For any product or service you can think of, there’s likely already a subscription service out there. Imagine it –you can start your day using your subscription razor or beauty box, have a perfect cup of coffee from your subscription club, pack your kids’ lunch with your subscription snacks, feed the dog and give him a new toy each month from your subscription membership, get ready for the gym in your new subscription workout gear, go to a movie theater where you’re a subscription member, then come home and enjoy a glass of wine from your monthly wine club box with your subscription home delivery meal. Literally, you can have a subscription for every aspect of your life – or close to it. In an age where convenience is king, a subscription model can automate repeat purchases. However, is that enough to hold onto customers and earn their ongoing loyalty?
THERE IS NO DOUBT THAT SUBSCRIPTION BUSINESSES ARE BOOMING
- The subscription e-commerce market has grown by more than 100 percent a year over the past five years, with the largest retailers generating more than $2.6B in sales in 2016, up from $57M in 2011.
- E-commerce subscribers are most likely to be 25 to 44 years old, to have incomes from $50,000 to $100,000, and live in urban environments in the Northeastern U.S.
- 15 percent of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis, frequently through monthly boxes.
- Amazon Subscribe & Save, Dollar Shave Club, Ipsy, Blue Apron and Birchbox are the five most popular subscription sites in 2018.
Although these numbers are impressive, it’s increasingly difficult to retain subscribers with 72 percent of them failing to make a repeat purchase in the 12 months following their first purchase, according to a Retention Science study.1
Compound this by the fact that many subscription services have a cancel at any time option. This means that a box subscription business like Birchbox or a service subscription like Match.com must earn their customers’ loyalty every month. This business cannot take a month off before their customers fall into the dreaded inactive segment. This is unlike other industries that wait up to 12 months before considering a customer inactive. For a subscription business, a customer who takes a month off is usually no longer a customer at all.
For a marketer who manages retention in a subscription model, this is a challenge that must be overcome. Furthermore, because of the explosive growth, many young subscription businesses don’t even know they have a retention issue, because their overall subscriber numbers are still increasing.
There are best practices from the world of traditional loyalty programs that can be applied to businesses with a subscription model. Here are five recommendations for setting up the foundation and managing success of a subscription model business.
- ALIGNMENT IS KEY
In a subscription model, purchases aren’t enough, especially when offering a discounted or bundled price as part of the subscription. A programmatic approach to retaining customers can help – but before you start any type of retention program design, make sure all of your stakeholders are aligned on what the success measures are for your program. Is the goal to acquire new customers? Increase the frequency of purchase outside of the subscription for new products or services? Reduce inventory on seasonal items? Or renew and retain customer subscriptions? All are great goals and ways to measure your ROI, but make sure to focus on the end goal – earn customer loyalty.
- THINK OF YOUR CUSTOMERS AS MEMBERS
Many subscription services already refer to their customers as members and doing so clearly leverages the concept of an ongoing relationship that extends beyond a series of individual transactions. Regularly remind your members of their benefits to reinforce why they’re paying for your products or services. Of course receiving new beauty products from Birchbox each month or searching through the latest database of family history records on Ancestry.com are powerful reminders to the member that they are receiving value for the service each month, but they already expect that. To enhance the value even more, include items like feature improvements for how members access content online, packaging products as if they’re a VIP member, including early access, handwritten notes, or free samples positioned as gifts. Make sure your members know why you value their membership and want them to stay committed month after month.
- VOICE OF THE CUSTOMER AND CO-CREATION
A subscription model with continuous service provides a unique opportunity to develop an ongoing dialog with your customers. This feedback should lay the foundation for your strategic approach – identifying the needs, pain points and preferences of your customers. Capturing and operationalizing direct customer feedback from key listening posts such as social media, customer support, sales and surveys, allows your customers to share what their needs are and what is important to them. Encourage your members to review your service; be sure to thank them when they do and follow up promptly if they report any issues such as a moldy onion in a home meal delivery. Even better, enlist them to become an influencer on a member panel and ask them to vote for potential new products and services. This may even help provide a sense of ownership in the service itself by asking for their input and participation in setting the ongoing value proposition.
- CUSTOMIZATION & PERSONALIZATION
Creating personalized experiences for your customers is at the core of
a great marketing program and the subscription industry is already set up to capture customer data, more so than other industries. It starts with something as simple as referring to your member by their name. In addition to the rich demographic insights, you can use data collected within the customer profile, transactions, and behaviors (e.g. social media engagement) to personalize each subscription, enhance the customer experience and increase engagement with members.
- ShoeDazzle engages its customers to take a short fun quiz to capture the customers “Style Profile,” and then provides tailored recommendations in a customized “Showroom.”
- Similarly, Nordstrom’s Trunk Club offers a dedicated stylist to curate shipments, have the customer vet the selection prior to shipping and take it further by continuously learning what the customer decides to keep, send back and why to dial up their personalization for future “trunks” – a true learning loop with a personal stylist.
- On the customer communications front, Ancestry.com has been known to send emails with the names of their customers’ ancestors in the subject lines to engage their customers with new database releases, driving extremely high email engagement metrics.
- THINK OUTSIDE THE BOX
Subscription box companies have a lot of opportunities to, well, think outside of the box. Free shipping has become so common that it is often the cost of entry rather than a differentiating benefit. Instead, you should focus on offering unique benefits to your members – something that will stand out and make them feel special, and ideally something that is brand reinforcing. Sound recommendations aligned with your stakeholders and customers’ needs can be the foundation for providing members with opportunities that go beyond discounts:
- Rewards for renewals
- Rewards for brand advocacy (i.e. reviews, social media sharing, etc.)
- High-touch service (e.g. a personal stylist, expedited response
to their requests, etc.)
- Member-only content
- Opportunities for community involvement (e.g. encourage member interactions, allow them to nominate other members for recognition, focus on charities important to members, etc.)
In a world with more options than ever for consumers, these are key recommendations to help your brand deliver a successful loyalty program. It is an exciting time for a marketer looking to increase loyalty in his or her subscription business; while there are certainly challenges, there are also pathways to success. Ultimately, with the right approach, companies can increase renewal rates, provide engagement to their consumers and create a more personalized experience.
Read more about paid loyalty on our website.