What I want to talk to you today is the culmination of the last few years of running a successful subscription box business that has generated hundreds of thousands of dollars as well as helping others to do the same. I’ll be sharing a few key insights and then breakdown the 4 “pillars” as I’ve been calling them, into actionable elements that you can use to help grow your subscription box business.
What I have identified
One of the great things about helping other Sub-Boxes with their business have been the ability to take a look under the hood and find out what makes them tick.
I’ve been able to see how they are making some amazing decisions for their business but also where they need to improve before they go out and try to scale their box.
It’s the subscription box business that focus on having systems and processes for every part of their business that are getting the most success. From the before they launched their subscription box they have continued to build standard operating processes (SOPs) or Plans for everything.
From customer acquisition and support to shipping and packaging. Everything is planned, measured and tested with only the best processes making the cut.
One thing that has struck me through my research and work with other business owners has been just how simple and straightforward it is to break down the steps needed to really excel in each part of your business. So, this post is going to be the culmination of my journey to date and I want to share that with thhe wider world. I’ve broken the work I have done in Marketing and Operations for other business PLUS how I have personally hhandled growth and retention in my own Sub Box – The Whisky Order.
It’s all neatly packaged into four main “plans” that will help you to setup and manage your business with clarity.
Enough of me crapping on, let’s have a look at them
1. The Launch Plan
2. The Marketing Plan
3. The Retention Plan
4. The Growth Plan
Independently, each one of these plans form a powerful document or action plan that you can use in your business. But where they really shine is how interconnected they are and just how significantly they can complement each other. It’s like when you move from working alone when you are packing boxes to when you work with a team. You don’t just double your productivity but it triples or even quadruples your performance.
The same thing applies here.
In this next section I’m going to break down these 4 pillars for you and help you to create action plans of your own.
Your Launch Plan
The launch plan is the foundation document that will set the tone for your business. I find that its best to split this plan into two main parts:
- Part 1: Is the detailed information about your subscription box.
- Part 2: Is the detailed plan on your launch activities
Part 1: Sub Box Information Plan
This part of the document is very tactical. It’s where you are going to write down and get clarity for your business idea/pre-launch phase.
Because this part will vary from business to business I’m going to gloss over a lot here. But don’t worry, as you keep reading you will find that your Marketing Plan, Retention Plan and Growth Plan will fill in any gaps you may have AND build on what you develop in here.
What goes in your Info Plan?
- Who you are (business name)
- What you offer
- Who you offer it to
- Why do you sell this product to them?
- Website Go-Live date
- Launch Date
This is all about having clarity and specificity about the type of customers you want to attract, what you are going to offer them and why they want what you have. It’s specific, measurable and forces you to really go deep into the mind of your target market. It’s this depth that really helps set you up long term in your marketing message.
Key Focus Areas:
The biggest mistake you can make when pricing your box is pricing it too low. There are a lot of factors that will influence your pricing structure and if you get this wrong it will have serious consequences as your business grows.
- Not being able to hire staff
- Not being able to afford to acquire customers
- Not making enough for YOU! Or worse…
- Not making enough to pay your taxes
How do you deal with this? Well first make a list of every single cost that goes into making a box.
- The Box
- Items (average the cost with the highest possible number)
- Label for shipping
- Printer Ink/Toner costs
- Anything not listed that is relevant to getting that parcel to a customer
Now, once those costs are added up – add 20-40% for your profit margin. That should give you plenty of buffer in your pricing so you can offer discounts and special offers.
One thing to note: Your pricing can always change. Don’t feel like it’s set in stone. Test pricing increases with your customers after a few months. Profit = power.
Pick a date and keep it. Simple. Don’t overthink it. Just do it.
Part 2: Your Launch Activity Plan
- Pre-Launch Period
- Landing Page setup
- First Shipping Date
- Target Email Sign Ups
- Target Subscription Sign Ups
- Launch Offer (Discount etc)
- How will you advertise
- Your marketing budgets
Part 2 is all about acting with clarity and purpose. You setup KPI’s, budgets and also draw that proverbial line in the sand that will help you launch.
