As brands and retailers compete for shoppers’ attention online, encouraging repeat purchases has become a critical part of managing the customer experience. Because of this, business models like subscription commerce have become more prevalent across a variety of retailers’ websites and marketplaces.
The subscription business model allows brands to charge customers a recurring fee, commonly set monthly or annually, for a product or service. Aside from the recurring revenue, subscriptions can help build stronger customer relationships by turning customers that are already seeing value in the brand into loyal followers. This means that brands can attain higher customer retention rates and lower their acquisition costs in the long term.
Prominent examples of this include nutrition brand Huel with their subscribe and save model allowing customers to try products one at a time without overstocking, and cosmetics retailer Birchbox which delivers its subscribers a box of cosmetics products monthly. Even marketplaces like Amazon have integrated subscription services as part of their checkout process, while eBay provides store subscriptions to its shoppers. When aligned correctly with marketing campaigns, subscription e-commerce can drive growth and customer loyalty for brands.
The Opportunities with Subscription Commerce
Modern consumer purchasing habits are rapidly changing towards opting for convenient shopping experiences with free delivery and fast support. Online subscriptions are ideal for brands seeking growth opportunities, as they enable businesses to serve customers by providing value with low effort. Unlike traditional retail, subscription models are not based on total revenue from ad-hoc purchases but instead rely on contractual buyers generating revenue.
Because of the consistent, predictable revenue generated from this model, order and inventory management becomes easier and more efficient. Subscribers also tend to have a closer relationship with a brand, contributing to lower attrition rates thereby lowering the number of customers who stop purchasing from the brand over a period. The data generated from subscribers can help understand their lifetime value and help to set accurate acquisition costs during peak and slow-selling periods.
Research has shown that, by 2023, 75% of businesses that sell directly to consumers (DTC) are expected to offer subscriptions. As more brands seek to serve their customers online, gaining shoppers’ trust can take persistence, and subscriptions provide a creative solution for building trust, loyalty, and encouraging repeat purchases.
Convenience is the Key
The opportunities within subscription e-commerce are heavily influenced by whether the customer experience delivered by the brand is sufficiently convenient. A seamless customer journey is key for creating a friction-free experience the encourages shoppers to return. If their interaction is difficult and creates hassle, the likelihood of the customer returning is low. Brands should always consider how ease-of-access features like changing products ordered, changing delivery frequency, and subscription cancellation and pause options are implemented within the journey. This is not always straightforward, and many subscription services can struggle with creating a positive user experience and communicating changes to customers.
Depending on a brand’s scope and scale of the subscription business, other feature considerations like email integration and automation, repeat payment systems, postage and packaging, and the offline experience may be required. Analyzing the data and user base is key to understanding what’s truly important to your user base.
Common Types of Subscriptions
Whether a brand is offering software or physical products, online subscription services are commonly classified into three distinct categories – access, curation, and replenishment.
- Access subscriptions allow brands to create member-only initiatives that include special perks such as early product access and exclusives for dedicated subscribers. Many businesses at scale already implement loyalty initiatives, oftentimes alongside other forms of subscriptions.
- Curation subscriptions allow customers to gain access to products and services handpicked from a custom service that is unique to the brand and not replicated by competitors. This creates an ideal opportunity for brands looking to create a more personalized, exclusive offering.
- Replenishment subscriptions help to supply customers just as they’re about to run out of their previous purchase, at a lower-than-retail price point. Although this a popular method when initially starting with this business model, it can be easily replicated so it can be challenging to compete for pricing.
With the assistance of digital platforms, most products or services can now be offered as a subscription. Research has revealed that consumers are increasingly subscribing to products that were not historically offered as subscriptions. However, before commencing with subscriptions you must consider how the offering can help your brand beyond the transaction. For instance, in highly saturated industries like skincare or beauty, subscription offers can help grow loyalty by showcasing curation and influence. Because a subscription process will involve exchanging more information than a standard checkout, it also provides an opportunity to cross-sell and upsell, or to gather more detailed customer data that can help deliver a more personalized customer experience.
By understanding what consumers seek, brands can tweak and refine services to best match the customer’s desired experience. Consider how personalization can be enhanced over time to maintain the longevity of the subscription, and whether the overall price is reflective of the value for the customer.
When starting with subscription offerings, gaining consumers’ interest and trust can take time and persistence. Customers cannot interact with the brand or products in person, so digital touchpoints become essential for creating a curated experience through communicating brand values, building trust, and encouraging purchases. To help you learn more about how to establish an effective online subscription strategy, our team has included a few best practices to follow.
Define your scope
Brands can often make the mistake of targeting too many demographics. When targeting a larger group of potential customers value propositions can become too broad and create more confusion than conversions. Prior to setting your strategy, always research the target category and demographic to ensure that your product or service is solving the problem for that customer group. When targeting more than a single group of customers, it can help to work with A/B content testing to serve different value propositions to customers based on their characteristics.
Consider personalization options
As digital subscription services have become more prevalent, the plethora of choice can lead customers to be hesitant to choose. Enhancing the options for personalization within the subscription can help convert more customers by easing their uncertainty through options to customize their package to suit their needs.
Offer trials wherever possible
Enticing shoppers with a trial period or a tester package is a popular strategy for building confidence and trust through removing the commitment of a full subscription. By using tactics like free, generous return policies, free cancellation periods, and samples, brands can make customers feel more comfortable with their purchase as it seems like a risk-free investment.
Interact with your customers
Having a more in-depth understanding of your customers is always an advantage. As brands learn more about their buyers, they can better understand how to meet their needs and stand out from the competition. Subscriptions provide a unique opportunity to interact with customers and ask them about their preferences, pain points, and more in a way that is not available with most traditional shopping methods. For instance, questionnaires are ideal for collecting valuable information from customers where they may feel more comfortable sharing their preferences anonymously. Requesting feedback from subscribers frequently is vital for understanding whether the shopper has liked or disliked the product or service, and how that offering can be improved to enhance their future experience.
Subscription E-commerce is Here to Stay
It can be easy to dismiss the value of subscription sales because the business model is relatively new for a number of e-commerce categories. However, as consumers are increasingly indicating their preference for a personalized online experience, subscriptions provide the opportunity to tweak and customize offerings without an overhaul of the product or service range.
Following the practices set by companies that have experienced success with this business model can help to minimize mistakes when initially setting a strategy. Online platforms also provide access to vast amounts of data to help businesses understand their customers better and create more engaging experiences going forward. Curation and customization offer buyers exactly what they want and ultimately contribute to greater customer retention rates.