Choosing products for your box, often called ‘Procurement,’ is one of the most exciting and important parts of your business. It’s here that the promise of your product comes to life, and depending on your performance, customers decide if they stay or cancel their subscription.
When choosing your products and tackling this task, take these three main considerations into mind:
1. Understand Your Niche & Value Proposition
Let’s start with some general positioning you should keep in mind when selecting products.
At your business’ core is your niche. This is the market, trend, or lifestyle that your business serves. It’s that idea you’ve identified as having a special characteristic: an idea worth marketing to.
For example, if you deliver artisan food each month, your niche is defined by customers who value artisan foods over “regular” food. Ask yourself what’s at the heart of your business. Is it art for children, gamer gear, or organic snacks? Who are your customers? What is the community behind your product? That’s your niche.
This is important because understanding your niche is critical in fulfilling it. Your members signed up to your service because they have a specific set of products in mind, sort of like a checklist of what they think defines the business. If you’re curating for an eco-friendly audience, it needs to come through in your procurement. Ensure that your products breathe the culture behind your business.
Your Value Proposition
While your niche defines the ethos of your business, your “value proposition” defines the promise of value in your box. This isn’t always a monetary promise, like “$50 Retail Value.” Perhaps it’s your promise of discovering brand new small business, handmade goods, or another indicator of a special high standard you hold, like fair trade.
Living up to your value proposition is as important as properly servicing your niche. If you make the promise of a specific monetary value, like the $50 mentioned above, missing it or not living up to this value affects both retention of customers and reputation of your business. Reflect on your value proposition throughout the procurement process, asking yourself if the items selected live up to the standards you’ve outlined.
2. Understand Variety, Aesthetic & Quality
The truth is, you can fulfill your niche and value proposition and still have dissatisfied customers, an incredibly frustrating experience that likely all procurement teams have experienced at one time or another. Why does this happen?
Well, it may be due to how your box looks.
Effectively selecting products also requires you to understand the aesthetics and visual quality of your box build. Aesthetics can most simply be understood as the beauty in the design of your box. Getting this right means your customers aren’t left feeling like they need to add up retail prices or count products to make sure they got everything.
- Does it feel full? The feeling of fullness is a great way to psychologically prime your customers. Even if you have smaller sized items, used speciality packing material or something else to keep products tight and well presentable when your box is opened.
- Does it look worth it/Is the quality of the products clearly apparent? The visual quality of your products is another big part of satisfying customers. Even if the product is large, poor packaging can degrade perceived value. Make sure your products look as beautiful as possible.
- Do you have variety? No one wants to receive seven variations of the same product. Keep your products varied and unique to help customer see the value of curation and your procurement process.
Remember: Make the unboxing experience one that delights the senses, providing a true experience to your customers.
3. Positioning Your Business to Vendors (and Negotiating!)
Equally important to positioning well with your customers is positioning yourself with vendors, the businesses providing the products for your box. While there’s no cookie cutter way of doing this, procurement usually takes one or more of these two strategies:
- Free Sample/Product Marketing
- Wholesale, Less, or At Cost Product Buying
The strategy and methodology behind Free Sample/Product Marketing procurement relies on the value proposition that by including their product, a vendor is exposing themselves to highly qualified, converting customers. These customers are signing up for your service to discover products that they intend to become loyal customers to. In the same way that a vendor should see value in product sampling at Costco or Whole Foods, they should feel confident about putting their product in your box: you’re connecting them with customers.
- Pro: Free products mean a larger margin/less cash out of your business. This means you can keep prices lower for customers and still have high profitability.
- Con: This is probably one of the harder procurement methods, especially when scaling. You begin to rely on multiple vendors (perhaps you find that most businesses can only provide 3-5000 units free), which can create logistical challenges that, while overcomable, will require time and effort.
On the other hand, you have some form of product buying. Generally, this is a more sustainable approach for procurement. Vendors tend to take greater interest in the deal, but are still able to be negotiated with by employing some of the sales strategy found with free sample marketing. First, we suggest you start at a wholesale/distributor cost pricing ask. This is due to the likely large volume of orders you’ll be placing. Work with the vendor and negotiate for a price that works in your build. If you need to push them down, stress the same marketing aspect mentioned above: qualified customers are discovering their product. Don’t be afraid to ask for at cost pricing or a cost share arrangement.
- Pro: More sustainable procurement. Your team has a budget and is able to be flexible with buying products. Some months, you may procure under budget and find yourself with higher profitability.
- Con: You need to build purchasing into your price point (price to customers). If you plan on spending $10 on products per box, you’ll need to know what you’re left with after shipping and other normal expenses. This means you’ll likely have a higher priced box. Generally I recommend spending around 20-30% of the average revenue per user on products.
Note: When pitching how your service provides valuable promotional benefit to your partner’s (vendor’s) brand, brush up on the specifics and science of the argument. Part of what you’re offering is what’s known as ‘social proof’ or ‘informational social influence,’ a psychological phenomenon where your customers believe that because you chose the product, it is a correct product to choose. Statistically, customers (and people in general) are more likely to choose a product after being referred. We see this both in business relationships and in customer advocacy for your business. In this case, you’re the referral source for the product, and it follows that your customers are more likely to start using the new product individually. The more you build this concept of trust and vetting with your customers, the greater value of your referral.
Keep the Big Picture in Mind with Procurement
In each of these strategies, we’ve covered general, big picture topics. Specific methods and choices vary from subscription service to subscription service, so start by taking a step back and working through the rudimentary definitions of your business. When building your box, consider your market – the niche. Consider the promises you’ve made – the value proposition. Consider the feel of the box – the aesthetics, quality, and variety.
With vendors, keep in mind that you’re providing a useful service for them, regardless if your business is built on promise of Discovery. Remember, you’re a trusted source providing a referral to a new product. This type of advocacy is beneficial to any business, be sure to use that angle to your advantage in negotiating.
Now go build some amazing boxes!
*Tip – Subscribe to a handful of some of your favorite subscription boxes. Getting a look at how similar businesses are procuring products and putting together box builds can give you a fresh dose of inspiration and insight into what other business owners present to their customers.
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