Turn your Business into a Subscription Box Model: The Step-by-Step Guide

Are you thinking about having subscription boxes?

It is a great way to have consistent revenue, and boost your existing ecommerce business.

In this blog, we are going to take you through the entire process of creating a subscription box line, with the help of a CRM. In this blog, we are using HubSpot, but you can use any CRM you want.

So, without further ado, let’s take a look!

Part 1: Start Thinking About Your Subscription Box

Step #1: Analyse Your Current Product Line

In order for your business to have a thriving subscription box that will one day take over your entire business, you need to analyse the product line you currently have.

Firstly, you would need to find your best selling, moderately selling and worst selling products. In a subscription box, you don’t only want to sell your best products, you want to have a mix of all of them, so all products flow out of your inventory well.

Secondly, divide your products based on how expensive they are. You don't want to put massively expensive products bundled together. You want to strike a balance between expensive and convenient products for your box.

Finally, Calculate product margins. You need to know how profitable your subscription box actually will be. This will also provide you with an approximate marketing budget you can work towards.

Step #2: Define Your Subscription Box Concept

Firstly, you have to decide on how many subscription box types you are going to use. A standard suggestion is:

• One or two boxes with only your best selling items.
• You can also have category boxes, although they will not have a high purchase amount.
• Standard box with mixed or mystery products.
• A fully customisable box

Secondly, you have to create variations of your box, to cater to different audiences with different needs. The variations can be:

• sizes
• frequencies
• Customisations

Finally, have a clear unique value proposition. Your existing customers might not welcome the idea of a subscription box initially. But if you clearly define the benefit of them, they might opt for it, which will likely benefit both parties, if the design is superb.

Step #3: Price Your Subscription Box

Firstly, you almost always have to provide a discount from your original single product pricing, because otherwise, most customers might not switch to the model. You can always increase the price of both models once enough customers have switched to the subscription.

Secondly, you have to consider extra operating costs to the subscription box. Here is a great calculator for calculating the cost and pricing. 

Finally, do not charge extra for customisations as much as you can. Because customisation will be your greatest asset, and people are less likely to cancel subscriptions for something they customised for themselves.

Building Your Subscription Box

Step #1: Build a Subscription Platform

Firstly, you need to figure out which system you would use. Spotify and Woocommerce both offer subscription systems for added cost. We saw people using some specialised services like CrateJoy for subscription launches as well. You can consider all of them, but realistically, this should always complement your existing site.

Secondly, you can work with a CRM to manage and plan everything. In this blog, we have been using HubSpot to build the backend system using Marketing Hub Enterprise. But, you can also use Zoho, Marketo, SAP, or Salesforce. Any CRM or ERP will work for you in this regard, 

Finally, create the front end of the system, aka the website. If you have an existing ecommerce in a platform, it makes sense for you to stick with that platform. But, improving the UI/UX of specific subscription related pages is necessary. If you want, you can improve your entire site as well! And then it is ready!

Step #2: Design Attractive Packaging and Branding

Firstly, develop a strong brand story. Create a narrative that relates with your target audience. Then, choose a brand personality. Determine the tone and voice of your brand. The tone you choose can very much make or break your business. If your story isn’t compatible with your audience, no one is going to follow you.

Secondly, develop brand guidelines. Create a style guide for consistent brand application. Brand guidelines work best when you have a large team, or hand out freelance contracts often. You can save serious levels of work hours with a brand guideline.

Thirdly, choose the right materials. Select packaging materials that align with your brand image and environmental values. A suggestion is, use the most similar packaging with your products, that will create a level of similarity your buyers will enjoy from their previous purchasing system.

Finally, Optimise the box dimensions to accommodate products and shipping requirements. In most cases, you can find standard sized boxes everywhere on Google and on the market. You can simply use them as well.

Step #3: Test your subscription model with the loyal customers

FIrstly, identify your loyal customer base. Identify customers with multiple purchases or high average order value. Utilise existing loyalty programs to identify dedicated customers. Evaluate customer interactions, reviews, and social media engagement.

