Learn All About Setting Up A Food And Beverage Subscription Model
Food and beverage is one of the most popular in subscription business models. As they are fast-consumption and recurring purchase products, food and beverage bring high regular revenue.
With high growth potential, it’s no surprise more food and beverage businesses want to join the subscription model wave. But is it that easy to start a subscription model?
In this blog, we tell you how to set up your Shopify food subscription business model for success.
What is a food and beverage subscription business?
A food and beverage subscription business is a recurring revenue model in which customers sign up, pay a fee and receive products and services at regular periods. There are different types of subscription models. Once signed up, customers don’t need to place orders every time; rather, they receive their products and services on their chosen dates.
Some examples of food and beverage subscription models using Appstle Subscription and Loyalty app.
The benefits of food and beverage subscriptions
While all kinds of subscription models provide the basic benefits of convenience (for customers) and predictability and recurring revenue (for eCommerce businesses), subscriptions in the food market have many more advantages.
Subscription business models bring recurring revenue and hence, brands can predict the revenue month after month. Recurring revenue is also more stable and helps businesses plan their finances better. Recurring revenue can help speed up business growth. It helps increase customer lifetime value (CLV).
Better customer engagement
Subscription models are based on long-term relationships between brands and customers, and hence, this model provides many opportunities to engage customers. For example, you can:
- Send updates and notifications about deliveries
- Give freebies, new product testers, etc.
- Offer more personalized customer support
- Regularly collect feedback
- Offer exclusive discounts
Get customers to try new products
Getting customers to try a new product or service is much easier via subscriptions. When customers sign up for subscriptions, they enter a long-term relationship. This form of association builds trust faster. Besides, subscribers already like your brand and products. And so, they’ll be more open to trying your new products.
- Slip new products into the regular deliveries as freebies
- Offer discounts on new products and services
Improve customer lifetime value
The longer customers engage and transact with your brand, the better the chances to boost sales and improve customer lifetime value. For example, you can encourage customers to upgrade their subscription plan to a higher level. Moreover, if you offer a good experience, customers will renew their subscription plans year after year. This way, you can also ensure higher customer loyalty.
How to set up a food and beverage subscription business model?
If you’re looking to start your food and beverage subscription business, we’ve made it easy for you. Follow the below steps to set up your food and beverage subscription business model.
Step #1 Know the different types of subscription models
There are many types of subscription models, but which one should you choose for your food and beverage business? To determine that, you’ll first need to understand the different types and how they work.
Replenishment subscription model
As the name suggests, this type of model is suitable for reordering items on a recurring basis. Food and beverage products are consumables with a limited shelf life, and hence, they get consumed fast. They need to be restocked and replenished recurrently.
The replenishment subscription model suits food and beverage products. Customers don’t have to go through the process of selecting items and placing orders every time. The replenishment subscription model helps in many ways:
- Adds a competitive advantage to your F&B business—customers will choose your brand for the convenience
- Creates a consistent stream of revenue
- As the demand is predictable, it helps you manage the inventory better
- Boosts customer retention
- Customers get to try new food items
Build-a-box subscription model
Build-a-box subscription model allows customers to choose the products they want for every delivery. Customers may not want to buy the same food items. This type of subscription gives customers the freedom and flexibility to choose products, the quantity, delivery frequency, date, etc.
A build-a-box subscription helps:
- Boost customer satisfaction as customers can choose their preferred products
- Increase the customer lifetime value
- Offer freedom and flexibility to customers
Curation subscription model
Curated box subscriptions have an element of surprise. Customers receive boxes that include curated products. For example, in a grocery curated box subscription, the box could contain a mix of vegetables and fruits. Every delivery may have different items.
Benefits of curated box subscription model:
- Can be personalized—curate products based on individual preference
- Introduce new products through the curated box
- Collect feedback and reviews from customers
- Keep customers engaged and interested by adding new products every time
Step #2 Identify your food and beverage products
Food and beverage is a vast industry, and every vertical under it, too, is huge. And hence, when you’re launching a new food subscription retail business, it’s important to narrow down your product list.
Why? So that it’s easy for you to manage your inventory and subscription business model. Moreover, you can launch your subscription plans and products in phases.
Some tips to identify the best products for your subscription business:
- Conduct a survey, ask customers their favorite items
- Based on past sales, identify your star items—the most-selling products
- Add new products, discontinue products based on sales and customer feedback
Step #3 Decide subscription time frame details
Depending on the product and service, subscription deliveries can be daily, weekly, monthly, quarterly, etc. You must decide the time period, when you set up your Shopify subscription model.
For example, vegetables and fruits should have more frequent deliveries, while items like sauces and butter could have less frequent deliveries.
While you could decide the time frames on your own, a good way to go about it would be to ask your customers their preference. Conversely, you could have many options when you start your subscription business and bring changes based on what’s more in demand.
Another way is to keep it simple by offering only two or three delivery times, and later introduce more options to serve your customers better.
Step #4 Identify your subscription value proposition
The food and beverage market is brimming with subscription options. To succeed in the market, you have to ensure your subscription model stands out. That’s where you must bring in your unique value proposition—the perks and benefits you offer.
