Whether it’s groceries or clothing, customers are signing up for subscriptions for all kinds of products and services.
And everyone’s favorite drink, coffee, is no exception. As a result, eCommerce is witnessing an increasing number of coffee subscription businesses.
If you’re thinking of starting one, this guide is for you.
What is a coffee subscription business?
A coffee subscription is where customers pay a subscription amount for a pre-defined duration and receive coffee for that period. For example, the duration could be a month, quarterly, half-yearly, annual, or any other.
If you’re wondering how a coffee subscription works, it works like any other. With this type of service, customers get to try different types of coffees. Depending on the subscription format, customers may be able to choose if they want the same kind of coffee or a variety.
How big is the coffee subscription model?
Based on a 2021 estimate, coffee subscription business sales account for around 2% of the global coffee spending which is expected to go up by 5%-7% in less than a decade.
The coffee subscription market is valued at around $685 million (USD) globally. With a CAGR of 10.9%, the coffee subscription business market is expected to reach a staggering $1.98 billion before 2032 ends.
What is the churn rate for coffee subscriptions?
The average churn rate in the coffee subscription industry or the percentage of subscribers that cancel or decide not to renew their subscription is around 11%.
This figure is common among most subscription-model businesses.
Why sell coffee subscriptions: the benefits
It’s a recurring revenue stream
Selling coffee subscriptions enables you to predict your recurring revenue, which can help you plan your business goals and tasks. Besides, revenue forecasts also make your business financially healthy.
Helps increase customer engagement
Offering coffee subscriptions opens up more opportunities to engage with customers. For example, engage when you send regular delivery updates, tell them about new coffees added to your inventory, etc.
Makes it easy for you to introduce new coffees to customers
The subscription model makes it easier for you to introduce new coffees in your inventory to customers. For example, you can add a sampler packet in the regular deliveries. Moreover, you can also offer a discount on new coffees, which improves the probability of customers buying the latest products.
It adds a new revenue stream to your business
Adding a coffee subscription model to your existing coffee business gives you a new revenue-generation stream. Coffee is a fast-moving consumable that customers need to replenish regularly. A subscription model can help you increase income.
Now that we know why you should sell a coffee subscription, let’s back it up with a few numbers, too.
Improve customer lifetime value
When customers join subscriptions, they enter into long-term relationships with brands—at least, that’s the intention when they first join.
If their subscription experience is satisfactory, they continue to renew their plans year after year. This is because the nature of the subscription business helps brands improve customer lifetime value.
With immense competition in the coffee subscription market, setting up a subscription model on your Shopify coffee store can help you improve the customer lifetime value.
Expand customer segments
A coffee subscription model can make it easy to expand your customer segments. Think about it; coffee has a massive customer base. People of all ages, gender, in all locations, and demographics drink coffee.
You can target these different groups by setting up customizable coffee subscriptions to meet the preferences of different segments. Allowing flexibility and the freedom to choose from a wide range of coffees is a for sure way to expand your audience.
Boost customer engagement and loyalty
A subscription is built on the premise of a long-term association between customers and brands. Since it is a recurring transaction model, it provides multiple opportunities for coffee brands to engage customers.
For example, regular delivery updates, a monthly coffee newsletter, new coffee announcements, discounts, surprise gifts, etc. These communication strategies help keep customers engaged and hence, loyal.
Subscription business statistics you should know
- The global D2C market is forecast to grow at a compound annual growth of 15.3% from 2022 to 2027
- 40% of all coffee sales in the next five years will be D2C
- The curation model currently has the largest market share worldwide
- 79% of consumers in the US prefer to make their coffee at home
- Smaller quantity coffee purchases are growing in popularity
The above statistics show a steady growth in the coffee subscription market size. But that’s not the only benefit. Let’s look at the overall benefits.
How to get started with your online coffee subscription business?
What are some examples of coffee subscriptions?
If you want to learn how to launch your coffee subscription business, seeing a few good coffee subscription businesses in action will greatly help. Here are some of the best global coffee subscription businesses to learn from, for anyone planning on starting a coffee subscription box:
Bean Box Coffee
Born out of Seattle’s digital culture, Bean Box blends coffee enthusiasm with creativity and tech to provide subscribers with the finest coffee. One thing that makes this subscription service unique is the sampling sessions called “tasting flights”, where first-time subscribers are provided with four 1.8-ounce bags of coffee as samples. Bean Box hence knows not only how to win subscribers but also appreciate new subscribers, thus encouraging loyalty from the outset.