Secondly, create a pilot subscription program. Select a limited number of participants: Choose a manageable group of loyal customers for the pilot. Provide incentives to encourage participation, such as discounts, early access, or personalised recommendations.

Thirdly,  gather Feedback and Data. Collect feedback on product selection, pricing, packaging, and overall satisfaction. Monitor subscription sign-ups, retention rates, customer lifetime value, and revenue generated. Observe purchasing patterns, product preferences, and subscription management.

Finally, refine your subscription model. Use insights from the pilot to improve product curation, pricing, and overall customer experience. Refine packaging based on customer feedback and performance data.

Enhance communication with subscribers through email, social media, and personalised messaging.

Launching your subscription box model at a massive scale

Step #1: Calculate Your Limit

We naturally want everyone to always buy from us. But for that to happen, you need to have a big enough facility that produces these products, a big packing facility, and a massive supply chain. If you are reading this blog, chances are you don’t have that.

Firstly, you need to accurately know how many products you can sell, and set your advertising budget accordingly. That means, if you have the capacity of selling 500 products per month, and the cost of acquisition is roughly 10 USD, don’t spend more than 5,000 USD in a month.

Secondly, if you are on a platform that can handle big orders and can scale with you, that will save you a lot of trouble in the long run. Otherwise, you might be forced to change your infrastructure in future, which will incur heavy costs and will be a general thorn in your side.

And Shopify or Woocommerce subscriptions systems are also very user friendly, so you won’t have to care a lot about the experience they are having.

Finally, invest in a Customer Relationship Management (CRM) Software! CRMs like HubSpot, Salesforce, Sap, Oracle can be extremely helpful  in managing your customer data, interactions and preferences on a massive scale.

Step #2: Scale Your Operations

Firstly, Expand your warehouse or fulfilment centre to increase storage capacity and order processing capabilities. In the beginning, try your best to increase capacity without spending too much, since you probably still won’t know if the product is going to be successful or not.

Secondly, Recruit and train employees to support increased order volume. Have salespersons, customer service agents, and backroom staff. Keep these people happy, because they are the ones who will actually run your business.

Finally, Implement inventory management software. Track stock levels, reorder points, and demand forecasting. Use an inventory management system that can integrate with your CRM, like Cin7, Monday.com, or Zoho Inventory.

Step #3: Expand Your Marketing

Firstly, Develop a 360^o marketing strategy that has a multi-channel approach. A 360^o strategy focuses on everything around the customer, and not just a single channel. This includes social media, YouTube, and everything in between. This is more expensive, but way more effective.

Secondly, increase advertising spend. Most ecommerce businesses can’t sustain or grow without having a sizable advertising budget. You should, at the very least, start with 10$ per day, and run for a week. And then go from there.

Thirdly, build a strong social media presence by engaging with customers and creating compelling content. Social media presence can be extremely effective if your team can follow local news and can work with the trends.

Finally, implement email marketing campaigns. Use your CRM to set up multiple email campaigns, like abandoned carts, notification reminders. You can also have newsletters, or massive lead nurturing sequences. With a CRM, only your imagination will be your limit.

Step #4: Focus on Customer Experience

Firstly, offer multiple channels for customer support (email, phone, live chat). Using HubSpot, you can manage everything from one place, so your reps won’t have to jump from one platform to another just to reply to people.

Secondly, personalise customer interaction. With HubSpot, you can personalise with little to no effort. But even a small amount of personalisation will make them feel acknowledged, which is a massive deal in any sort of business, and specially businesses where this quality means business.

Thirdly, implement customer feedback mechanisms. Ask them for feedback everytime they have an interaction with your employees. After every support ticket, ask your customers how they felt about the interaction.

Finally, have data analytics for everything. With HubSpot, you can have SLAs in place that will track how the customer reps are handling their liability. Time to first reply, average reply time are metrics you can keep an eye on to see how your reps are performing.

