A Guide to Subscription Marketing
Huge growth in subscription e-commerce in recent years has many companies looking at ways to introduce a subscription service to their online offering. With customers increasingly expecting highly personalized and convenient methods of obtaining goods and services, subscription marketing — from access subscriptions like Netflix to replenishment- or curation-based services like Dollar Shave Club or Barkbox — is a great way to deliver a customized retail experience that is convenient, exciting, and offers value to your customers.
Read on to find out how different types of subscription services stack up and how subscription e-commerce can work for your business.
The subscription model appeals to consumers who desire a highly personalized, bespoke customer experience without having to engage with anyone or step foot inside a brick and mortar store. Sarah Steimer of the American Marketing Association explains: “Subscription boxes satisfy this appetite for a detached yet customized shopper experience, and they do so with the climactic bonus of “unboxing.”
Subscription box services offer a ‘curated surprise.’ In other words, they deliver products that the consumer may not have otherwise sought out for themselves, but fit comfortably within the realm of what they like, what they need, and what they can afford. The key to a successful subscription model is finding that tricky balance between surprise and getting it right, every time.
According to a recent survey on subscription e-commerce conducted by Mckinsey & Company, the market for these types of services has grown by more than 100% per year over the past five years, with the largest retailers generating more than $2.6 billion in sales in 2016, up from $57 million in 2011. While it’s clear that the appeal of subscription e-commerce is on the rise, it’s helpful to take a closer look at who is buying into it.
● 15% of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis, frequently through monthly boxes.
● 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.
● Women account for 60% of subscriptions.
● Men are more likely than women to have three or more active subscriptions (42% versus 28%).
● The median number of subscriptions an active subscriber has is two, and nearly 35% have three or more.
There are three main categories of e-commerce subscriptions:
Curation-based - Customers receive a curated selection of items based on personal preferences, with varying levels of consumer decision-making. This category works well for apparel, food, and beauty products. Companies currently offering curation-based subscriptions include Frank & Oak, Fabletics, Barkbox, and Ipsy.
Replenishment-based - These types of subscriptions appeal to customers looking to save time and money by automating the process of reordering the same or similar items on a regular basis. This works well for commodity items such as toner cartridges, razors, or vitamins. Companies that provide replenishment subscriptions include Xerox, Amazon Subscribe & Save, and Dollar Shave Club.
Access subscriptions - Membership provides exclusive access and/or additional perks. This category primarily functions for entertainment services, apparel, and food. Example companies offering access subscriptions include Netflix, JustFab, Google Play, and Amazon Prime.
The research conducted by Mckinsey & Company also found that subscription churn rates are high, with consumers cancelling services that don’t meet their expectations.
● 28% of access and curation subscribers say having an excellent personalized experience is the most important reason to continue their subscriptions.
● For replenishment subscribers, convenience (24%) was the most important consideration followed closely by value for the money (23%) and personalized experiences (22%).
With the data in mind, there are a few factors to consider for a successful subscription service:
Consistently deliver an excellent personalized experience - The key word here is consistently. For the customer to see value in committing to your products on a regular, scheduled basis, you have to get it right nearly every time, not just some of the time.
Reduce risk - For many consumers, committing to a purchase that is largely automated and curated by someone else will seem risky and worrisome. Engineer confidence in your subscription service by giving some control back to the customer. Easy returns or exchanges are a must. Many curated subscriptions permit customers to skip boxes or swap out items easily. Cancelling the service should be relatively simple too.
Make it easy and convenient - By definition, a subscription service is meant to provide ease and convenience, but there are a few key features your service needs to get right. Firstly, it needs to be easy to sign up for your subscription service. This means customers need to know exactly how it works and what they’re signing up for, but more importantly, it means that you need high quality analytics that derive data-rich information about your customers without being overly intrusive or cumbersome.
It may be tempting to bombard customers with lengthy questionnaires to glean as much as you can about their preferences, but if it’s too much, your customers will fatigue and walk away from the process.
Provide value - For many customers, the allure of a curated box or the convenience of auto-replenishment will not be rewarding enough to commit to a subscription, so the added incentive of a preferred price rate or discount for subscribers is important.
When done well, subscription marketing has the potential to provide a richer, more personalized online shopping experience and can automate customer retention. The key to success is providing an out-of-the-box experience focused on excellent customer service, convenience, and value.