Subscription Business Challenges: How to Identify and Overcome Them in 2023

Subscription businesses can face several different challenges. From subscription fatigue to customer retention, subscription businesses need to be aware of the challenges they may face and have a plan in place to overcome them. By being proactive and planning for potential bumps in the road, subscription businesses can stay afloat and continue to grow and thrive.

The article will cover how you can identify your biggest challenge(s) to running your subscription business, why they must be addressed, as well as provide tips on how to come up with solutions for overcoming these issues.

1. How to identify your biggest subscription business challenge(s)

The first step to overcoming any challenge is identifying what it is. You need to be aware of the different challenges your company, industry, and the market may face and understand the magnitude of each one of those challenges.

You can use different methods to identify your biggest challenge(s). One way is to survey your customers and ask them what challenges they face with shopping in your store. You’d be surprised what you can find out from listening to your customers. iHeartDogs.com saw their daily subscription rate double after making a change based on customer feedback! Video

Another way is to look at analytics to see which metric has the biggest negative impact on your company. This could include data on customer churn rates, subscription renewal rates, and more. Once you know which metric has the biggest impact on your business, you can start to develop a plan to address it.

Challenges faced by all subscription businesses and how to find your way around them

Subscription business owners should also be aware of the challenges their competitors are facing. This will give you a better idea of the types of challenges you may face and how to address them. It can also help to inform you on where to allocate resources and which areas need improvement. Your competitors (especially those that have been around the longest) can oftentimes miss the opportunities that lie right under the noses. Seize these opportunities and launch your company forward.

How to tackle the unique challenges of subscription businesses?

As subscription services become more available, unique challenges to growing a subscription business have come up from a variety of business sectors. One method that I like to employ to help solve these unique challenges is the 5 Question method that was developed by Sakichi Toyoda. The essence of it is that by repeating “why” five times when confronted with a problem, you can go beyond symptoms and discover the source of the problem.

For example, if my problem is a decline in sales, my first question to myself would be “Why are sales down?”. If I look at my data and see that traffic to my site has decreased, my second question to myself would be “Why is my site traffic down?”. After looking and seeing that an article that was once ranking on Google search suddenly stop bringing in traffic, my third question would be “Why is this article not providing traffic?”.

After checking with my developers and seeing that a change was made around the same date as the decline in traffic, my fourth question could be “Why did that change affect traffic to my article and website?”. Finally, I realize that my website was blocking search engine crawlers from scaping the content from my website for the last few months. After fixing the issue, getting Google to crawl my site, traffic and sales start to increase and my business is back on track.

What are the biggest challenges subscription companies face?

There are a few common challenges that subscription companies face. One of the biggest challenges is the subscription churn rate. This is the percentage of customers who cancel their subscriptions within a given period. Some of the other common challenges are the subscription renewal rate and the customer acquisition cost. The renewal rate is the percentage of customers who renew their subscriptions after the first month or year. The customer acquisition cost is the amount of money it costs to acquire a new customer.

What are the challenges of scaling a subscription business?

As subscription businesses grow, they often face challenges in scaling. This can include problems with logistics, customer service, and processing the payment. To overcome these challenges, companies need to have a clear expansion plan and be prepared to make the necessary changes to accommodate growth. They also need to make sure that their systems are scalable and can handle an increase in volume.

2. Why you must address your subscription business challenge(s)

Once the challenge has been identified, you need to take steps to address it. This could involve modifying the subscription offering, improving customer retention rates, or finding ways to reduce churn. It’s not enough to identify the biggest business challenge. You must take steps to address these challenges to continue thriving.

Each challenge can have a significant impact on your business if not addressed. Subscription fatigue can lead your customers to cancel their subscriptions, customer retention helps maintain revenue, reducing churn rate means more customers make their payment, and the right pricing is essential as it helps improve margins and profit.

Why are industries switching to the subscription business model?

There are several reasons why industries are switching to the subscription based model. One of the main reasons is that it allows businesses to build recurring revenue and create a more stable income stream. Brands that have multiple streams of revenue are more likely to survive if one area of the business begins to underperform because of reasons the company can’t control.