The biggest problem I see is that most, if not all Sub-Box wannabe’s will procrastinate in this space for far too long. This procrastination leads to self-doubt, and this self-doubt can cause you to start self-sabotaging or worse… to become paralyzed and do nothing.
Your KPI’s are of your choosing, your budget is your own budget. You get to decide what you feel are right for this measure but having it clearly written out and decided forces you to take the next step on your launch journey.
My advice for those stuck in the pre-launch phase:
Start creating your launch plan now. Break it down into the two phases and write down the exact steps you are going to take. Put your launch date in your calendar and get to work.
The biggest goal for you in the Pre-Launch phase is really to get email subscribers and people committed to buying your first round of subscriptions. So your mindset is about: How can I advertise my pre-launch in a way that hits the market I Identified in Step 1?
For ideas on pre-launch marketing tactics – check out my post here. It’s got over 25 ideas for you.
Get clear about everything at the start. Write it down like the examples I have shown you even if it feels a little overwhelming. It’s worth it in the long run!
- Set a clear date – and keep it
- Get a landing page setup – Dont overthink it
- Setup your pricing – Get the sums right
- Think of your pre-launch offer – make it an event!
Your Marketing Plan
You have launched! Congratulations!! I hate to say it, but it’s not over yet. In fact the fun is only beginning.
Once you have your business off the ground you need to start testing, measuring and finding your very best subscribers.
Creating a Marketing Plan is VITAL. It will be the fuel that feeds your business, help protect you against shiny thing syndrome, which is something that is very real for business owners and provide you with the clarity you need to stay the course on your marketing decisions (and when to bail).
Marketing Plan’s will generally be an individual thing, because unlike the horse shit that is being shovelled down the Internet Marketing pipeline these days, there is no one size fit’s all approach to getting customers. In fact you should always strive to find the path that works for you even if it’s contrary to general marketing convention.
There ARE a few consistent elements though that will help you to get the most out of your traffic sources and these elements follow on from your Pre-Launch Plan.
Just like in your launch plan I like to break these elements down into two parts
Part 1: Your Message
- Your website MUST pass the grunt test
- Your website NEEDS to tell the customer what to do
- You need to KNOW your customers
- Don’t focus on building a subscriber base – build an email list
Part 2: Master Your Traffic Sources
- PPC doesn’t always have to be profitable
- Don’t ever rely on one traffic source
- YOU are responsible for getting eyeballs on your site
- Measure, Test and Optimise
Time to break that down.
But first a quick note. I want to point out that I didn’t include any specific traffic sources in that outline. The reason being is that there is not one traffic source that is going to fit all. The dickhead marketers out there are going to try and ram some secret sauce like Facebook Ads down your throat but to be honest, it’s not really that complicated to find a traffic source that works for you. What makes it work is if you have clarity of your marketing message and you know your audience very well you are not going to struggle to find ways of nudging them in the direction of subscribing.
Mastering your message.
What do I mean by “mastering your message”? Mastering your message means that you are able to succinctly articulate to people and potential customers what your business does, who it serves and how someone can take the next steps.
In the start-up world, this is generally called an elevator pitch.
It gives someone the short spiel that they need to accurately understand if your product is for them and make the decision to find out more or subscribe.
The reason that this is so important to get right before you start spending your marketing budget is because it helps make you extremely clear about who you want looking at your ads or posts and helps them to understand what you are trying to sell them.
We are inundated now with more advertising and marketing than every before, if you are not very clear about who you want to target with what message you will generally get lost in the weeds. People just switch off and are numb to advertising these days.
You might find that your message evolves over time, and that’s ok. In fact I would be surprised if it doesn’t. As you gain more market awareness you will get a clearer picture about the types of customers you serve.
