The consumer’s buying habit which is gravitating more towards a simple and convenient experience is encouraging more and more businesses to explore ways to provide this convenience.

Considerably, the subscription model is one of the ways which can be used by businesses to provide an improved experience.

The subscription model was initially pioneered by newspapers and magazines and later on, it has been used successfully by various software as a service (SaaS) companies. Beyond increasing the customer retention rates, a subscription business model has a lot more to offer that simplifies business and makes it more valuable in the long run.

Let us take a closer look at the benefits of the subscription business model for a food service.

What does it mean for the customer?

First and foremost, a subscription means added convenience for the customer. They get what they want at a lower price as they are buying in bulk. And best of all they don’t have to repeat the process of buying several times. They don’t have to place an order to restock after a few days or months. The item is delivered to their doorstep. It is almost magical, customers order it once and their product keeps coming up and replenishes itself before they empty their stock, it puts them in a good position where they never run out of the product. Or nor they have to repeat any painful process to procure it every month.

With flat discounts on subscriptions, customers can keep things within their budget. These initial discounts are the big engines that drive the subscription model.

Over the years food subscription boxes have taken this concept and brought out a very different approach to home cooking by combining highly curated recipes with seasonal ingredients. Another aspect that makes it easy to use is the additional flexibility provided by these businesses is to try their subscriptions and occasionally skip it when it is not required.

What does it mean for the Business Owners?

Once the customer orders from you, the likelihood of ordering again from you is very much higher in the case of a subscription. The major reason behind this: ordering process is automated.

When you consider a one time order, there are more variables involved. And this is multiplied whenever the customer has to repeat the same process every time.

Every business can creatively provide that extra value that can convert a one customer to a loyal subscriber. Once the customers like your offer, it is much easier to retain them and make them your loyal customers.

When you compare the volumes, the revenue generated by the subscriptions are way more than a single business transaction.

Predictability

The subscription business model amplifies your business and as a business owner, you can predict the revenue in advance. And when you already know what to expect in the forthcoming future (at least a significant part of it), you can definitely plan better and wiser. You can manage your inventory wisely and buy the required items and stock them with precision. There won’t be any last minute shortages of the ingredients. And this same concept helps you to avoid any wastage.

Cashflow

This simply means that the money comes upfront too! A subscription model will provide a good cash flow for your business. Instead of an estimate, you can be fairly accurate and expect the amount you will have in hand.

When you compare the margins with those one-off transactions, then the margins are way much better in a subscription model.

Customer Acquisition

Now when it comes to acquiring new customers you can actually commit more resources for their acquisition, primarily because as you don’t have to worry about the gaping hole which is usually left by fleeing customers.

If you look at this in a different light, it means that higher customer retention rates mean that you can build on a very stable foundation. When compounded over the years, this will translate to real growth.

Developing strong relationships with customers

In case of a normal feedback mechanism, the loop between you and the customer is not as well maintained as in comparison to the subscription. When you have repeat business, the chances that you get a feedback from the customer is also pretty frequent. So you can work on to identify and improve your shortcomings a lot quicker.

Put Data to Work

Subscription businesses are backed by a strong IT framework which also keep track of the enormous data generated by the customers. This data which can be used to make better marketing plans. This data which includes buying preferences, items usually bought together, frequency of the item in a particular order will help you run highly functional promotional campaigns.

Conclusion

Many different industries are adopting a subscription model for their business. This model offers better convenience to their customers. Subscriptions make budgeting easier for the customers. For business owners, it provides the ability to predict revenue, correctly and develop strong relationships with the customers.

For the last 3 years, Restolabs has been powering online ordering for food services. Our new update makes it easier for small business owners to leverage the subscription model for their businesses. If you want to know more about this feature or how it can help your business, then you can reach us here.