This kind of recurring model also allows businesses to better control their costs, as they generally know ahead of time how much inventory they need based on the number of subscriptions. It also allows them to focus on fewer products and do a better job at marketing and selling them. This can help businesses to be more profitable and grow more quickly.

How do I survive in a highly competitive market?

Your business needs to have a clear understanding of its unique selling proposition (USP) and communicate it effectively to customers. Your USP is what differentiates you from the competition and makes you worth choosing over the alternatives. Brands that have a strong USP can usually charge a premium for their products and services because customers have a higher perceived value.

To also stay ahead of the competition, you should always be looking for ways to improve your products and services. Start engaging with your customers on social media more with content that will lead them to your store. This is the difference between brands versus just another store. Brands customers can identify with are the companies they come back looking for more and more.

3. Tips on how subscription business owners can overcome their challenge(s)

The challenges are common, but that doesn’t mean they’re insurmountable. You need to be proactive and have a plan in place in your business model to overcome these challenges. Here are some tips on how you can overcome some of them:

Subscriptions Fatigue

To overcome subscription fatigue, you need to be constantly innovating and looking for ways to improve your products and services. You should also be active on social media and engage with customers directly. This helps to build customer loyalty and create evangelists for your business. Remember, this pandemic has brought a lot of different types of stress on customers. The better you can stand out, the better you stand at keeping your customer’s subscription.

Churn Rate

To reduce churn, subscription businesses need to focus on customer retention. This means providing a great customer experience, offering incentives for customers to keep their subscriptions, or offering more payment methods for billing. You can also offer discounts for customers who refer friends or family members. Brands that connect with customers on common beliefs or interests can reduce their churn rate dramatically. Reducing church by increasing customer retention is key to the success of your subscription businesses.

Subscription Renewal Rate

To increase subscription renewal rates, you need to focus on customer satisfaction. This means providing a great customer experience and offering incentives for customers to stay subscribed. Try adding value to your customer’s subscription through your support team by answering questions about billing or payment proactively. Give your customers a variety of payment methods to choose so subscription billing is not one of the reasons they don’t renew. Increasing subscription renewal rates is key to the success of your subscription businesses.

Customer Acquisition Cost

To decrease customer acquisition costs, subscription based businesses need to focus on up-selling and cross-selling. This means providing additional products or services to existing customers. Take a look at your customer journey through the checkout and look for opportunities to offer something your customer can’t refuse. This should increase the average order value, increase revenue and provide a better return on your advertising investment.

Dunning Process

The process of communicating with customers systematically to collect accounts receivables or subscription billing is known as dunning. Dunning can’t be avoided because billing your customers is a necessity regularly. Brands that use the right tone of voice, are clear about their subscription policies, and make it easy for customers to contact them can minimize the amount of churn for your subscriptions. Autoship Cloud makes sending these friendly communications to your customers with the right details and options they need to manage their subscription.

Prioritize Return & Exchange Services

Since you have a subscription model for your business, you need to be able to quickly and easily process returns and exchanges or cancel their subscription billing. Great service helps to keep your customers happy and maintain their subscriptions. Implement a return and exchange policy that is easy to understand and easy to follow (30-day risk-free). Make sure you have the resources in place to quickly and easily process returns and exchanges to provide the best customer experience possible.

Offer Attractive Discounts and Promotions

To attract new customers, you need to offer attractive discounts and promotions for your products and services. This helps to get new customers in the door and hopefully convert them into subscription customers. Can you offer free shipping or special discounts for subscription customers only? These are good places to start in discovering the right discount and promotion. Be sure to track the results of your discounts and promotions so you can continue using what’s working and stop using what’s not.

What are your biggest challenges to running a subscription business?

Running a subscription business is no easy task. You have to be able to identify and address your biggest challenges in order to keep your customers happy and coming back for more. Thankfully, there are ways to come up with solutions for these challenges. And if you’re looking for help getting started, Autoship Cloud is here for you. With their easy-to-use platform, you can create and manage your subscription business with ease – no programming knowledge required. Sign up for a free trial today and see how they can help make your subscription business dreams a reality!