I’ll give you an example from my own experience.
When I first started The Whisky Order I made the hypothesis that I would be serving Men aged 35-50, who lived in major metro areas. I figured they would be suave single guys who look for sophistication. After running ads for a few months and not really getting much traction, I decided to have a better look at the data.
Low and behold I was off in my targeting!
It turned out my single biggest customer base was… wait for it… Females – 25-35 all over Australia who were purchasing subscriptions for their partners – not gifts but subscriptions!
This meant that while I was getting traction, it was more by luck that by design. Once I changed the messaging to focus on that core customer base I instantly saw a greater ROI from my marketing.
But this change didn’t just happen overnight. Nor did I change just my ads and targeting. No, It also applies to how I setup my website. So for that lets find out why….
Messaging is not just about ads
I mentioned a little thing called “the grunt test”. Now I’ve shamelessly stolen this from one of my favorite marketers of all time: Donald Miller of Story Brand.
The Grunt test is the ability of your website to make sense to a user in the first 3 seconds. If it doesn’t you have lost that customer. I guarantee it.
Think of a caveman. If he was your spokesman and you wanted him to articulate in the quickest way possible what your website does how would he say it.
“*grunt* – We send you new whisky every month”
Ok, that was a poor caveman impression, but you get the point.
It’s simple, to the point and it makes it damn clear to my users what I do for them. So when you are thinking about the title messages for your site, make sure it passes the grunt test.
Why focusing on new subscribers is the WRONG choice for marketing
Something that has taken me a long time to learn is that putting all my marketing efforts into getting more subscribers is the wrong idea. You should only be focusing on one thing to begin with – building your email list & relationships with prospective customers.
It sounds counter-intuitive, so bear with me hear while I explain.
When most people think of marketing they are generally focused on spending money and then getting a result in the form of sales from it. This is known as getting an ROI from your advertising.
There is nothing wrong with this, in fact it makes sense, but where most people will get it wrong is they think marketing is a simple two-step process.
1 – I launch an Ad
2 – People pay me money
= $$$$ Profit.
But this couldn’t be further from the truth. As we talked about earlier, we are so overexposed to marketing messages and ads these days that customers are generally quite numb to them. This leads to high costs for marketers and business owners AND it leads to the fear that certain marketing channels just don’t work.
I’m not able to count the number of times I’ve heard things like “Facebook Ads don’t work” from business owners.
What I have found is that, just like in real life, you need to focus on building a relationship with your target market before you start asking for the sale. You need to earn trust. The businesses that do this effectively will reap the long term rewards in the form of cheaper customer acquisition costs, better customer retention and a stronger brand.
Ok so that’s all good and well, but what does this look like in real life?
We don’t need to make this hugely complicated. In fact it can be as simple as this:
- Video or Content related to your Sub Box
- Retarget with some content showing off your Box and its amazing value
- Retargeting people who view the content with a coupon offer in exchange for an email address
- Email drip sequences where you can really connect deeper, show off your amazing box in depth and build trust.
- One time offer using PPC ads + email.
That’s a decent sequence and one that I suggest you try. Another example could be:
- Facebook Lead Ad – Discount offer to try your box
- Retarget with a video showing off box + call to action
- Email drip sequence reminding of offer and benefits
- Facebook Ad retargeting email list close to sign up cut off.
Those two sequences are straightforward and focus on nurturing the relationship before asking for the sale. You are treating the customer as a human and not asking them to marry them on the first date.
A big benefit of doing it this way is that you are building out your email list first, which is an asset you can keep forever (or until someone unsubscribes), so even if they don’t sign up as a subscriber initially, you still have the ability to convert them as you continue to market to them ongoing.
Implementing your Marketing Plan
Your marketing plan should evolve with your business. It will start with an idea and then end with you testing that idea and making adjustments.
Your plan includes:
- Your Message – Does it pass the grunt test
- Your traffic sources – what works and where?
