When it comes to growing an eCommerce business, most people believe that the answer is to acquire as many new customers as possible.
In reality, it’s only the tip on the iceberg. The real growth opportunity lies in retaining customers who’ve purchased from you before. It’s like that old saying which goes like “make new friends but keep old ones around. The first is silver but the later is gold.”
And we couldn’t agree more! Today, one of the best ways to retain your eCommerce customers is to offer a subscription & recurring payment option.
Most eCommerce business owners think that the subscription-based business model is only limited to streaming services like Amazon Prime Video, Netflix, HBO, Spotify, and so on.
But the truth is, the subscription-based business model is no longer limited to the entertainment SaaS industry.
People nowadays want products like their toothbrushes, dog food, cosmetics, and other essential items delivered to them at the same time every month. And if you look from the general people’s perspective, this actually makes a lot of sense.
For instance, subscription-based delivery frees them from worrying about purchasing essential household items every month. This, in turn, helps eCommerce businesses that sell such essential items to generate a fixed amount of revenue every month.
Despite this, if you’re still skeptical about focusing on customer retention, then allow the following section to change your mind.
Why Customer Retention Matters More than Customer Acquisition?
When it comes to starting an eCommerce business, acquiring new customers is the ultimate goal. However, customer retention is also equally important, if not more.
Plus, acquiring new customers takes five times more time, effort, and money than keeping an existing one.
Moreover, existing customers are the driving force behind the success of any business. They are the ones who will be more likely to come back and help you keep your business going in the future.
So, if you want to ensure the long-term success of your eCommerce business, focus on enhancing your customer retention rate so that your existing customers keep coming back to shop at your store again.
And like we mentioned earlier, one of the best ways to improve customer retention in your eCommerce business is to adopt a subscription-based business model.
What is the Subscription-based Business Model?
Subscription is basically a type of business model in which customers decide to pay for certain products to receive them on a weekly, monthly, or yearly basis.
Unlike the traditional business model where businesses make money from a customer’s one-time purchase, the subscription model allows generating revenue on a recurring basis in return for the consistent delivery of products or services.
It’s basically a win-win contract between business owners and customers.
How does the Subscription Model work for eCommerce Businesses?
Let’s suppose that you’re a bodybuilder and you need to buy nutrition supplements every month. So, you go to the same store every week or month to purchase your nutrition supplements.
But wouldn’t it be a lot easier if you can get your nutrition supplements delivered to your house every month automatically?
Wouldn’t it be nice if your nutrition supplements are always stocked up so never miss your diet? Well, this is what the subscription model offers to the consumers.
It allows them to subscribe to certain products of a brand and get their items delivered at their doorstep at the same time every month.
And for eCommerce businesses, the subscription model allows them to generate a fixed amount of revenue every month automatically.
And that’s not it! There are many other reasons why eCommerce businesses should seriously consider adding subscription & recurring payment options to their Magento 2 store.
5 Reasons to Consider Adding Subscription & Recurring Payments Option in Your Magento 2 Store
If you’re looking for ways to improve your customer retention rate and increase sales, then the subscription model strategy is definitely worth trying out for many reasons such as…
1 – Boost Sales by Increasing Repeat Purchases
When it comes to selling products online, it’s quite difficult to persuade potential customers to buy from you.
According to Marketing Metrics, the probability of selling to a prospective customer is only 5-20%, while the probability of selling to an existing customer is between 60-70%.
This is mainly why the majority of businesses focus more on customer retention rather than customer acquisition.
A study by Harvard Business School also found that increasing the customer retention rate just by 5% can grow your sales by as much as 25% to 95%.
So, if you want to grow your eCommerce business revenue, consider integrating the Magento 2 Subscription Extension or Subscribe Now Pro extension in your Magento 2 store to fully leverage the benefits of customer retention.
2 – Fixed Basic Income
Apart from increasing your sales and revenue, the subscription model also gives a stable, fixed amount of basic revenue no matter the market situation.
All you need to do is, integrate the membership subscription extension in your Magento 2 store and get enough customers to subscribe to your products.
With this extension, you should aim to get a sufficient amount of subscribers to ensure that all your operational expenses are covered.
This will not only increase your profits from the orders besides subscriptions, but it will also help you survive if a financial crisis arises.
3 – Forecast Cash Flow More Accurately
Financial management is crucial for every eCommerce store.
As a business owner, you must build an accurate cash flow forecast. However, the main problem with running an eCommerce business is that you can never accurately predict how many people will visit your store and purchase your products.
Fortunately, the subscription model allows you to enhance your cash flow forecast. It basically gives you all the important data about the number of subscribed customers, products they’ve subscribed to, pricing, and payment method accurately.
This, in turn, gives you a holistic view of subscription sales you’ll generate every month, which helps to drastically improve your cash flow forecast.
4 – Control Inventory More Precisely
For every eCommerce business owner, it’s crucial to manage inventory effectively. But, the calculation is extremely challenging.
With the subscription model, however, you can easily control and oversee your inventory, control the number of products for sale, and storage of inventory.
In other words, with Magento 2 Membership Subscription, you can easily collect accurate data about your orders in months as well as in years. All you’ll have to do is record what your subscribed customers are going to buy and in what schedule.
This, as a result, drastically improves your inventory management and you have more control over it.
Over to You!
This is it! This is how you can boost your customer retention rate with Magento 2 subscription and recurring payment options.
As you know, customer retention is all about keeping your existing customers happy. And if you do that well, you no longer need to worry about your customers switching to your competitors unless you give them a reason to.
So, make sure that you’re making it convenient for them to stay with consistently rather than buy from a competitor.
