159: 5 Simple Steps to Adding a Subscription to Your Product-Based Business

Hey, product-based business owners. Did you know that having a subscription box could change the game for your business? Predictable inventory, better cash flow, and monthly recurring revenue? Yes, please. I took my retail store doing about $250,000 a year and added a subscription box to pass the $1 million a year mark very quickly. And I'm telling you how on this episode.

Welcome to the Launch Your Box podcast with weekly tips, tricks, and strategies to start, launch, and grow your subscription box. Now here's your host, Sarah Williams.

Welcome back to the Launch Your Box podcast. Today I'm talking to my product-based business owners. Okay, now what I mean by the product-based business owners They are someone that has an Etsy shop right now. Maybe you have some products, you're selling your things on Etsy, that's your website, that's what you've got going on right now. That was me, that was me, 2013 Sarah, who was an Etsy store owner, and that's how I made my revenue from month after month. And, and it was great, it was great. Maybe you are making your revenue from doing pop-up events. I did a lot of shows, a lot of pop-ups, a lot of special events where I rented a booth and I brought my products. I stayed there all weekend and sold my little face-off in those pop-up events, and that was good for me too. It allowed me to build a customer base, and it was really great. It really helped me see the potential that I had with my product offering. Maybe you actually have a retail store. That was kind of the next part of my journey, having my retail store. And when I say retail store, I don't want you to think of like this fancy shop that I had. It was literally 600 square feet, and 300 square feet of that was workspace. So I just had a little tiny 300-square-foot storefront where I could have people pick up their custom products, and I sold a few things in the front of the store. That was my retail store, but it was a journey. It was that Etsy shop, and then I was doing all these pop-up events in town, out of town, on the road. I would load up my trailer and I would hit the road and do these events, and they were really great. I brought in thousands of dollars a weekend from those events. Then I opened my retail store in an effort to get all the stuff that I was doing out of my house which turned into a really amazing thing. That first Christmas I had a line outside of my retail store. I knew that I needed to go bigger at that point. And maybe you're just sitting there and you're already selling your products in an online shop outside of Etsy. Maybe you have a Shopify store, maybe you have a WooCommerce store. This is who I'm talking to today, because what I know, when you already have an established product-based business, you are 10 steps ahead of, say, someone coming in to Launch Your Box and wanting to start a business with a subscription box. And there are so many benefits to adding a subscription box to your already existing business, and it's really a no-brainer that you can offer to your current customers. And I want to talk about those benefits first before we get into my 5 simple steps to adding a subscription box to your product-based business. So let's just go through the benefits because I need you to understand why we're doing this. We're not just doing it to say we have a subscription box. There's some real benefits. As a product-based business owner, I used to tell myself, there was a saying that I found one time and I just kept it near and dear to my heart. It was something like, the rent is due every day. And it hit me in a place where I knew if I didn't show up and try to sell something and post on social media and send the email and go live and do the event and have the sale, I wasn't making any sales that day. I had to show up every day because that rent was due in my head every single day. And if I didn't do anything to make a sale, I didn't make a sale. And that kind of pressure long-term can really burn you out. That kind of pressure long-term can really get exhausting. One of the number one benefits of having a subscription box in your business is that you're creating a stable revenue stream. It's predictable. There's no more of this roller coaster, this kind of feast and famine of Am I going to sell anything today? Am I going to sell anything this week? If I have a retail shop, is anyone going to come in today? What do my sales look like? I've got the bills that are due and there's that pressure every day to make sales. But when you have a recurring payment that hits your bank account every single month, it changes everything. It stabilizes your business and it stabilizes your cash flow. And that's the number one benefit of having a subscription box. The number two benefit for me is customer loyalty. Our subscribers are our best customers. They have committed to purchasing with us regularly. They're handing us their credit card. They're saying, charge me every month. They're our most loyal customers and they are regularly giving you their money in exchange for products from you. And that creates a source of buy-in that you don't get from a one-off customer. If I'm scrolling social media last night, I'm scrolling social media, I see this really cute jean skirt and I'm like, oh, I want to buy that. I've never purchased from this boutique before. I don't even know the boutique I purchased that from without looking in my email. I'm not loyal to them. But you know, the places that I have a subscription box from, I know exactly who they are because month after month their logo box is showing up at my door. I know who they are. I know what I get from them. I know that I love the products from them. And that's what we're creating with our subscription box. We're branding and we're delivering an experience every month, and that creates loyalty. Number 3 benefit of