Your Retention Plan
Alrighty. We have nailed our launch, gotten really specific with our messaging and gotten our first customers and email subscribers. But What Next?
This is the big one: Customer Retention
As with all things in life: if we fail to plan then we are planning to fail.
So why do we put so much effort into getting new customers and not the same amount of effort into keeping the ones we have. After all, if we treat them right – they keep paying us money…automatically!
Putting a clear and effective customer retention plan in place is what will take your business from a side hustle to a professional Sub Box that is significantly more profitable.
I would like to point out that customer cancellations or churn is just a fact of life in the subscription economy. Its normal, its healthy and it’s perfectly ok to have customers cancelling. Reducing the number of cancellations is the aim though and that is what I want to arm you with today.
So let’s get a plan in place to help get you to that next level. Of course, I’ve broken it down into two main parts for you
Part 1: Active Retention
Active retention is really about putting in place software and automation that kicks in when a customer wants to cancel or just cancels their subscription.
Active retention should probably be called re-active retention. But I call it active because it’s active mechanisms within your business that get engaged when someone wants to cancel a subscription.
One thing to consider with active retention is how aggressive you are and when you would like these mechanisms to start from. I suggest testing them out to see how they work for your customer base.
A discount offer which is presented to customers who are about to cancel – Some subscription software will have this built in (such as Recurring Billing by Bold) however you can use something as simple as a popup on the customer account cancellation page which offers them a one time/ongoing discount or bonus for staying as a member.
Not having the ability for customers to self-cancel and forcing customers to email you first.
I don’t agree with this tactic however I understand the logic behind it. The logic says you should be able to save a percentage of your customers from cancelling. I have personally tested this with my own store and found that it really makes no statistical difference in churn rate. In fact all it did was increase my administrative burden.
Email Win-back sequence
This tactic WORKS. Most people who make the decision to cancel will have made up their mind to leave well before they click the “cancel subscription button”. Pestering them with clever tactics and technology at the moment they decide to churn really doesn’t make a huge difference.
However… something that will happen is remorse.
This basic human emotion will start to kick in after 30-60 days of not being a part of your community (providing you have given them a great experience). You can capitalize on this by creating an email sequence that is sent to your customers after 30-60 days after cancellation. During this sequence its about reconnecting the relationship and maybe giving them an irresistible offer to come back – like a lifetime discount or a bonus.
Implementing a survey into your cancellation flow not only helps you gather valuable customer data but can also provide a better solution to cancelling for your die-hard fans who are maybe having a bit of financial difficulty.
Using a survey you might be able to direct a subscriber to a lower cost subscription, something that keeps them in the loop but also keeps them a paying customer.
Find out why your subscribers are cancelled and actually implement changes where you see a trend forming.
Part 2: Passive Retention
Passive retention is a lot murkier. There are fewer tactics to implement in this phase and it’s more about the structure and flow of your sales process plus ongoing customer support. I genuinely believe that putting effort into this space is where you will see the bigger long-term wins for your business and where you should start building your retention plan from.
To reduce your customer cancellations using passive retention strategies we are going to focus on one main thing: Fear and Desire.
Fear and desire are the to biggest impulses that control us humans from the day we are born. Fear of missing out, desire for pleasure, fear of being left outside, desire to be warm.
These are the most important elements of sales psychology – remove the pain, increase the pleasure and we can use this as the foundation for our passive retention strategy.
Let’s have a look about how we can implement these impulses into our business.
The main reason someone cancels any subscription box is Fear and this fear will generally manifest itself in the following cancellation reasons:
- It’s too expensive
- I don’t like it
- Not enough value.
Knowing this is extremely powerful though. Most sub box owners will have some form or survey at the end of a cancellation workflow. They collect the responses and think “oh – too expensive, that’s because you don’t see all the amazing things I am doing behind the scenes!” Or we get a little bit defensive and don’t really do anything with that info other than feel bad about ourselves.