Atlas Coffee
Atlas Coffee Club’s strength lies majorly in its exceptional onboarding process. They take their subscribers through a section where they collect information on the customer’s preferred roast, coffee type, bag size and so on to perfectly customize the subscription box to the customer’s expectations. This global coffee subscription brand sets a great example of how to approach customization.
MistoBox
Mistobox’s subscription plan provides choice and does this in the best way possible. With the finest coffee roasters from over 60 countries and 600+ choices of coffee, the customers have innumerable personalization options. The brand makes the whole process transparent by clearly providing a section- “How MistoBox works” to alleviate basic anxiety any customer might have in trusting a brand.
If you are looking for more inspiration take a look at our blog on the best coffee subscription business examples.
Understand the different types of subscription models
To set up a subscription business for success, you must first understand all the possible subscription options for your business. Besides, this will help you know how coffee subscriptions work.
The subscription model type to choose, depends on the nature of your products/services and the industry.
Here are some of the most common types of subscription models:
Replenishment subscription
This would be a good model for coffee subscriptions. It is most suitable for consumables that customers use regularly and, hence, have to buy it often. Moreover, coffee has a short shelf life; therefore, it’s best bought fresh in small batches.
With this subscription model, customers can receive their selected coffee in every delivery. Moreover, it is convenient, as customers do not have to go through the whole drill of choosing their favorite coffee, adding it to the cart, placing new orders, and making payments, every time.
Benefits of the replenishment subscription model:
- It adds a competitive advantage to the business—customers who like the convenience factor will choose your brand over others
- It provides a consistent stream of income
- It enables you to manage the inventory better as the demand is predictable
- It helps improve your customer retention rate
Curation subscription model
In the curation subscription model, customers don’t know what products they will receive. They receive a curated selection of coffees. Every delivery may include different coffee types. It works on the element of surprise.
This model, too, works well for coffee subscriptions because customers like to try new types of coffee.
- Allows you to offer highly personalized customer experiences
- Easily introduce new products to customers
- Get customers to try and share reviews of new products
- Maintain excitement with the element of surprise
Build-a-box
This subscription model allows customers to tailor their coffee boxes to their preferences. For example, customers can choose the different types of coffees, quantities, delivery frequency, dates, etc.
Benefits of build-a-box subscription:
- Provides high levels of freedom and flexibility to customers
- High customization increases customer satisfaction
- Helps increase the customer lifetime value
Identify your product/s and source it
Another critical step is to identify the products you want to offer customers. For example, let’s say your product is the main protagonist of your coffee business. If your product is not good, your subscription business is set to fail.
But don’t fret. As your business takes shape, you can change products, add new products to your inventory, discontinue, etc., based on customer feedback and preference.
Determine subscription time frames
Depending on your customer needs, you must decide the subscription time frames. Choose from weekly, monthly, quarterly, half-monthly, and annual time frames.
The best way to choose the time frame is to conduct surveys with your existing customers. Ask direct questions, such as, ‘what time frame would you prefer to sign up for?’, etc. This will help you get a clear sense of the available time frame options.
To keep it simple, you could start with one or two options; for example, quarterly and annual subscriptions.
Then, as your customer base grows and you learn more about their preferences, you could introduce more options to serve different customer segments.
Identify the value proposition of your coffee subscription model
The coffee subscription market is chock full of options. So how do you ensure you stand out from the crowd?
That’s where your value proposition comes in—the mix of financial benefits and perks you’d deliver to your customers. Satisfying your customers would be the key to sustainable value creation.
Here’s what you can do to figure out your value proposition:
- Define your value proposition before you start promoting your subscription business
- Identify your subscription business goals, brand voice, and mission
- Get a sense of what your target customers want and expect from you
- Analyze the value, benefits, and costs that you can deliver to customers
Different factors to consider to build the value proposition:
- The amount of financial benefits via discounts, etc.
- Other benefits such as community experience, events, exclusive perks
- A feeling of belonging to an exclusive group
- First access to sales, new product trials, surveys, etc.
Determine the flexibility aspect of your coffee subscription
When customers enter into long-term commitments such as subscriptions, they expect a reasonable degree of flexibility from the brands.
For example, customers might want to customize their subscription or want the freedom to pause and swap deliveries when they want to.
Flexibility helps create subscription businesses where customers remain happy. And here are some aspects that you may have to play around with:
- Flexibility around product choice—customized boxes
- Delivery schedule
- Payment options
- Canceling and pausing subscriptions
- Flexibility to choose the types of communication customers can receive
Identify subscription payment and set up dunning management
Depending on your goals for the subscription business, you will have to consider the subscription pricing or payment strategy.
You could have a fixed price model, where there’s a predefined fixed price for the subscription.