having a subscription box is our increased lifetime value. Do you know what the lifetime value of your current customer is? I mean, if you're doing online business or if you're taking names at the register in your register system, and you might be able to see how much someone has spent with you over their lifetime of being your customer. But when you have a subscription box, you really can see that at scale. So on average, with my thousands of subscribers, I know that they stay on average for 18 months. Generating thousands of dollars each. I know when I get somebody into my world that they're staying with me for— they're giving me their credit card month after month after month for on average 18 months. We just went through a launch and I was writing all the names of my subscribers on my wall and I could not believe how many subscribers I have had with no pausing, no stopping, no quitting, no canceling since 2019. 5 years worth of products, 60-some boxes these people have gotten, and there were hundreds of them. And there were even people that were still subscribers from the very first box that I had, and that was 2017. That's 7 years ago. People have gotten every one of my boxes. 80-some boxes. That's amazing to me. And that's a, that's a loyalty play. That's a stable revenue stream play. That's an LTV play. The lifetime value of those customers is crazy. And we won't get that with one-off products. We just won't. The loyalty, the branding is not there. It's not the same. The number 4 benefit to adding a subscription box to your product-based business is the opportunities you have for cross-selling and upselling. You are increasing your average order value and your LTV at the same time. And what I mean by this is I give you a set of items in your subscription box, right? And a lot of times I'm giving you a t-shirt. What items can I carry in my shop to pair with that t-shirt? What items can I pair in my shop to go with one of the items from your box? Thousands of people are getting that box every single month. That means thousands of people are getting that same t-shirt every— this month. What can I pair with it? Oh, let's pair a cardigan. Let's pair a kimono. Let's pair a bracelet set, maybe some earrings, maybe a handbag that goes with that shirt, because I know thousands of my customers have that exact shirt. So that gives me an opportunity for cross-selling. Hey, you got this cute new shirt in your box? Here's some things that go with it. And let me do a style guide. Let me put those on. Let me show you how to pair that t-shirt with this cute new blazer in the shop. Let me show you how to pair that blazer with this new cardigan. Let me show you all the fun accessories that match that t-shirt that you could add to your collection. These opportunities are amazing because When I'm thinking about buying products for the store to sell, I already know what's going to go in those boxes because I'm planning those boxes a year in advance. So I already know what's coming up. So I can look at these products and go, oh, that's going to go with the item in the August box. That's going to go with the item in the October box. That's going to go with our Christmas box. And I can purchase inventory for those people. Number 5 benefit, probably the biggest benefit besides the revenue stream, but it's the scalability. When you think about your product-based business, I want you to think about how long would it take you and your team, or if you're a solo entrepreneur, you to pack and ship 500 orders. Now, if you're a maker, that's going to take a little bit longer because you got to make all the things. But if you had 500 different orders come through your shop this week, how long would it take you to make, pack, and ship those orders? They're all going to be different. They all are going to have different amounts of things in them. One box could have 2 things, one box could have 12 things, one box is going to be different sizes. Like, it's a whole process, right, to pack and ship 500 orders. But what if you had 500 of the exact same order? You could line up the boxes, you could go down the row, pop the first item in, pop the second item in, and just fulfill all 500 at once. All the shipping is going to be the same, the box size is going to be the same, the product is just so efficient. We can pack all of our subscriptions, all those, all of our thousands of subscriptions, and literally a day and a half. For us to do That many individual orders would take us weeks. The picking, the packing, the shipping, the weighing, the all the things. Like, it's so efficient. You really have the ability to scale your business in the best way with a subscription box. And that's what we're talking about. When you have a product-based business, you're already halfway there. You've already got a customer base. You already have products. You already have a system for selling. So now that I've convinced you that you really need a subscription box, let's dig into the 5 simple steps to making that happen. If you're a note taker, I want you to take some notes because I want you to put this on the wall. If you've been thinking about starting a subscription box for a while and that whatever's holding you back, I get it because I sat on my idea for a whole year because I just couldn't figure out how to make it happen. I knew I could make it happen in my brain. I would lay, lay in bed at night and dream about what I would put in these boxes and what it would be like to have a subscription box, but just actually sitting down and doing it really kept me stuck. So I've got 5 simple steps for you, and if you can just lay these out for yourself, put them above your computer, look at them every day, you're going to be able to do this. And do this well. All right. Number 1, identifying your best customer. You already have customers. So who's that best customer? Who are they? How often do they shop with you? What's