The Subscription Model for Increasing Sales

Want a neat way to increase sales, or get regular income even if you have seasonal sales, or irregular selling periods?

Use the subscription model of selling.

Magazines have been doing it forever. The customer pays an annual fee, and receives the magazine at each publication. If the customer wants to renew, she's given the option to renew a few times and well in advance of the expiration date. In addition, those regular contacts allow the magazine publisher to make other offers that may be of interest to the subscriber. (There are variations on this model, but this is the basic outline).

How can you put this system to work for you?

You have choices.

You can work out the frequency you'd like to be paid. And you can work out the frequency that you provide your service.

Omaha Steaks are a subscription gourmet meat company. The customer pays each month and the meats are delivered to the home. This company offers premium meats, helping to make the buyer feel special for having a high quality product delivered to her. The Omaha Meats subscription model is selling status as well as steaks.

Teresa Howley, a sculptor, travels the country with her work selling sculpture to private collectors. Occasionally a collector will take a piece on the subscription plan. Terry leaves the piece with the collector and her office manager bills the collector's credit card each month.

Small business owners who sell high-priced goods and services could benefit by offering a payment plan subscription option to buyers. It spreads income out over time, which can help with the monthly cash flow, and you can charge a premium price or added percentage for what is effectively a loan.

Here's a drawback of the subscription plan to watch out for: it's called "breakage". Breakage happens when the subscriber either cancels the subscription or just stops paying (sometimes before the end of the agreement).

In creating your subscription model, you'll need to plan for breakage. People stop paying. People's lives change. Things happen. One of my clients stopped paying me this month. But I didn't have to get mad or go postal. My subscription plan was built to handle the breakage. I won't be hurt by the loss of revenue, I could take the goods back easily, and in the process I've made a friend who is welcome back to my business at any time.

You can use the subscription model, too. And it doesn't matter what you sell. It only matters how you sell it.

Hardware store? Call it "store credit". With the right down payment and interest rate charged (watch out for usury, that's illegal) you can cover the cost of goods sold quickly and then collect gravy over time. Another option is to take automatic payments from a credit or debit card each month.

Attorney? Call it a retainer. With low overhead (because you're selling a service), your retainer is nearly all profit, unless your client needs additional services. In that case, have a scaled plan.

Pizza shop? Call it "pizza club". Knowing the cost of your food ingredients, labor, delivery charges and shop space are crucial. Selling pizza club memberships at $20 per month for free delivery of 5 pizzas could be just the answer to slow times when the students are out of town or when your other regular customers aren't eating as much pizza. Some of your customers won't use the full value of their subscription. But remember: don't gouge. Make sure you give them full value all of the time, perhaps by including a members-only newsletter that teaches the pizza weight loss plan!

You get it.

When following this subscription model, make sure your plan is win-win. Don't undersell and don't oversell. If you know your business numbers it will be fairly easy to put together a subscription plan that you can market. And once you have that, you can differentiate yourself all the way to the bank!