How to Keep Customers (Happily) Paying Forever
Do you want repeat customers? Of course you do. Plenty of research shows that getting more business from an existing customer costs you less in both outlay and effort than persuading someone to buy for the first time.
The easiest way to make it happen is by creating a subscription service that automatically delivers your service or product on a regular basis in exchange for an automatic payment from the customer's credit card. Subscriptions aren't just good because they capitalize on people's laziness, they can also provide more stable and predictable revenue than if you have to wait for even loyal customers to return of their own accord.
"You're now conducting multiple transactions with that customer over time," explains Jon Gettinger, senior vice president of marketing at Aria Systems, which provides software for creating subscription services. He's also a contributing author of Aria's The Big Book of Recurring Revenue Innovators.
What kind of businesses can use a subscription model? More than you might think. Magazines, book-of-the-month clubs, and video rental companies like Netflix and Redbox are obvious candidates, but they're not the only ones. Try thinking creatively--no one expected car rentals to work on the subscription model before Zipcar came along. Many products, especially consumer products, can be adapted to this approach. Run a restaurant? Initiate a dinner-of-the-month club. Walk dogs? Consider offering a prepaid monthly subscription for 5, 10, or 15 walks.
Here are some inside tips for a successful subscription model:
1. Give customers a good reason to sign up.
For a subscription model to work, it has to be a good deal for both you and your customers. What can you give them that they want, in exchange for the right to charge a monthly (or weekly, or annual) fee?
The most obvious answer is a discount, and that's always an effective tool. Pet Food Direct has signed up thousands of customers (including me) by offering a discount to customers who agree to have products shipped on a regular schedule. Since they sell vitamins that my cats need and pet stores don't carry, it's a great arrangement for both me and them.
But look beyond the discount if you can. It's an undependable way to create loyal customers, and you may be vulnerable to someone undercutting you. If you have a limited-availability product that customers want, consider offering it to subscribers before anyone else. Special or upgraded service, as well as advance inside info can also be good incentives for customers to subscribe.
2. Prepare for a more intense relationship.
"You've created a better-defined relationship, and that comes with a set of obligations for both sides," Gettinger says. On your side, the biggest difference may be customer service--you should prepare for a lot more questions and communications from customers, both about the subscriptions themselves, but also about your products and general info. You should also give customers the tools they need to manage their subscriptions, change addresses and credit card info, etc., directly on your website. You should also make sure customer service folks have ready access to info about customers. "If they talk to customer service, they want to be known and understood," Gettinger says.
In general, customers feel more connected to a company when they're subscribers, and you want to encourage that feeling by having plenty of personnel on hand to answer their questions and resolve their complaints. Be aware that if subscribing customers can't get through to someone when they need help, they may be likelier to voice their discontent on social media or to their friends than regular customers would be.
3. Do market research.
On the customer side, subscribing means they've entered into more of a long-term relationship with you. "Now you have permission to communicate with that customer," Gettinger says. Use that permission to conduct research, asking customers to answer questions about their preferences and how you might serve them better whenever they con tact you, and whenever they renew.
Another way you can use your newly expanded relationship with customers is to propose additional products and services they may want. "If the customer likes one service, you can offer an additional service," Gettinger says. "If they're getting ready to quit, you can offer a different option. You have the ability to talk with them, and you have more intimacy in that relationship."
5. Don't get stuck on one model.
Regular revenue is nice but the true advantage of having subscription customers is you can use your research with them to modify and improve your business model overall.
"One thing to realize is that there are a lot of different options," Gettiner says. "This is just one way to have a relationship. There are many others, such as usage-based billing and pre-paid. So don't get locked in to an idea of how to create recurring customers. Talk to them, do the analysis, and be ready to adjust."
Like this post? Sign up here for Minda's weekly email, and you'll never miss her columns.
MINDA ZETLIN | Columnist | Co-author, The Geek Gap
Minda Zetlin is a business technology writer and speaker, co-author of The Geek Gap, and president of the American Society of Journalists and Authors.