Subscription commerce is booming. Online retailers ranging from new startups like Honest.com to large multichannel retailers and brands like Teavana, Jockey and Johnson & Johnson are launching subscriptions and product discovery clubs as a way to improve customer engagement and increase lifetime value. And, consumers love the convenience and the "surprise and delight" factor.
It takes skill and expertise to deliver a program that builds consumer goodwill and sales—and the stakes are high. Executed correctly, subscription commerce programs rapidly grow top-line revenue and improve margins by turning one-time customers into lifetime relationships. But woe to the retailer who leaves consumers feeling tricked into purchases they don't want. In the era of social media, there is no room for a subscription misstep.
Subscription commerce programs are deceptively complex and getting it right is paramount. Here are six ways to make sure you deliver a high-value service to loyal customers, while also attracting new customers searching for ways make their lives easier and more fun.
1. Know yourself—and your customers. Subscription commerce can take on various forms. The most common are 'replenishment' services where customers get items they use on a regular basis, like baby products, office supplies or cosmetics shipped to them every few weeks. There are also 'discovery' services where retailers help their customers discover exciting new items they love, but might not have been aware of otherwise. Take the time to understand which works best for your customers and your business, keeping in mind that it could be both.
2. It's what you offer. Trying to decide between 'Subscribe now and get free shipping!' or 'Sign up and get a surprise gift'? Don't just slap up a subscription offer and hope for customers to sign up. Instead, do an analysis of your most loyal customers; what do they buy, how often, which are their favorite products, which price points are most attractive, etc. Run A/B and multivariate tests and measure everything in order to optimize your subscriptions offers over time to drive maximum sign-up and continued usage.
3. Watch retention. Be sure to measure the retention and projected lifetime value of each subscription offer to ensure long-term profitability. When are your customers churning? Is it between orders 1 to 2 because "I didn't mean to sign up" or between orders 3 and 4, because I have too much product? Identifying and being able to analyze these keys events and take action allows you to unlock the full potential of subscriptions.
4. Put the customer at the center. Continuity programs of the 80's and 90's locked in customers and ultimately didn't work for consumers. Subscription commerce programs today should take a different more customer-centric approach focused on convenience, value and the customer experience. Ask for their feedback. Do they like the service? What could be better about it? Put your customer in control, allow them to opt out, skip a delivery or even accelerate a delivery. By putting them in control through powerful CRM tools, you'll gain their trust and they'll retain themselves.
5. Leverage subscriptions as a chance to upsell and cross-sell. Subscription services are a great way to upsell your member base to increase average order value and create healthy margins. Think of that subscription order as a stake in the ground to remarket to your most loyal customers. For example, if a customer is receiving their box of diapers in 10 days, you'll be hard pressed to find a more relevant time to upsell the customer to increase average order value. To the customer, the communication is simple: 'your box of diapers is coming. What else do you want to add to the box?' Perhaps your wipes, vitamins and ointment (higher margin products)?"
6. Cover all your bases. There are many pitfalls to avoid when launching a subscription platform. Common ones include suboptimal credit card approval rates, missing the transactional email lifecycle, and inventory control issues. Due to the nature of recurring transactions, a significant percentage will be declined and responding with the appropriate action is critical to retention and lifetime value. Additionally, what happens in the case of an item being out of stock or discontinued? Whether you're launching a replenishment type subscription program or product discovery program, make sure your subscription commerce platform offers all the tools you need to set your business up for success.
With so much money always being poured into acquisition and conversion, subscription commerce presents a unique and massive opportunity to drive exponential revenue growth and profitability to your bottom line. A successful program helps you identify and interact with your most valuable customers – the ones that have been most influential in helping you build your business.
Greg Alvo is CEO of OrderGroove.