But if you put it into perspective, its actually a really great opportunity to find out even more about our customers.
“It’s too expensive”
This will be the #1 reason you get cancellations. I Guarantee it. No matter how cleverly you price your product you will always get people who cancel for purely financial reasons.
However the first thing to look at when someone cancels on price is did I actually communicate the true value of the box? And I’m not just saying you should include the RRP on the insert in the packaging. I mean – Did I actually communication how this box speaks to their inner desires.
This desire can manifest itself in a few ways:
- Access to high value items, or
- Improvement in someone’s standing within a community.
Once you identify their main desires you will notice that price stops being an important factor for the majority of subscribers especially if you can constantly play on this throughout their subscription.
Our July Sexy Body Box features a total value of $89.95 for the low-low cost of $19.99 (inc shipping!). Sign up today and get your box before they all sell out!
This July, Sexy Body Box members will be the first to get their hands on this amazing anti-aging serum (worth over $60!) before it’s official public release in November. This is our way to say thank you to our amazing members!
Which one is more appealing to you? Both examples communicate the value but the second example highlights the exclusive nature of the included product and plays on the inner desire.
This style of messaging can be used on your advertising AND reinforced on the internal communication you are sending to your customers.
Communication Tactics for Retention
Being tactical with you communication can make an amazing difference to your ongoing retention with your customers. This has been proven time and time again in nearly every subscription business I have worked with.
The No #1 area most people will fail in their communication will be the moment that a customer signs up. That person has just opened up their wallet, taken out their credit card and trusted some stranger on the Internet to deliver their goodies. The customer is at a very vulnerable position right now; they might be excited, fearful or impatient but most of all – they don’t know what is going to happen next. This starts the tiny little seed of doubt. Your first job as a subscription business is to ensure this seed can never take root. This doubt is simply fear trickling into their brains and it is a major reason you get a lot of month 1 cancellations.
So how to you deal with this?
Make sure your communication is perfect from Day #1. There are a couple of ideas on how you can achieve this.
Option 1: Thank You Page Perfection
Be very clear from the moment your customer hits a thank you page, exactly what they can expect. You, don’t need to go overboard with this either! Just make sure they know the important details.
- When they can expect the first shipment
- When they will be rebilled
- Who to contact if they have a question
- Where can they get access to your community or social channels
If your shopping cart allows it – try and include a video introducing yourself and explaining all this to your customers.
It helps to put a human face on the brand, makes you approachable and it’s just great customer service!
Option 2: Email Sequence
When a customer signs up for your subscription, using an email drip sequence is a great way of doing two things:
- Providing clarity about the subscription, and
- Building anticipation for the upcoming shipment.
A good example of a sequence is this:
Thank you email
Welcome your new subscriber, let them know what to expect and when. If you have a community that you want them to join, this is the perfect time to let them know.
Show off your past boxes and your happy customers testimonials. If you have a hashtag that you get your customers to share, make sure this is included.
A reminder that your shipment will be there soon. Show off a bit of the behind the scenes action so they can get to know you a bit better. Start building anticipation for the impending arrival!
Shipping Confirmation Email
Make it a party! Yay – it’s coming. Tell them how they can share the experience by taking a selfie with your hashtag.
Your main aim here it to make someone feel confident and comfortable in the knowledge that they are being looked after and something cool is coming. You are building it up, making it an event.
How to implement
Now that I have spilled my guts, its time for you to implement what we have talked about. What I want you to do next is to breakdown the steps that you will take in your business that cover the following areas:
- Active Retention
- Passive Retention
Create clear activities that you will perform and start taking note of your churn from Day 1.
- What will your active retention plan look like?
- How will you implement passive retention?
- Your Day #1 Communication is vital, what will your email sequence or thank you page contain to make sure you remove that seed of doubt?
Your Growth Plan
It’s time to get Big, and no I’m not talking about those magic pills that those spammers email you about. I’m talking about growing your subscription business past your first few dozen subscribers well into your first hundred or even thousand plus subscribers.
