What kinds of things do you run out of regularly? Toilet paper, milk, coffee, dog food?
While business may be inherently unpredictable, and you’ll never be able to control whether a fickle market will want your speciality products or services, there is one thing people will continually and reliably pay for: Convenience.
The value proposition is simple: Life is too short to worry about mundane tasks like remembering to pick up toilet paper or razor blades. So businesses dealing with these products can set up a recurring delivery to their consumers. Subscribe and you’ll never run out.
Known as the Consumables Model, this is the go-to subscription model when there is no inherent enjoyment in shopping for the product you sell. Consumable subscriptions are operating successfully for products as varied as razor blades, dog food, nappies, toilet paper and toner cartridges.
Dollar Shave Club is the ultimate example of the Consumables Model. Their value proposition was based on the fact that name-brand razors were being sold for far too much money at the stores. Instead, Dollar Shave Club came in and positioned themselves as a cheaper alternative where people could access these items by getting them delivered to their door every month from as little as $3.
This was a real solution they were offering to customers. By offering products at cost, they were taking a hit on the mark-up revenue. However, with a predictable, steady income stream, Dollar Shave Club could create accurate, future forecasts and be able to manage their expenses precisely because of the monthly subscription revenue coming in.
Then they added the pizazz.
They created a truly unique customer experience focusing on ‘delighting’ customers with packaging and an edgy, fun brand. This helped them scale and ultimately led to a successful acquisition.
In 2015, they were purchased by Unilever for a whopping $1-billion dollars!
This model is ideal when your business has either:
As seen in the U.S, Big Box “e-tailers” (e.g. Amazon, Target) offer subscriptions for many consumables. So, in order to succeed against the scale of Amazon and other giants, you need to clearly identify your points of difference.
While you can’t fight them on price, delivery speed or product variety, you can give customers a reason to buy your product instead. Have a strong brand on everything you sell, entice customers to fall in love with your brand through the experience you provide and ensure you can maintain a steady delivery service to provide constant value.
Who Gives a Crap offers super-soft, 100% recycled toilet paper and donates 50% of profits to build toilets in the developing world. Their best value subscription is 48 double length rolls for $48 delivered, on an adjustable schedule that suits the consumers need. They’ve added tissues and paper towel to their range after consulting their subscriber base.
Does this sound like a model that would work for you?
One thing to keep in mind is not to underestimate the logistical challenge of fulfilling a physical product or service for thousands of subscribers.
You may have to take control of the manufacturing process to ensure you can access supply if and when you should need it.
What a journey it's been unravelling the 9 Models of Recurring Revenue!
As you can see virtually every kind of business, in almost any industry, from Fortune 500’s to your local trades person, can create at least some recurring revenue in their business. It requires you to look at your business from a few different angles, and to be open to a new way of
Implementing one of these subscription models (or variation of) in your business could change your life and your business forever.
We wish you every success.
If you still haven't signed up for the series, drop us your details below and we'll send them straight to your inbox.
CEO and Founder, Exit Advisory Group
If you would prefer to reach our directly, I would love to start a conversation. Connect with me and send me a message on Linkedin, or get in touch any of the ways below. Old fashion phone calls are also welcomed!
If you liked this article we'd love you to share it!