This can be anything from select content or a trial period. This allows both members and non-members an opportunity to sample what you have and to decide if it is worth the money you are asking. Not only that, trial periods have the added psychological benefit of letting clients become used to using the product which will help convert them from tryers to buyers.

If done right, the subscription model can be quite profitable. Just ask Markus Frind who, in two months made over $900,000 from his website Plenty of Fish.

Business ideas for the subscription model

This list is by no means exhaustive but should get you thinking.

1. Dating/Meetup service such as Match
2. Technical support
3. Entertainment service such as DailyLit
4. Access to information like Ancestry
5. Convenience services such as the delivery of groceries (Netgrocer)
6. Internet services such as web hosting (Lunarpages)
7. Download service such as Netflix and iTunes
8. Online gaming site such as Lord of the Rings Online
9. Lifestyle services such as Memetome
10. Internet magazine

Good Luck!

Other articles in the series:

1. Seven Ways to Make Money on the Internet

2. Make Money Selling Subscription Services

3. How to Maximize Your Donations

4. Make Billions Selling Advertising