This is where the rubber meets the road for a lot of new subscription businesses; they get that nice momentum during initial launch but don’t quite capitalize that into meaningful ongoing traction. If this is hitting home for you, then take note of what I am about to say.
Your key to success is in knowing your numbers.
Your ability to measure and track every part of your business is vital to your ability to grow safely and sustainably.
What numbers do I track and what do they mean?
Churn, as we discussed in retention is the number of subscribers who actively cancel each month in relation to the new customers acquired. To put it simply: You want more customers coming in, than going out.
Lifetime Value (LTV) is the dollar amount that your average customer will spend while a subscriber. This is calculated by averaging the length of time your subscribers are members x your revenue per subscriber.
Average length of time = 3.5 months
Average revenue per box = $19.95
= LTV of $69.82
CAC stands for Customer Acquisition Cost. This is the amount of money you are spending to bring on a new customer. If you are using PPC like Facebook Ads, this would be the average conversion cost for your campaigns.
Lifetime Profit (LTP) is a similar calculation to LTV, but instead of calculating the revenue of each customer, you are calculating the profit for each customer.
So if your average profit per box = $5 and your average subscription duration is 3.5 months. Your LTP would be: $17.50
Average Subscription Duration
This is pretty self explanatory – this is the base figure we have used to calculate the LTP and LTV.
There are a bunch of other metrics we can look at, but they are not as important as the above.
Why are these numbers so important?
One of the great things about running a subscription business is that we get to make money form our customers time and time again, each month, for the duration of their subscription with us. We differ ourselves from ‘normal’ eCommerce stores by focusing on the ongoing relationship and transaction, rather than by trying to squeeze the maximum profit from our marketing campaigns.
If you can track and measure your average profit, subscription duration and churn numbers, you are going to have a massive advantage on the marketing battlefield.
To help illustrate this I will give you a look inside my own numbers
- The cost of my subscription is $59.95 per month.
- I have an average profit of 54% ($32.37 per month) before shipping costs
- My average subscription duration is 5 months. This means I have a total profit per customer (averaged) of $161.86 less shipping.
- I have excluded shipping as I break this down between domestic and international rates
This means that I know I can spend about $120 to get each customer and I know I’ll break even overall for the year. The figure is less because I like to include the shipping costs in my calculations, and like I mentioned earlier, they vary based on subscriber location.
This. Is. Powerful.
It doesn’t mean I’ll go and blow all my money on new Facebook Ads of AdWords or Influencers, but it helps me to identify that I can actually spend a decent amount on those channels should I desire.
I may decide to spend more money on developing amazing content. I might spend more money on improving customer experience; I can focus on areas on my business that need attention (like my inability to sort my filling lol).
Knowing the intimate detail of your numbers will help you plan and make better business decisions long term.
Now, the wanky marketing dickheads out there are going to say something like “why don’t you just go and blow all your money on FB ads bro – go scale”
Frankly, because I don’t want to. I’ve hit a level in my business that is very comfortable for me and I don’t really see the need to. I tend to use The Whisky Order as a testing ground for new theories, implementing new campaigns and an excuse to enjoy great whisky on a regular basis. It pays the bills, is profitable and keeps me comfortable.
This brings me to my next point
Grow for you
Your own perspective on growth is going to dictate what happens after you know your numbers.
Do you want a massive empire? Great! You know the numbers and can decide where you want to invest your next marketing dollars on creating 6 figure PPC campaigns.
Want a nice lifestyle business where you only work a few days a month? Awesome – use the numbers to help you plan and plot your business so that it becomes profitable and sustainable for you.
Your clear understanding of these numbers will help you decide on the next steps you want to take in your business. In my opinion, you should start looking at the following (in order) as you start to grow:
- Fulfillment & Storage
Fulfillment and Storage.