their frequency? Are they coming in weekly? Are they buying online monthly? Like, what's their frequency and who are they? What type of person is this? You know, I had a retail store, so I actually could see my person, right? I could see how old they were. I could see what they would look for in the shop. I could— it was kind of like a heat map on my website. I could see how they walked around the store and looked at things. I could see how often they purchased. Who are those VIP people in your business? And as you're thinking about this question, you're probably— there's customers probably popping in your head like, oh yeah, Debbie buys something from me every Thursday. Or, or Susan comes in and shops with me at least twice a month. Think about that person. And I want you to start identifying traits about that person. How old are they? What is their lifestyle? And, you know, if they're following you on Facebook, you can click on their names and do a little snooping. You can do some investigating, see what other places they follow, see what interests they have on their own Facebook page. But really start to take a look at your top 20 customers and really dial in with who they are, who they are, where they live, how old they are, their buying habits, their frequency. What makes them a VIP of your business? Really identify your best customer. Number 2, we need to identify our best sellers. Okay. This was something that I did early on with my business that really helped me form my subscription box. Okay, so what are your top 3 categories in your business? For me, I was a gift shop, and when I looked at my top categories, it was graphic tees, it was beverageware because Yetis were so freaking popular that I was, I was monogramming every cup that walked by my storefront. Okay, so it was drinkware, it was bags of all kinds. So I took those 3 categories. Those were my best categories: graphic tees, bags of all kinds, and drinkware. And I built a subscription around those top 3 categories in my store. And I had a lot of different other things, a lot of accessories, a lot of other things. And we add those in here and there all through the box. But really, when you look at my subscription box month to month, it has one of those 3 things in there, if not 2 of those 3 things in that box every single month. So what categories are your best seller? What are people repeat buying when they come in? What are they buying a lot of? For me, that was graphic tees. I would have customers come in and they were buying graphic tees every time they were there. What are people asking for more of when they come in? Do you have more cute cups? Do you have any crossbodies? I'm really looking for something that's about this size. Listen to your customer because they'll tell you what they want. So identifying your best seller— what are those categories? What are people repeat buying? And what are people asking for more of? That's going to be the heart of your product inside your subscription box. Now, number 3, we've got to set your pricing structure. And this is easy as well because you have data. As a current product-based business owner, you have data in your systems on What is your average order value right now? If you went and looked up your AOV right now, on average, what are people spending with you per transaction? So that number for me was about $40. When I started my subscription box, people would come in and buy about $40 worth of stuff, and that was really 2 items. It was a bigger item and a smaller item. And then I took a look at what was my average order value of my top 100 customers, and that was higher. That was closer to $80. So in my mind, when I was thinking about my pricing structure, on average, people were spending about $40 with me when they would come in, and my best 100 customers were spending upwards to $80. So I knew I needed to price my subscription in the $40 to $80 range. And so I priced my box at $40 in the beginning. And then after about 18 months, we added an upgraded version, which now I believe is $74. So you see how those two numbers came into play. Most of my subscribers are on my $49 level at this point in my business, but the second next level is my $74 level. So those two numbers were really important to me as I was building out the pricing. I wanted to make it affordable for that everyday customer that was coming in. They were already spending $40 with me, so why not make a box that was in that same price range? And then how could I uplevel it for my best customers to get more things and spend a little bit more with me? And so I want you to think about your pricing structure on this. Now, number 4, the next step into building your subscription box business was you've got to create exclusive exclusivity and scarcity. And you know, this is something that I've gone back and forth on over the last 7 years with my own subscription box. What are the benefits of being a subscriber? It can't be the same as being a one-off customer. Okay, so there's usually some pricing benefits. So the items in my boxes are priced really great for those subscribers. If you were to buy any of those items one-off in my store, they're going to be much higher. Also, something that if you can do it, I would do it, is making the items only available in that box. Can you remove the fact that you can sell these? Like, these are only available to my subscribers. I did that a lot in the beginning. Like, these are all custom products that I'm having brought in. They would not be available in my shop. Now some of them are available in my shop right now just because I have extras at this point to meet the minimum order quantities from my manufacturer, but I'm hoping to grow to the point where I can have exclusivity again because I really believe it makes all the difference. When you're sold out of something and people can only get it if they're a subscriber, it makes them want to