The hard truth about the subscription model is that despite its widespread popularity and predicted market growth, many subscription offerings fail. Most often this happens when a brand’s subscription model has been created because the company feels like it should in order to stay on-trend, but it is not actually aligned with what the target subscriber wants or needs. So, how do brands align and present the value of their subscription to customers knowing that oftentimes subscription is seen as a one-sided relationship that only benefits the brands?
The traditional relationship between brands and their customers is like dating in your 20s. Casual shoppers are like casual daters—you’re just getting to know each other. But converting a casual shopper to a subscriber is asking for a regular, recurring commitment. Conversely, some relationships fast track: Subscriptions are bought on that very first interaction because there is an obvious and immediate value to jumping in with both feet. Even if it’s love at first sight, when you convert a subscriber you are asking your customer to go steady. So, why should they?
Thankfully, the answer to this question is much simpler than dating in your 20s. It is relatively formulaic, saving a few variables unique to the brand’s particular industry and vertical. It’s also important to consider both new subscribers and current subscribers, as it can be dangerous to assume relationship bliss among this latter group.
To navigate transitioning existing customers into subscribers and continuing to delight current subscribers, we will break down the five key factors for subscription success, and the segments of the subscription model where your brand can offer the most value.
Breaking Down the Strategy for Success
Whether it is day 1 or day 1,000 of your brand’s subscription journey, it is critical to audit the methods you have outlined for implementing a successful subscription program to assess what is truly working. When you have carefully executed the following strategies, you will naturally achieve a greater understanding of how to create continued value for your subscribers.
- A clear and unique value proposition–A well-developed value proposition must be clearly communicated to signal to your target audience that you have created a subscription with them in mind, designed for their benefit.
- Personas and segmentation—It may seem simple, but knowing your subscribers is essential. Narrowly targeted, accurate buyer personas will result in higher engagement and conversion rates.
- Personalization—Much in the same way that you should remember your partner’s anniversary, personalizing the relationship with your subscribers is also critical. Companies that use advanced personalization methods can realize an improvement of >20% in their NPS and incremental revenue growth of >10%. Doing this in a way that strikes a balance between privacy and profit can translate to customers who feel seen but not stalked.
- Loyalty/Rewards programs—A bouquet of flowers or a nice dinner out can speak volumes. Customers want to feel appreciated and valued. Companies with strong loyalty marketing programs grow revenues 2.5 times faster than their competitors and generate 100-400% higher returns for shareholders. These programs also provide a sense of community, so subscribers are gaining a lot more than just a product or service.
- Seamless user experience—All relationships require work, and companies that continue to make strides toward achieving continuous delivery, innovation and personalization are poised to advance past the casual stage with their subscribers, keeping them for the long haul. Companies that lead with customer experience top of mind drive revenue 4-8% higher than industry competitors.
By tailoring your subscription offering with these standards in practice, you ensure that the offering you’re building is intentional without forcing your existing value proposition into a new format your customers won’t understand. But this is only half the battle. Brands go wrong when they fail to define what segment of the subscription economy they will zero in on.
Let’s look at some of the common methods retailers are using to scale from that first date to a more steady thing. For the purpose of this article, we will discuss the differences surrounding the subscription box, subscribe and save, loyalty programs and membership—the subscription offerings most common in CPG and retail. CPG and retail, more often than media and entertainment, are tasked with securing that long-term relationship. In media and entertainment, subscribers are more likely to jump right in because they want instant access to a platform-exclusive movie or show.
Here is a quick summary of the four programs:
Subscription Box—When you think of retail subscriptions, the subscription box is likely what you imagine. FabFitFun and HelloFresh dominate this space with their recurring delivery that introduces customers to new products at far less than retail cost.
Subscribe & Save—This model gives customers one-time purchase options usually through an online marketplace and the opportunity to repurchase specific products at regular intervals (e.g., weekly, monthly, quarterly) at a discounted price. Notable vertical leaders including Amazon and Chewy.com are known for their subscribe and save models.
Loyalty Programs—While not new, these programs provide non-monetary rewards in the form of points, discounts, products or other benefits to the subscriber. The value for the brand is in the data.
Membership—Unlike subscribe and save, the membership model limits access to the product or service to subscribers who pay a monthly use fee. It is not uncommon for different membership tiers to have varying offerings at multiple price points. Costco, Peloton, and Equinox all offer membership-based subscriptions.
Understanding the key factors for success and the subscription offering applicable to your product or service is only part of the solution for creating a connection that leads to that long-term customer relationship. The other side of the equation comes when your brand marries (yes, pun intended) that customer’s need with both an excellent and memorable experience. Excellent customer experience will persuade your existing retail customers to convert to subscribers because the value add is clear, but creating that brand loyalty is not without challenges.
The subscription stereotype—the assumption that subscription businesses are only after recurring revenue, are difficult to cancel and don’t offer any real value to the customer—is a huge barrier to converting subscribers. Once your customers are on board, your subscription offering must be able to meet the demands of continuous delivery, innovation, and exceptional customer experience at scale.
Misalignment between why the subscription was created and its myriad of practical applications can cause the subscriber count to quickly dwindle. Take, for example, BMW’s Summer 2022 announcement that it would charge customers a subscription fee to activate their vehicles heated/cooled seats. Drivers took to social media to protest the change—unable to see the value in paying to use hardware that is already installed in their vehicles. This is a classic case of value misalignment. Finally, and especially for brands trying to reinvent their subscription model, the assumption that you already know everything about your customer can hinder those ongoing improvements.
Things to Consider
As you evaluate the future of your subscription model, it is important to have clear answers to a few key questions.
- Do you understand the key factors for subscription success? Furthermore, how do you plan to use existing data to create a value proposition that resonates with the way your customers engage with your product? Is the value the subscription provides clearly aligned with what your subscribers are requesting?
- How can data help you understand where your customers are and what they currently value? Subscription businesses require their own set of data tools within tech and analytics stacks that are designed to evolve. Data from disparate, siloed channels won’t be inherently valuable for the purpose of understanding what’s important to your customer. But, when evaluated in aggregate, the data can uncover behaviors that will shape your subscription offering for the future. Analyzing the way your model customers behave can lead to uncovering strengths that should be amplified.
- What does exceptional customer experience look like? Customer experience should add value to your relationship with your subscribers. Be open to evolving your CX over time, but ensure that you have a solid foundation that your subscribers trust.
Just like you wouldn’t propose on a first date, it is unreasonable to expect your customer to commit to a subscription without making its value clear first. As you build or refine your subscription offering, remember that you are entering into a long-term relationship with your customer. Ultimately, that commitment will be easier when you lean into personalization, provide convenience, and offer an exceptional experience that makes your customers willing to commit to a recurring payment. After all, these incremental steps will provide the basis for a strong, happy relationship where, ultimately, the subscriber keeps saying yes.