The biggest time suck for every subscription business is the fulfillment side. While we have an advantage over eCommerce store in terms of recurring revenue and profitability, the downside is that most of our orders are pretty custom and require a high touch to get them out to our customers.
This is where having a clear idea on your profitability is going to help you determine how you handle this big part of your business. As long as you know your numbers you will be fine.
The biggest advantage to having strong profitability in your business is your ability to decide how you are going to handle the actual fulfillment of your growth long term. If you have razor thin margins, you are going to need a LOT of subscribers before you can start doing things like outsourcing tasks or hiring staff, at least without losing money anyway.
This is my main point about actually understanding your numbers before you go down the path of growing your business. It informs your choices long term.
Ok. So you know your numbers and they look fine. What next?
You really have 2 main choices when it comes to fulfillment:
- Keep it in house
- Use a 3rd Party Fulfillment provider
In House Fulfillment
Virtually every Sub-Box is going to start off with In House fulfillment, and I literally mean – in your house. But what happens when it gets too big? You DO actually need things in your home other than boxes, packaging supplies and products.
Here is what I call the stepping stone method of in house fulfillment. This assumes you don’t want to have the expense of a warehouse operation straight away BUT you want all the crap from your home gone.
1. Hire a storage locker to store and hold every item.
This will cost anywhere from $100 – $200 per month and will hold about 4 Cubic Meters (12 ft square). As you grow add more lockers to hold the items.
How this works: Each month you removing all the box items, boxes, filler etc. Bring them back home to pack, then eventually return the remainders back to the locker. While it may sound tedious, it’s actually a lot better than having a cluttered house. Just ask my wife…
One downside to this is it becomes hard to accept deliveries to the locker and you will still need everything sent to your home.
2. When you grow
Start pricing a small warehouse early, so you know the estimated monthly cost. Once your storage locker fees start to hit close to this number it’s time to move into your own premises.
The advantage of doing this is you are no longer fulfilling in your home and you have a secure premises where you can accept now deliveries and manage operations. By the stage you are ready for this you should also have your core group of staff ready to run the operation (more of this in the Hiring Section).
3rd Party Fulfillment
Using a 3rd Party Fulfillment Centre (3PL for short), has been a godsend for me. As someone who likes to travel and doesn’t want to be tied to the monthly commitment of fulfilling the boxes I’ve been using a 3PL for quite some time.
But, before I start singing the praises of 3PL’s I wanted to say a few words of caution.
The biggest danger in using a 3PL is your lack of oversight in the packaging and distribution of your product. If you have an extremely high standard for presentation, like to have a lot of customization to your products or even enjoy doing little things like leaving a personalized note in the box, it’s going to cost you.
3PL’s will generally charge “kitting” fee’s for any customization made to boxes or orders. Things like applying stickers, leaving notes etc all add up in fees. So just make sure you can afford them before sending your products to a 3PL.
For me, I negotiated a fixed rate for the pouring, filling, labeling and packing of my whisky boxes. Obviously this is highly custom and has required a lot of negotiation + appropriate licensing but it’s made my life that much easier.
An advantage of using a 3PL is that you can have them store all your ongoing supplies and consumables and give them authority to re-order without needing to consult with you. Effectively managing your inventory for things like Boxes, tissue paper etc.
Another advantage is that the 3PL may actually have better shipping costs available than you. As they ship for a large number of businesses they usually have a negotiated rate with a preferred shipping partner. Look into this as you are negotiating with a 3PL because you may be able to reduce your shipping costs enough to offset the costs of using a 3PL in the first place.
So: If you are using a 3PL – Know your numbers and make sure you can afford the costs PER BOX to have each item sent out.
One of a big issue I see for budding subscription entrepreneurs is they feel that they need to be across everything. From packing and shipping to marketing and customer service, we feel like business owners we need to do it all. It’s hard for us to let go of each little piece of the pie in our business.
