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A Look at the Subscription-based Business Model: The Power of Subscriptions for Food

By Nick Epson on October 6, 2020

Almost overnight, business acknowledged a shift in how consumers prefer to buy – today, subscription-based business models are the norm for everything from delivering products to people’s doors to selling on-demand services. This model even works for our food as everything from on-demand restaurant food to grocery subscription services are widely available. 

It’s safe to say that we’ve come a long way from the days of hunting and gathering as our food now comes to us! 

But what makes food subscriptions so great and how can it work for your business? We’ll take a look at the general style of this service and touch on its value then we’ll dive into some specific examples.

Why is the subscription-based business model king?

We see this business model reign supreme because of the simple fact that it’s easy. It’s easy for the buyer and it’s usually easy for the seller. While there are challenges in getting an app started and marketed to the appropriate audience, once everything is in place and business is rolling, supporting the app is a relatively straightforward process.

Subscriptions offer an accessible way for customers to get whatever they desire, on-demand. We used to have to go to the nearest Blockbuster to get our fix for major motion pictures or TV series until Netflix came along and crushed them. Ever since Netflix has had an app, people have voraciously bought smart TVs and other smart devices that run streaming services because it’s hands-down the easiest way to ingest media.

For both businesses and users, the subscription method offers a reliable “set it and forget it” way of affordably delivering and purchasing services. Businesses can essentially break down whatever product or service into a “piece” that is then delivered at a certain frequency. Customers receive a steady supply of the product or service at some set price point that makes it easy to budget, even though such models typically cost the consumer more money when looking at the long term.

As consumers, we value convenience (and quality) above all else which is why subscription-based services aren’t slowing down any time soon. If you’re offering some kind of food, you need to figure out how to make it as on-demand as possible, even if it doesn’t directly involve some kind of to-your-door service as one popular flavored syrup company, Torani, figured out during the early days of this year’s pandemic.

A quick look at Apple’s new subscription service

The truth is: just about every big name out there is using the subscription-based business model to sell products or deliver an on-demand service. Apple is about to ramp up its offerings this fall with the new Apple One which will combine its six most popular services into one all-inclusive subscription at a discounted rate compared to purchasing everything à la carte.  

Apple is a great example of a company that has pivoted its offerings over time. Looking back at Apple’s history, they’ve historically been a company that has gotten by selling their hardware. Today, they’ve shifted to offering services like Apple Music, Apple Arcade, Apple TV, to name a few, which is becoming their bread and butter.

The power of subscriptions for food

Aside from media, the most popular kinds of on-demand services today revolve around food. We gotta eat, after all!

When it comes to the on-demand delivery of unprepared food, some of the more popular, contemporary examples include the likes of Blue Apron or Hello Fresh. With either, the customer picks a plan, sets up payment, then receives high-quality food at regular intervals. This alleviates the need for lengthy or frequent visits to a grocer by supplying just about everything a consumer could need to make fresh meals with real ingredients.

Such subscriptions that offer – or should offer – the following to provide the highest level of value for the customer:

  • It offers an automated mechanism to re-order. Customers should receive their products at regular intervals as well as be able to use an app or web platform to easily get more or alter their subscription. A push notification system can be used to engage customers around the time they would typically need to re-order if they’re not set up on an autopay schedule.
  • There’s some kind of loyalty rewards program. From a business perspective, this serves to increase sales and overall profit by providing a “deal” that instills the idea in a customer that they can spend more, especially when the offer is some kind of percentage off regular pricing.
  • Subscribers can interact with each other or at least find valuable information published in-house. This is great for customers who are looking to spin recipes and do more with the food they purchase. Forums and other tools for users to interact inherently increase value by expanding the amount of knowledge a site or app hosts.
  • Promotions. By giving a user reward every time they successfully convert a friend or family member into a user, the user will often put that money back into the service meaning discounts or coupons will pay for themselves. Plus, the business earns more revenue from additional customers. Though new customers typically get started at a reduced rate because they signed up through a friend, it gives them a chance to “get hooked” meaning they’re more likely to continue the service if they’re satisfied.
  • Simple onboarding tactics. Businesses should implement QR codes that link a user to a sign-up form that they can complete using a modern sign up or authentication tool. Making the registration process simple is key as it translates to higher conversion.

While the subscription-based business model seems to be most effective for grocery delivery, the reality is that this same style can be applied in other scenarios. For example, if your model is strictly B2B, then why not make it as easy as possible for businesses you work with to order your products? Apps for business work on the same premise and put you in the category of being an “easy” vendor when ordering is mostly automated.

In another example, one method that a business could employ would be to partner with an existing brand like Blue Label Labs customer, Valhrona, which provides inspirational content for pastry chefs. From here, you could start a service that provides, say, chocolate on-demand – by leveraging an idea that you find on Valhrona, you then start a service that creates and delivers said items. You would want to give credit where it’s due and hope that, in time, this develops into a relationship that would allow you to expand your offerings and ultimately get Valhrona to help market on their end as well.

Blue Label Labs understand the power of the subscription-based business model

Blue Label Labs disrupts evolving marketplaces by building products that flow with the current of digital trends. We can help you plan and ultimately develop a subscription service for the food you offer whether you want to compete as a grocery deliver service, an automated catering business, or something else. Get in touch with us and ask us how we can integrate valuable subscription services for your business.

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