Paying for a product or a service on a weekly/monthly/annual basis is not new. It is quite common, especially for services. How are you paying for your cable service, newspapers, or even the milk delivered to your doorstep? Do you pay on a daily/one-time basis? No. We pay monthly. Our credit card or bank account is automatically charged at a given date every month. And that is called a subscription.
Another term that has a similar process is memberships. Think about the swim clubs for our kids or the gym (though we never show up!). They collect a regular automatic payment from us because we signed up for a membership.
You get the point now? People are used to the subscription economy. So why not sell our products and services on a subscription basis and collect recurring payments on a monthly or annual basis?
Let's first look at the numbers of a mythical membership site. This site has the following figures:
If you enroll just 20 new members monthly (that would be roughly one member every 1.5 days), then here's a rough schedule of your projected income in the first 12 months:
One sale every day and a half of $20. Yet, it compounds up to the point where you're generating $3,665.74/month by the end of the first year. And it will just keep on going.
According to marketing metrics, the probability of selling a product to a new customer is 5-20%, but to an existing customer is 60-70%.
Some believe that selling a recurring subscription is just inherently harder than a one-time offer. I thought this for a long time. The idea was that people are hesitant to get into recurring subscriptions because of the commitment.
But, look at your monthly budget and look at the number of recurring bills you likely pay every month:
You get the idea. It isn't that we have an issue with recurring billing at all. In fact, we PREFER it. Most people would rather commit to paying that cell phone bill for 24 full months just to avoid the upfront costs of your phone.
When we think about our memberships, it isn't the recurring nature of it that is the big sticking point in selling it. It is the OFFER.
We will pay every month for something that we cannot do without. We will pay every month for something that is difficult to walk away from (it is called the pain of disconnect). At the core, we will gladly pay monthly for something which we SEE is giving us more VALUE each month than what we are asked to pay.
So, it all starts with your offer.
You have to give your customers more value than what you're asking them to pay. Furthermore, they need to see that what they are getting is worth more to them than what they're paying each month.
Do you know how much money your store will make in any given month? The obvious answer will be NO. But if you sell your products on a recurring payments basis, you know how much you will generate based on your membership subscribers. That gives you a working baseline as this is the LEAST your store will make this month.
Most locations guests come an average of 3 times a year; there are, of course, exceptions with your regulars and dedicated players. So if you could make all guests come one more time, your revenue would climb by 33%. So what if you could turn each guest into a monthly visitor, or a weekly one? That's what a well crafted recurring membership system for your location can do.
One of our locations that implemented a charged recurring weekly membership system went from having 1238 members, who came an average of 0.24 times a month (that's 3 times a year), to a whopping 3121 members, coming 2.52 a month (30 times a year), in just 3 months!
Each time that member comes, they might buy a drink, food, or other activity not in their membership, even more ways to profit!
The higher percentage of customer retention is one of the most trusted ways of increasing any business's profitability. Your business will have a better chance of success if you get the customers to return and make repeated purchases.
Even if the customer cancels the subscription (churn) after two payments, you still had a better return from him. In reality, the customer is likely to stay longer to consume your products or services.
Subscriptions offer you an opportunity to establish a long-term relationship with your customers.
Want to add this to your store? Reach out and we can walk you through existing options through our partner program, or help you set up your own system!