Scaling Smart: How to Grow Your Subscription Box Faster than Your Expenses
Good news: your subscription is starting to take off! However, as your customer base grows, so does everything else including your operations, inventory, and customer service needs. Figuring out how to meet these needs can seem daunting. Like with any business, if you aren’t careful as you grow, you can find your sales chasing your over-bloated expenses (and we know what that can lead to).
As you continue to expand, it’s important to minimize the growth of your expenses, and hopefully stress. This article will briefly review how to scale effectively while keeping your expenses of two key areas, Marketing and Operations, in line.
Marketing
One of the expenses that can get out of control is marketing. The biggest frustration you can encounter is when you invest a large sum of money in marketing and get no Return on Investment (ROI). The purpose of marketing is simple: to grow sales (more customers buying boxes). However, to do this effectively you must know and understand your customer base, and pivot with them. According to Reid Hoffman, founder of LinkedIn, customer feedback is “the coiled spring that catapults your company forward. It will continually adjust your trajectory, while keeping you on target." Some of the questions you should always be asking about your target and existing customers are:
What Social Media platforms do they use? Are they part of any online communities?
What influences their purchase decisions?
What did they like about the last box? What did they not like? What would they like to see in future boxes?
What would motivate them to tell someone else about your subscription box?
What differentiates you from other boxes they have considered?
This approach, known as feedback marketing, can give you the insight you need so that you can spend marketing dollars in the right areas, thus maximizing your marketing ROI:
Giving your product to the influencers that have credibility (not just followers) with your target market.
Posting ads in social media platforms that your target market visits frequently
Rewarding existing customers for being apostles of your product.
Feedback, with the proper analytics and strategy development, can keep you from ballooning your marketing expenses with the hopes of achieving greater sales as a result.
Operations
One of the toughest areas to handle when scaling your subscription box is operations. When you had 50 subscribers, it was relatively easy to fill them in house, but what if you have successfully scaled to hundreds of subscribers and are growing that number by double-digits? You have now evolved to a level of operation that can require both intense focus, expertise, and capital. Here are the cost areas to consider as you scale your operations:
Warehouse Labor
Wages
Benefits?
Training Materials
Safety Equipment
Uniforms
Vacations / Sick Leave – Paid but no productivity
Labor for Other Services
Payroll
Accounting
Customer Service
Managers / Supervisors
Logistics Specialists (this can be costly)
IT Support?
Physical Capital
Facilities
Maintenance / Repair / Operation
Equipment
Computers
WMS Guns / Scanners
Label Printers
Office Supplies
Warehouse Supplies
Subscription Box Packaging Materials
Digital Capital
Inventory Management System/ Warehouse Management System
Shipping Software
Time
(For Management) To Hire Your Workforce
(For Management) To Train Your Workforce
To Repair / Maintain Equipment
Materials Handling for Shipping / Receiving / and Pick & Pack
There is certainly a lot to consider and expenses can get out of control very quickly. Keep in mind that if you consider doing fulfillment in house that some of the above costs (such as your facilities) won’t scale up or down with your sales. One of the intangible costs of handling all of the operations in-house is focus. Instead of focusing on growth, you’ll be concentrating on operations and ensuring everything runs optimally. A good way to keep your operations expenses down while allowing you to focus on the growth of your subscription box is to outsource your operations. Many subscription boxes partner with fulfillment centers to enable them to have access to all of the operational benefits they would have in-house at a much lower cost. More importantly, it has allowed them to focus on their growth and marketing strategies as opposed to running the day-to-day operations. We discuss the signs that show when it is time to partner with a fulfillment company in a previous article you can access here Additionally, the right fulfillment company will allow you to scale (both up and down) your operations with your business, removing some of the risks and costs associated with owning and operating your own facilities and workforce. Lastly, subscription boxes utilize fulfillment partners in order to take advantage of their size (and leverage) to reduce their materials and shipping costs. Keep in mind there are 3 key things to consider when choosing the right fulfillment partner (we discuss these in a previous article that can be found here).
Grow Your Sales, Not Your Expenses
In summary, effectively scaling your subscription box doesn’t mean that you should anticipate spending a great deal of capital to accomplish it. From effectively using customers and their feedback to spend marketing dollars effectively to partnering with a fulfillment company to grow your operations without massive amounts of capital, you can effectively ensure that your sales growth exceeds your expenses, resulting in greater profits and funds for additional investment in what’s most important: continued growth and expansion.
