From car clubs to chilli sauce boxes and computer software, the subscription model is on the rise. American Express sets out four top tips to capitalise on this growing market

UK consumers now spend £395m every year on subscriptions, which takes in everything from Amazon Prime to independent subscription boxes. The market is set to be worth £1.8bn by 2025, according to Whistl.

How can your business get a piece of this huge – and growing – opportunity? 

1. Identify genuine customer benefits

If a customer wants to buy something, it is often easier for them to just do it there and then, without the hassle of signing up and handing over details.

So why should they sign up for a subscription? What does it add to the customer experience? Do subscribers get money off? Advance access? Exclusive products? Convenience?

Your subscription needs to save the customer time, money or stress.

Spotify’s Family subscription model is a perfect example of all three – a single automated payment per month gets your entire household (which may have dramatically different music tastes) all the music you could ever want anytime, anywhere.

2. Take subscriptions seriously

Subscriptions are not an add-on to your existing business – they are a separate business in themselves, which comes with all kinds of unexpected and volatile costs.

With subscription boxes in particular, rises in postage costs can rapidly erode your profit margins. You will also need to arrange packing and shipping, and sign up for services to manage payments and subscriptions.

Plus, you will need the capacity to provide excellent and rapid customer service when your software does not work, or your subscription boxes have not arrived.   

3. Talk to your customers

A McKinsey study found more than a third of consumers who sign up for a subscription service cancel it within less than three months. Within six months, half your subscribers are likely to be gone.

Talking to your customers, acting on feedback and changing your service to suit them is key to keeping them.

One of the most common reasons for cancellation is when a subscriber ends up with too much of the product coming through their door.

Hello Fresh’s flexible subscription service helps customers avoid this: they can cancel, change their chosen meals or skip a week.

4. Never stand still

The flexibility of a subscription service offers your business incredible opportunities to iterate and improve your products.

Every month, you have got a chance to give your customer something better – and if you do not, they will switch to someone that will.

Take creative software provider Adobe. Their industry-standard Photoshop used to cost around £600 to buy as a standalone package – a major expense for many smaller creative businesses. Now, it is available to their Creative Cloud service subscribers for £19.97 per month, including updates every six months.

The change has paid off: a decade ago, when Creative Cloud launched, Adobe’s customer base was 12.8 million. Now, Creative Cloud has 26 million subscribers.