Steps to set up your value proposition:
- Define your value proposition before you start promoting your subscription business
- Define your goals, brand voice, and mission
- Understand what your target customers want and expect from you
- Analyze the value, benefits, and costs that you can offer to customers
Factors that will determine your value proposition:
- Financial benefits, for example, discounts and savings
- Community experience, exclusive events, etc.
- A feeling of belonging to an exclusive group
- Exclusive access to sales, new products, etc.
- Feedback and say in new products, etc.
Step #5 Incorporate flexibility and freedom in your subscription plans
Although food, beverage, and groceries are regular items, it’s possible that customers might want to make such changes in their subscription deliveries. For example, they might want to take a break, change products, quantity, delivery dates, etc.
With flexibility, you can make subscribers’ experience better. You can bring in flexibility across the customer journey. Let’s look at some ways to do so:
- Allow customers to choose the plan they want
- Allow them to change their plan with ease
- Let them add or remove the products and services they prefer
- Make it easy for them to contact customer care
- Enable flexible payments
- Allow flexibility to choose the type and form of communication customers prefer
- Allow the freedom to cancel subscriptions easily
However, setting up flexible subscriptions is not easy. For it, you need an efficient Shopify subscriptions app with technology capability.
Step #6 Set up payment and dunning management
Your subscription payments and pricing will depend on your products, services, and business goals. There are different types of pricing formats.
- Fixed price: a predefined fixed price. A straightforward pricing method where the pricing does not change.
- Tier-based pricing: different prices catering to different customers. When you have a wide range of customers, the tier-based pricing format works well.
- Variable price: based on products and items in deliveries. Food and beverage product prices may differ based on availability, season, freshness, expiry dates, etc. The variable pricing model is well suited to food and beverage items. For example, when customers add more products, they get charged more accordingly.
Once you set up the food and beverage subscription pricing, you can move to setting up dunning management.
What is dunning management? Dunning management involves sending the messages and prompts to customers to take the necessary action when their payment does not go through due to any reason; such as, expired cards, card decline, payment failure, etc.
Dunning management helps reduce churn, save time, and boost revenue of your food and beverage subscription business.
You can set up dunning management by using an efficient subscription app for Shopify.
Step #7 Choose the best shipping solutions for subscription deliveries
One of the main components of your subscription business is the shipping carrier. Because no matter how good your products are, if they do not reach customers on time or in good condition, your business is set to go downhill.
To choose a good shipping carrier partner, consider these factors:
- Proper handling and safety of products
- Delivery speed and accountability
- Company reputation and reliability
- Coverage and location
- Technology capabilities
- The ability to scale
Step #8 Set up automation
Subscription businesses are designed to build strong customer relationships. And one of the key aspects of these relationships is communication. Customers expect brands to keep them informed about their orders, deliveries, new products, etc.
And that’s why Shopify food and beverage subscription businesses need the capabilities of automation.
Here’s how you can automate:
- Install an efficient automation tool
- Automate order status messages
- Set up automated dunning management
- Send automated payment reminders
- Send automated delivery notifications
- Thank you messages
- Automated payment and billing notifications
Step #9 Set up a landing page
A landing page is where you can guide traffic from your content. For example, for your social media posts, promotional ads, blogs, etc. This is the page that provides helpful information to your potential customers.
To ensure your landing page converts, include these components:
- Information about your food and beverage subscription plans
- Content that helps customers decide whether they should sign up for the subscription plan
- Call to action button/s
- Separate landing pages for different customer segments
- Segments that collect customer information, for example, demographic, location, etc.
Step #10 Put together a marketing plan
To run a successful subscription business, you’ll need to craft a marketing plan to help you acquire new customers and retain the existing ones. Here are some aspects to include in your food and beverage subscription marketing plan.
- Incentives such as discounts and offers to first-time customers
- Set up a loyalty or rewards program
- Create campaigns on different channels such as email, social media, SMS, push notification
- Run influencer marketing campaigns by collaborating with micro and macro influencers relevant to the food and beverage industry
- Share user-generated content on different channels such as social media, etc.
- Run refer-a-friend campaign for your existing customers
- Organize offline events exclusively for your subscribers
Step #11 Monitor and optimize your food and beverage subscription
From onboarding customers to payment and post-purchase, there are many touchpoints in subscription businesses. And hence, it’s important to monitor each and every step in the journey.
Metrics to measure:
- Customer acquisition rate
- Customer retention rate
- Average duration of customers
- Customer churn rate
- Customer lifetime value
- Subscription renewal rate
- Net promoter score
- Monthly recurring revenue
- Active engagement rate
Only when you measure these metrics, will you be able to identify aspects that need your intervention and optimization.
Ready to launch your eCommerce subscription business?
It’s a good time to set up a food and beverage subscription business. Subscription model has been on the rise. Food and beverage being one of the fastest growing markets. And so, there’s immense competition in the business.
Hence, it can be difficult to reach your subscription business goals. To ensure success, you have to set it up well. Follow the above steps with the help of a comprehensive Shopify subscriptions app.
Appstle Subscription and Loyalty app is designed for Shopify eCommerce subscription businesses. The app provides comprehensive features to set up and market subscription plans.