How to Perform Market Research for a Subscription Box Business

Starting a subscription box service can be an exciting and creatively fulfilling undertaking, but playing a guessing game when it comes to your audience’s wants and needs is risky business when you’re looking for long-term success. This is where market research comes in, by backing your idea up with a firm understanding of your niche and the demand for your goods.

Market research can provide clarity on subscriber preferences, ideal price points, and competitor weaknesses. Understanding why market research is important—and how to perform it—is an important step any potential business owner should take as their business idea comes together.

Using marketing research to build your subscription box business

Performing market research when you’re setting out to start a subscription box service begins like most other businesses, with just a few key areas of focus. At its core, the goal of market research is to learn where your subscription box’s products fit into a market, and how you can fulfill the desires of that market long-term.

What is market research?

Market research is the process of gathering data on the industry your service or product will fit into, determining who your business is suitable for, and analyzing that data to guide your business decisions. Your approach to this type of research can take many shapes, from organizing focus groups to creating online surveys to gather input on your offerings.

Why is market research for a subscription box business important?

Market research is important for any new business, but it’s especially crucial for the subscription box business model. Subscription box businesses depend on the ability to curate products that their audience will find value in consistently. Doing that without researching and understanding your audience’s wants and needs is going to be an uphill battle. Market research can reveal key information like:

• A confirmed and measurable demand for your offerings
• Shortcomings in competitor products
• The ideal price point for your product
• How saturated your market is

Market research is what has helped one of the most well-known subscription boxes, HelloFresh, stay innovative and become the top option in the subscription meal plan industry. Using market research, HelloFresh’s founders Dominik Richter and Thomas Griesel were able to discover an untapped market for health conscious meals that were quick and easy to make.

Where to start with market research for subscription boxes

Since subscription box businesses have a high cost to start, finding your demographic and audience is key to making sure your subscription box business doesn’t fail. That’s the power of market research: helping you understand your future clients and their buying habits.

You’ll want to get a sense on where your best market is located, who makes it up, and if there are any competitors in the field. This is the information that will help you determine the best product and pricing.

Use business data and trends

When performing market research, there are plenty of resources already out there for you to get the numbers, information, and other sweet sweet data you’ll need to build your business. Some key resources for opening a profitable subscription box business include:

• The Subscription Trade Association – a community of business owners in the direct-to-consumer industry, focusing on recurring purchases. This is a great resource for getting to know the industry you’re jumping into, and learning what best practices made other subscription services, like Ipsy or Scentbird, successful.
• Industry reports – many market research firms, like IMARC group, perform market research and provide reports on specific industries as a service. They even have a recent report on the subscription box industry, where you can find insights on market size projections and top niches. If you can shell out some cash for them, reports like this can give you a big headstart in your business journey.
• The U.S. Bureau of Economic Analysis – knowing the income levels and spending habits of your ideal customer is critical for determining your ideal price point, and identifying who your products appeal to.

Spending some time poring over the reports and information these three resources alone offer will help you determine the best subscription box business ideas out there.

Find your audience

Once you have an idea of what type of product you want to offer, like grooming supplies for dogs, it’s time to find the people you will be selling your boxes to and who will hopefully be buying them. To find your audience with market research, focus on:

• Your niche: Your niche is the space that your business fits into within a larger industry. For example, animal care could be your industry, and you might find a niche catering to dog owners. Tools like the Census Bureau’s NAICS search tool can help you define your niche.
• Your audience needs: Understanding your customers’ lives well will help you provide a thoughtful subscription for them. Conducting interviews, surveys, and reading product reviews is a great place to start determining the needs of your clients.
• Your demographic: Your demographic, or the characteristics that make up a segment of buyers your product is appealing to, can greatly influence your approach to product curation and marketing strategies. The best way to learn about the lives of your intended audience is by using surveys targeting your potential clients.

The better you know your product and the audience that would find it appealing, the more fruitful your research going forward will be.

Another basic is the formation of a legal business entity to limit your personal liability, and provide credibility to your service. LLC and corporation filings are where Northwest shines, and we can help you start your business as soon as you’re ready to.

Determine product potential

Since subscription boxes focus on recurring revenue, you’ll need to research the existing interest around your niche. Tools like Google Trends or SEMrush can show you how many people ask questions or search for terms related to your box idea. When determining the potential of your product, you’ll examine these factors:

• Size of your market or market size, i.e., how large is the demand for your product
• Start-up costs and quarterly cost of restocking products
• Emerging technology or services that would make your subscription box obsolete
• Competition in your industry

Performing this type of product market research can help avoid customers losing interest and unsubscribing by ensuring there’s a desire for your product from the start.

Analyze your competitors

Unless your subscription box offerings are remarkably unique, you’ll likely find a competitor or two in your niche. This might seem worrisome at first, but it presents an opportunity to do things better than other businesses. Marketing research allows for deep and low-level analysis of competitors depending on what you’re trying to learn.

In addition to your analysis, make sure to check out customer reviews and conversations on places where your audience may gather, like Reddit, to see what others are saying about your competition.

Use market research to adapt

Launching your subscription box service doesn’t mean the research phase is done. Your initial market research should confirm demand, get you familiar with competitors and customers, and guide your marketing decisions as you gain momentum. After that, it’s important that to keep a finger on the pulse of your industry and niche as they evolve over time. Pair this with appealing and useful products, and you’ve got a recipe for reliable recurring revenue, and happy subscribers.