May 6, 2013
I’ve been noticing more and more small specialty food businesses turn to subscription models to help them keep customers and revenue coming in. It’s an interesting concept especially since most businesses (food or otherwise) spend more money acquiring new customers than retaining their existing customers* so if there is a way for your to maximize the customers you already have shouldn’t you do it?
Some examples that I’ve been seeing as of late:
1. Creating CSA (Community Supported Agriculture) type programs where customers pay upfront and receive a scheduled allotment of product. Take a look at the Courser Farm Kitchen Granola spotlight for an example of how one entrepreneur put this model to work.
2. Mail-order systems which is similar to the CSA-style in that customers pay upfront and have the product mailed to them on a regular schedule.
3. Pay-as-you-go subscription model in which customers sign up for a certain time period (ie, 6 months or a year) and will receive product every month either in person or shipped to them. In this model though the customers are charged monthly so that they don’t have to pay all the costs upfront. This may be easier for some customers to swallow who don’t want to spend several hundred dollars upfront but aren’t adverse to a smaller amount every month.
Some benefits of these models are that it provides you the business owner with a good idea in advance of what type of production you need to do and you either get an influx of cash all at once that you can use for operating expenses or you know that you have a certain amount that’s guaranteed to come in every month is you use a pay-as-you-go model.
There are benefits to the customers too though in that it takes the thinking out of the equation for the customer. And I mean this in a good way. If you can provide a subscription that gives the customer what they want and takes out the problem of them always needing to remember to come back to you again and again that can be of huge value to customers.
What do you think? Do you offer a subscription model to your customers? Or have you in the past and what were the results? Have you seen any other businesses doing this well?
* I’ve got some articles in the works in the next few weeks that’s going to take a look at how you calculate exactly what it costs to acquire new customers and retain existing ones so look for those in the near future.