This is a lesson I learned during my career as a leader in the Public Service. A true mark of your success is that your team doesn’t need you to operate. To move this into an entrepreneurial perspective. The true mark of success in a business is if it doesn’t need you to function day to day and remain profitable.
How do you do this? By implementing hiring the right people, at the right time and slowly removing yourself from the operations within your business.
Where do you start?
The way I suggest you look at it is this way: Where are the biggest time sucks that DON’T generate revenue for your business? Order them from most time needed to least time needed.
Key Hire 1: Fulfillment
I want you to start removing yourself from the burden of fulfillment as early as possible. Either by using a 3PL or just by hiring for the weekends you are doing the shipments. Providing you have followed the first phase in this Growth Plan (knowing your numbers) you should be able to pin point the exact time you can hire a staff member (even if it’s a family member), and roughly how much you can pay them.
Hiring on a casual basis while you are just starting out is an easy way for getting used to managing staff and also handling the flow of orders.
A big mental block for Subscription Boxes is the feeling that the more you grow – the more work you are going to have to do. If you have the staff in place to handle your workload then you wont need to experience this feeling. Get this monkey off you back before you start looking to hire anyone else.
Key Hire 2: Customer Support
They next role I would be hiring for is Customer Support. I would make sure though that you have spent a decent amount of time (3-6 months) managing the customer enquiries so you get a feel for the nature of the role and what your customers are actually contacting you about. This also helps with identifying key issues with your business such as:
- Unclear or incomplete information on your website
- Postage issues
- Unrealistic expectations on your sales copy
Keep this person accountable for timely support and also for providing you with ongoing reports about common issues.
Key Hire 3: Marketing
The last key hire I would look at is marketing. We love to think we know it all when it comes to getting new customers. I’ve been guilty of this myself MANY times, especially when it comes to running Facebook Ads. While I am no stranger to running successful campaigns, I would rather have someone else pulling all the levers, managing split tests and generally doing the monkey work while I focus on bigger picture things (like overall strategy).
Should you just hire a Facebook Ads guy? No, I think you should look at getting someone who is across most aspects of digital marketing so that way their work will be in Synch with the rest of your marketing strategy.
I’ve seen time and time again, clients focus on one message per marketing channel – they forget that there needs to be congruency between what they say on Facebook AND the email marketing they deliver.
How to take action
Get clear on your numbers. Set KPI’s on all metrics and hold yourself accountable for them. Work on reducing costs as well as increasing your profits + revenue per subscriber.
Key numbers to track each month:
- Average Subscription Duration
Grow for you
You need to establish your end goal: do you want an empire? Then go hard and put your profits into ongoing marketing and building new business. Do you want a lifestyle business? Set a clear goal of subscriber numbers, profits and start working towards that number. Once you hit it – maintain it!
Get your fulfillment right
Decide how you are going to grow out of the kitchen. Weigh up the pro’s and cons of outsourcing your fulfillment, especially if you want a business with large numbers. Outsourcing is not always the best option for highly custom boxes or anyone wanting a high touch with their customers.
Hiring the right way
Get rid of the order fulfillment first – you are a business owner – not a Factory Hand. Next start getting your customer service handled by professionals – but don’t lose sight of what is happening. Keep them accountable and get regular reports on common issues. Lastly, get rid of marketing from your plate. Once the other jobs are taken care of you will want to focus on the high-level aspects of your business. A digital marketing professional will be worth their weight in gold and able to work over a variety of mediums – not just one stream
That has taken me far to long to write and I’m sure it was far too long for you to read! Please take action on the information I have provided. I would love to see how you have gone implementing it and making some positive change in your own business.
If this was all a bit too high level I’ve got something that might help. Over the next few weeks I’ll be running a series of video lessons / webinars over the next few weeks where I breakdown how all the lessons look within my own business and from other Sub-Boxes. I’ll make sure you see an ad on Facebook , or if you want to sign up to the email list I’ll let you know when they are on in there too.
Take care and have a great day!