SUBSCRIPTION MODEL SUITABILITY

There are many core considerations that underpin a lucrative subscription model. Among the most important are rationalizing why, identifying a source(s) of relevant leads and pre-planning ARPS options...

WHY DO YOU WANT A SUBSCRIPTION MODEL?

When a business is thinking about launching some kind of subscription-offering, the bulk of the thinking usually revolves around "what's in it for me/us?" Answers include very tangible benefits like stabilizing revenue to smooth out what can be "roller coaster" peaks & valleys in "as is" models... and recurring revenue, so that they don't have to keep starting each year's sales numbers from zero. Business owners are quick to rattle off these and other reasons why they want to adopt a subscription model.

Equally important is clearly answering "what's in it for THEM?" Why will customers want to subscribe to whatever you want to offer? What about that offering will make them want to not only buy it... but REPEATEDLY pay for it? In most cases, insufficient thought is given to this side of the bargain... even though it is the MORE crucial question to answer well.

You need a great answer(s) to that "why?" Forcing anything into a subscription model wrapper doesn't automatically make it a desirable offering. Buyers will need to be able to see the "why?" themselves... as obviously & organically as possible... not because you want them to want it in this way, but because THEY want to buy it as a subscription. It can be challenging for entrenched leaders & teams to do this well. One of the reasons to hire objective minds like ours is to be screened through fresh eyes... as potential subscribers will view your proposition... then help you make it much more appealing to buyers.

RELEVANT SOURCE(S) OF SUBSCRIBERS

Do you already have a potential list of subscriber prospects? Are you going to offer this to existing customers or are you creating this mostly to pursue brand new ones? Any cannibalization concerns... or is that a positive objective of your concept? You SHOULD be thinking about lead source(s) at least as hard as you are thinking about the offering itself. Are you?

Relevancy is key. A massive lead source that is irrelevant to your offering is not automatically a good list. A much better list is one in which the bulk of the leads are already pretty interested in what you want to sell. For example, if you have a big list of people interested in some hobby- say- model railroading... and you are wanting to launch- say- an investing newsletter revolving around stock options, that's a sizable (topic) mismatch. It's not a natural that model railroad enthusiasts will have a strong interest in options trading too. On the other hand, if you have a big list of investing education enthusiasts and you want to pitch an investing newsletter, up to ALL of them are probably going to have SOME interest.

A perfect (relevancy) match is not absolutely necessary to monetize any existing following. For example, is your list of those model railroaders strongly associated because YOU lead the group? More simply: are you much of the appeal of the group? If they are more a fan of you than the topic, your draw might make it possible to "flip" some of them to be interested in your options newsletter product... even though it has nothing to do with model railroading.

Any list- mismatched or not- is better than no list. As the list becomes more relevant to what you want to sell, the strength of its potential to yield revenue rises. Such a source is even better if it includes many prospects already subscribing to someone else selling a similar kind of thing. All list(s) predisposed to paying via subscription for almost exactly what you want to sell are PRIME SOURCES of opportunity. They have relevancy AND a definite willingness to spend subscription dollars on something comparable.

Revisiting the example scenario: if the model railroaders were instead investing education enthusiasts, the list is stronger. If they are options investing education enthusiasts, it gets even stronger. If they are options education investing enthusiasts who subscribe to existing options newsletters, that list is likely "lowest hanging fruit" for your new product offering... a cream-of-the-crop pool of probable buyers.

Having any kind of large following- even to a free service- is a good foundation on which to try to build a lucrative subscription business. If you have some great content consumable over time or a large following to some kind of information, education or other service that might be able to be monetized via a subscription model, you should contact us for a FREE CONSULTATION. We are thoroughly skilled at innovating ways to package almost anything into profitable subscription businesses.

No such list now? No problem. We can help you innovate effective ways to grow a strong lead list and/or leverage tactics like direct marketing to narrowly target a very specific profile(s) most likely to be interested in what you want to sell. It is highly likely that we can find you relevant source(s) of prospects favorable to buy your good offering.

The point to all of this is to underline the importance of clearly defining your target market and building up- or being able to procure access to- relevant leads. In most cases, subscription offerings are NOT "build it and they will come" propositions. Whether yours can be (or not), knowing exactly who you will proactively pitch is better than investing money, time & energy building something only on hope that subscribers will then show up to buy. If you pin down the who, you don't have to wait & hope. Instead, you can go get them.