Another payment format is tier-based—have different prices catering to different customers. The tiered pricing method would work best for you if you have a broad range of customers.
You can allow customers to add more products to their regular subscriptions for an added cost. This helps you increase revenue.
Then, based on the payment method you go with, you’d have to choose the other aspects:
- One-time payment or periodic payments
- The different payment methods
Once your coffee subscription model payment is sorted, there’s a critical aspect to look into—dunning management.
What is dunning management? It’s how you reduce churn when there are payment failures, card declines, expired cards, etc. Dunning management will help reduce churn, save time, and run your online coffee business smoothly.
To set up an efficient dunning management system on your online coffee subscription business, you’ll require a smart tool that allows automation for dunning.
The tool should be set up to recover failed payments by sending notifications to customers. In addition, you must set up your dunning system to offer incentives to customers so that you don’t lose a sale or a client.
Explore Appstle Subscriptions and Loyalty App to set up dunning management on your eCommerce website.
Set up communication automation
Communication is the backbone of every eCommerce B2C business. Customers expect quick updates once they place orders.
Not just that, customers use different communication channels such as email, SMS, WhatsApp, etc., and have gotten used to receiving updates on all channels.
For example, if they miss reading the SMS, they can refer to the email.
With communication automation, you can leverage your day-to-day communication with customers. You can create, schedule, and send communication in an efficient manner.
Here’s what you can do:
- Automate order status alerts
- Set up automated dunning management
- Send automated reminders for payment deadlines before the subscription renewal date
- Send automated delivery notifications
- Automate thank you messages after every transaction
- Enable automated billing and payment notifications
Set up a landing page to promote your coffee subscription
Say, in your social media post, you tell customers about your newly launched coffee subscription. Your post talks about a wide range of coffee selection at the best prices.
You’ve made these promises in a short social post. The next thing you need to do is provide more follow-up information. That’s where the landing page comes in.
A landing page is any web page that customers can be driven to from your content. The landing page lets you share more information about your coffee, your subscription offers, special prices, etc.
Here’s what your online coffee business landing page should include:
- Your landing page should give information about your subscription offers rather than talk about your company
- Create a landing page that is focused. Don’t beat around the bush. Customers should get the information they want, and lead to completing the sign-up process
- Ensure it has at least one call-to-action. It can have more call to action buttons, too
- Create separate landing pages for different customer segments. That way, you can target customers better
- Ensure you collect more information about the customers. For example, just the name and email address aren’t enough. Try to gather demographic, geographical, etc. data
- Include links to your other platforms in the landing page. For example, social media pages, blog, etc.
Here’s an example:
Create a marketing plan for your coffee subscription business
Next, you’ll have to put together your coffee subscription business marketing plan.
Now, you can employ hundreds of marketing tactics, but you will have to pick a few, to begin with. To identify which strategy you must choose, consider your products, potential customers, and overall business goals.
Here are some marketing strategies for your coffee subscription:
- Special offers to new, first-time customers: entice new customers to join your subscriptions by offering them deals and discounts
- Loyalty or rewards program: customers earn points for every purchase
- Create cross-platform campaigns: include email, social media, SMS, push notification, etc. channels to market your subscription business
- Partner with influencers: identify micro and macro influencers related to your industry to broaden your audience reach
- User-generated content: employ social proof by resharing user-generated content on various platforms
- Refer-a-friend: invite referrals from your existing customers
- Organize offline events: conduct offline coffee tasting events in collaboration with cafes and chefs in different locations
Learn more marketing strategies for your coffee subscriptions business in this article.
Monitor and optimize your subscriptions
There are multiple customer touch points in a subscription business, from the onboarding process to the payment process. And if there’s a glitch in even one aspect, the entire customer journey flow can be disrupted.
Therefore, it’s critical to monitor your subscriptions business performance. Then, optimize it to address issues and fill the gaps.
Here are some metrics to monitor:
- Number and rate of new customers
- Customer retention rate
- Customer churn rate
- Customer lifetime value
- Net promoter score
- Active engagement rate
- Average duration/ life of subscribers
- Subscription renewal rate
- Monthly recurring revenue
- Annual recurring revenue
Once you measure your coffee subscription business metrics, identify the gaps, where you’re falling back, and optimize it.
How Appstle can help your online coffee business?
Whether you’re an online coffee business with a subscription model set up or want to launch subscriptions, you will need an intelligent tool to help you.
Appstle provides customizable features for subscriptions with features built to grow subscription businesses.
Explore Appstle Subscriptions and Loyalty app on your Shopify store today.
To know more, request a demo.
