Subscribe and save: The secret to generating passive income

Offering subscriptions in addition to one-time purchases is one of the best ways to set up recurring revenue—and therefore passive income—for your online business. With the subscribe-and-save model, you give customers the chance to sign up for a relationship with your brand, not just a transaction of money and goods or services. 

This blog post will explore the subscribe-and-save model (also called the “replenishment” subscription model), its benefits, and how you can adopt this kind of model for your online business. Plus, we’ll share some tips on making subscriptions appealing to your customers.

What is the subscribe-and-save subscription model?

If you want to start offering subscriptions to your customers so they can receive regular shipments of your products, then the subscribe-and-save model could be a great choice. A subscribe-and-save purchase option allows businesses to give discounts to their customers who commit to making recurring payments for their products or services instead of just one-time transactions. 

Customers who subscribe save money, and you receive passive income—it’s a win-win situation.  

So, which types of businesses have found success with this model? For many online stores that offer products customers use on a daily basis, the subscribe-and-save model is the way to go. Customers don’t have to worry about forgetting to reorder these items, whether they’re household cleaning products or snacks for their kids. Plus, it’s easy for you to predict inventory and forecast revenue when customers make recurring purchases month after month.

The subscribe-and-save model is especially popular for online stores offering products like:

• Vitamins and supplements
• Cleaning supplies
• Snacks or beverages
• Coffee and tea
• Diapers, wipes, and other baby products
• Razors
• Toothpaste and dental floss
• Other personal care items

Giving your shoppers the ability to receive regular shipments, without worrying about checking out each time, will create a level of customer satisfaction and loyalty that you might be missing with only one-time purchases. Plus, making your subscription options flexible—like allowing customers to skip deliveries or add products to their shipments—will help you retain customers over time. 

Benefits of subscribe-and-save: Going beyond recurring revenue

As mentioned above, the subscribe-and-save model is ideal for your customers, especially if you offer products that are used on a regular basis. But what’s in it for you, as an online store looking to sell products and attain passive income?

The answer is in the question—creating recurring revenue streams, or passive income, for your business can have huge advantages. Recurring revenue will give you stability and allow your brand to plan for the future. Plus, you can better forecast how much inventory you’ll need at any given time when you have subscribers making repeat purchases. This type of auto-delivery system will make things easier for your logistical team, as well, since they can easily predict future shipments and know what to expect on delivery day. 

There are so many benefits to the subscription model in general, too. For example, subscription companies can take advantage of:

• Lower customer acquisition costs (CAC)
• Better customer engagement
• Increased customer lifetime value (LTV)
• Reduced churn
• Improved customer loyalty (and LTV)
• Easier inventory forecasting

Of course, with any business model, there will be challenges. Continue reading to learn about a few disadvantages that are sometimes associated with the subscribe-and-save model. 

Challenges of subscribe-and-save

Though customers might initially be excited to save money by subscribing, they could quickly turn sour if their subscription is hard to manage. Say they receive their first delivery and decide they want to edit their next order—they should be able to easily make these changes themselves in their customer portal or through transactional text messaging. If it’s hard to edit orders or skip a shipment, you could lose subscribers. But, with an easy-to-use website and accessible customer portal, these issues can be avoided. 

Another challenge that online stores might face when it comes to offering savings on subscriptions is creating deals that entice customers, but that bite too much into their bottom line. Businesses should be careful to offer a subscribe-and-save discount that they can afford while maintaining an attractive price for their shoppers. 

How to adopt a subscribe-and-save business model

So, in order to adopt the subscribe-and-save model and start offering a discount to their subscribers, businesses should first decide how much of a discount they can give. At this stage, it’s critical to remember that with the subscription model, your business will likely see lower CAC and higher LTV. This means that merchants shouldn’t be afraid to give their customers a discount, as long as they take into consideration all the pieces of their revenue puzzle. 

Tips for making subscriptions enticing for your customers

Once you’ve decided to offer the best deals to your subscribers, you’ll need to create a plan of attack to convert one-time purchasers into longtime customers. There are a number of strategies to do so—not only with subscribe-and-save deals but with additional tactics that will have shoppers seriously considering a long-term commitment with your online store. 

Here are a few ideas to get you started:

• Create a landing page on your website with all the necessary subscription information
• Make subscribe-and-save the default option for shoppers 
• Offer other incentives, like free shipping 
• Start a loyalty program for loyal customers to earn points and rewards

Setting your business up for subscription success

Now that you know more about the subscribe-and-save model, including its advantages and some strategies for success, you can start converting casual shoppers into loyal customers. Subscriptions will give your business access to recurring revenue and stability that will only help you find more success (and subscribers) in the years to come.