ARPS: ANNUAL REVENUE-PER-SUBSCRIBER

A third key consideration, ARPS (sometimes AARPS) is often a concept that becomes increasingly important AFTER you have subscribers. But planning for it up front can help conceptualize a better model... and a better product too. Most startup subscription models never give this a thought. But the bulk of the profit of such models is usually in ARPS... not in whatever you want to launch as a new subscription offering.

ARPS builds on "how many paying subscribers can I get?" by adding the dimension that answers "how much can I make?" As your subscriber base grows, the natural business drive to maximize revenue comes into play. How do subscription model businesses maximize revenue? It's not only selling more subscriptions to new subscribers. Smart subscription models simultaneously strive to grow ARPS with the subscribers already on board.

Why think about ARPS now? To grow ARPS often involves thinking about the NEXT sale(s)... what do you sell them AFTER you sell them the first offering? Is transaction #2 only the future renewal or could you add something on to the subscription (akin to offering an HBO or Showtime to a basic video subscription)? Fleshing out the upsell & cross-sell possibilities up front can offer a logical (and faster) path to sizable growth (and product pipeline targets). It can play a huge role in developing the right product for transaction #1. Don't ignore or defer thinking about ARPS- much of the profit potential is at stake.

You've very likely been pitched bronze, silver, gold tiers for something before. Or basic, deluxe, ultimate? Fast, faster, fastest? All such tiered offerings are one common way to grow ARPS... by upselling subscribers into higher tiers of the SAME product.

Another good way to grow ARPS is cross-selling. Instead of selling a bigger or greater level of one product, cross-selling is getting customers to add on an entirely different product. Because they are so mainstream common, bundled cable TV offerings can illustrate both tactics well:

• an upsell would be getting a customer to add on to their cable package (like adding HBO to basic cable or the commercial-free tier to a service like Hulu). They are basically buying greater access to the same product. Migrating from bronze to silver or from "faster" to "fastest" would be other examples of upsells: same product, only more/better/faster/etc.
• a cross-sell would be getting them to add broadband, phone service, mobile service, alarm monitoring or similar. Those are not TV service tiers at all. Instead, a cross-sell effort has sold them other, different services from what they already have.

Upselling & cross-selling are 2 common ways subscription model businesses increase ARPS. If you plan for the potential of transaction #2 and beyond up front, it can help you map out a much more successful subscription model (and/or product or product pipeline). If you flesh out an upsell and/or cross-sell option, you are creating a way to make more revenue SOONER than opting to wait for the renewal(s). Maximizing BOTH new subscriber inflows and ARPS is a fundamental recipe for a very profitable subscription model. Are YOU already thinking about the NEXT sale(s) to grow your own ARPS? If not, you should be (even if you might not yet know what product #1 should be in full).

In the very best scenario, fleshing out the future offering will heavily influence the first one. That's the best way to create the natural upsell/cross-sell... so subscribers will WANT to pay you more money instead of only seeing such ideas as you trying to nickel & dime them. Since most subscription model upstarts never give ARPS a thought before they launch a first product, raising prices is frequently the ONLY play when they try to make more money later... the very negative perception of trying to squeeze more out of subscribers for mostly the same deliverables.

Think about how YOU feel about price hikes. Are you ever happy about them? So why do you assume your members will readily accept them? If you want to create a great subscription model, don't make this very common mistake. Work out a smart ARPS strategy up front... and then let it influence the development of product or service #1. Done correctly, you can have many other revenue & profit-growing cards to play than only raising prices. We can help you.

If you already have a subscription model but lack an ARPS strategy, you are probably realizing that you want/need to increase ARPS. How to do that well is trickier when you are already at market with product or service #1. But there are ways. Let us have a good look at your model and we'll figure out the optimal moves to grow this vital metric to maximize your profitability.

The next page presents:

1. 3 key initiatives to quickly assemble and monetize a new subscription business.
2. the leverage in subscription models,
3. examples of how much money a startup can make and
4. 5 important truths for subscription model startup entrepreneurs.

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