be a subscriber. There's no other way to get it. It's crazy, this Fear of missing out, like creating this fear of missing out. We call it FOMO with your customer base. They want to be a part of something special. And so how can you create this exclusivity and scarcity with your subscription box? And it's going to be different if you have never done a recurring revenue membership or subscription. This is going to be different for your customer and they're going to be like, what do you mean I can only get that if I'm a subscriber? And you're going to have to stay firm with it. A lot of times we want to say, oh, I'll buy extras. So if you're not a subscriber, you can get it too. Don't do that. You're shooting yourself in the foot that way. I've watched it time and time again with our members, and I think that's what is hurting me right now is the fact that I do have extra products that people know they don't have to be a subscriber to get it. And I'm changing that again because I know when I was exclusive, when things were exclusive in my box, Sold out every time. That FOMO kicks in and people want it. So I want you to be able to create exclusivity and scarcity with the products in your box. Now, the last one, number 5, is creating a great user experience. This is it. We've got to have a website and a checkout process that is clear and easy to navigate. So do I know that this is recurring? Do I know what I'm getting myself into? Do I know what I'm signing up for? Is it clear what I'm going to get in the box? Do I understand what's happening here? Is my website and my checkout process easy and efficient for my customer? Because if not, if there's any conflict in that situation, if there's anything, they will bounce. So we've got to make sure we have a great user experience on our website and our checkout. We've also got to make it easy for them to update or cancel their subscription. People are having subscription backlash. They've been part of subscriptions. They've made it impossible for people to cancel. We have to reassure them. You can cancel at any time. Here's how you do it. It's super easy. Don't worry about it. We would love to have you for as long as you'd want, but it's no problem if you want to cancel. We have to make their commitment phobia easy with no strings attached. Commitments. Okay, and then really the last part of this creating a great user experience is having a higher level customer service for these people. You've got to remember that these are the VIPs of your business. When a subscriber has an issue or needs to update something or has questions, they need to be expedited in the highest level that we can give them in our business. They need to be our VIPs. Okay, and so we've got to create a great user experience for them. And if we can do that, you're going to keep growing and growing and growing, and your retention rate is going to be in the 90s, and you're going to, you're going to keep building recurring revenue. And those are the 5 things. Those are the 5 simple steps to getting your subscription box going. Number 1, identifying your best customer. Number 2, identifying your best sellers. Number 3, setting up your pricing structure. Number 4, creating that exclusivity and scarcity factor into your experience. And number 5, really creating a great user experience on the tech side. We just, we have to make it easy for them. We can't overcomplicate things. We tend to overcomplicate things for people because that's just what we do as business owners. How do we make it simple? How do we make it easy for them? Now I'm going to leave this as a Sarah's best advice here. It's not really a number 6, but it's like Sarah's best advice. Going from a one-off product-based business— oh, this was me for, oh gosh, 4 years before I started my subscription box— the transition to having a subscription box was a little challenging for not only myself but for my customers. The thing about it for me is that I didn't talk about it enough. You've got to talk about your subscription, like, almost to the point where you think you're just sick of people listening to tell them about your subscription. I can't stress enough that you have to talk about it all the time. It's something new for your audience. But if you want to create a business that is 75% recurring revenue instead of one-off sales, you've got to make this subscription box the main thing in your business. It can't be the side thing. My business right now has 75% of its revenue as recurring revenue. I know every month that 75% of my sales are going to hit on certain days. Period. If I got sick and couldn't show up and sell, if my inventory never made it and I didn't have anything new to sell, if like whatever it is, I know that 75% of my monthly sales are coming like clockwork. And that kind of predictability in your product-based business is really priceless. Like the ease it gives you, the reduced stress it gives you. I just can't, I can't tell you enough of what it's done for my business. And when I look at all the members that had product-based one-off businesses before they started their subscription boxes, the difference it's made in their everyday life and stability and structure of their business is priceless. So you got to talk about that subscription a lot. To the point where you think everyone's sick of hearing it. You got to make it the main thing in your business to make it the main revenue stream in your business. So I want you to write those 5 things down. I want you to hang them somewhere where you're going to look at it every day. And let's stop thinking about starting a subscription box and let's actually do it right now. We've got 5 simple steps. To getting you on your path. Make sure you subscribe to the Launch Your Box podcast. I'd love for you to take a minute to rate and review it. Let me know which episode is your favorite so far. Don't forget to join me next week right here.