Step #5: Have a Customer Loyalty Program

Firstly, offer incentives for staying subscribed. Your subscription should always have a positive thought in their mind. You can offer big discounts on every sixth box, or have exclusive offers. Also, clearly communicate about the incentives they are going to get from the beginning. If possible, have a loyalty section in the website where they can see their own loyalty program status.

Secondly, build a community. Communities help brands with their customer retention and brands that have community have 40% more. Communities can help each other with troubleshooting, general communication, and even networking. And any benefit they can get from this community, they will associate with you.

Finally, have a tiered benefit system. Give small benefits to customers who just started out, and gradually increase the amount of benefits as people move on with your subscription.

In order to have a practical implementation of this system, write down the highest amount of discount you can give out, put that or tier 5 (or the highest tier), and then reduce benefits from there to reach tier 1. For example, the maximum discount you can regularly give out is 20%, so start with 20% at tier 5, 15% at tier 4, 10% at tier 3, 5% at tier 2, and 0% at tier 1.

Monitor and Analyse Performance

Step #1: Define Key Performance Indicators (KPIs)

Below are some metrics you can use to monitor performances (You can measure all of them with HubSpot):

• Customer Acquisition Cost (The cost of acquiring new subscribers).
• Customer Lifetime Value (The total revenue generated by an average customer).
• Customer Churn Rate (The percentage of subscribers cancelling their subscriptions).
• Average Order Value (The average revenue per order).
• Subscription Revenue (The total revenue generated from subscription boxes).
• Net Promoter Score (Customer satisfaction and loyalty).

Step #2: Implement Tracking and Analytics

Firstly, Track website traffic, conversion rates, and customer behaviour. You can do this from HubSpot, but you can take assistance from Google Analytics 4, and maybe a smart tracker like Smartlook or Microsoft Clarity.

Secondly, Any marketing automation tool like HubSpot, Marketo or MailChimp will help you give complete information about your marketing efforts. You can have a lot of campaigns set up to run, and they will run by themselves.

Thirdly, You need something to gather customer survey data. HubSpot can do it with Service Hub, or even Marketing Hub can have a workaround with forms. You can also use Typeform or Jotform, or even simply use Google Forms if you don’t want to spend money on it.

Finally, have customer subscription analytics. If you use HubSpot to build it, you can use HubSpot’s reporting. Otherwise, using any other subscription tool will also give you some form of analytics.

Step #3: Make Data-Driven Decisions

Firstly, try to identify trends and patterns by analysing data from customer behaviour. If you see that a specific demographic is buying your product more than any other, focus your advertising on that specific demographic. For example, if you see that boys are not buying your product, and girls are, that indicates that this specified product might be more suitable for them, and not for boys.

Secondly, evaluate your performance against industry standards and competitors. If you are underperforming, analyse your competition and see why you might be underperforming. And if you are overperforming, find out why you are doing so, and make sure your competitors can’t catch up with you.

Thirdly, adjust product offerings based on customer preferences and sales data. If needed, re-evaluate your pricing strategy as well.

Fourthly, Implement changes to improve customer experience. All businesses change their UI/UX every couple of years. Always give it a fresh look, and a fresh coat of paint if needed.

Step #4: Continuous Improvement

Firstly, update KPIs as your business evolves. The metrics that are working for you now, might not work after 5 years, or even 5 months. Always ask yourself that if you are asking the right questions, and if you are not, change them.

Secondly, Monitor industry trends to stay informed about the latest trends and best practices. Specifically, be informed about economic trends. Because, during recessions, people usually don’t keep their subscriptions, so if you can see that a recession is coming, you can reduce your expenses. Similarly, if you see that an economic boom is coming, you can increase your budget as well.

And finally, test different approaches to find what works best for your business. Just because something is working, doesn’t mean it can’t be better. Don’t keep repeating the same formula. Learn from MCU.

What Now?

Now that you are completely aware about how you can run a subscription box business,

The only thing left is to do it!

If you need help, you can get it from right here!

By clicking the button below, you can talk with one of our specialists who created this system, and this blog!