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Strategy

How to Build a Successful Subscription Model

Subscription models continue their popularity streak, but there's more to it than just curating products for your box. Use these insightful tips to start

Adebisi Adewusi
January 26 2019

If there’s one thing the success of Dollar Shave Club has shown retailers, it’s that there is a market for subscriptions. Online visits to pure players grew from 4.7M visits in April 2014, to 41.7M in April 2018. The subscription market has grown more than 100% each year for the past five years with big retailers, and in 2016, sales reached $2.6B.

Two years later, subscription models continue their popularity streak, and more big names are getting in on the fun. Walmart and Macy’s currently offer their own Beauty Boxes, while JCPenney partnered with Bombfell to launch a version for ‘big and tall’ men.

Depending on your product and target market, the subscription model can be a wise investment. There’s more to this tactic than putting products in a box, however. Below are five tips to help you build a successful box.

Choose The Right Subscription

Some of the top reasons consumers continue with a brand’s subscription service: convenience, tailored experience, and personalization. Any old package with random products won’t do. When selecting a subscription model, marketers would do well to consider the following options:

Curation Subscriptions: This subscription category is focused on surprising and delighting consumers by providing them with different select items each month. To master this category, cater your products to customers’ preferences and choose a fresh and exciting monthly theme for boxes. For instance, Play! by Sephora offers subscribers sample beauty products and coupons they can use in-store or online.

Replenishment: If you stock everyday items, a replenishment subscription may suit your brand best. 24% of consumers pick this option for the convenience. Amazon Subscribe & Save and Dollar Shave Club offer this service for products like razor heads, coffee pods, makeup removers, and the like.

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To succeed with this approach, add financial incentive and make ordering easy. 23% of replenishment subscribers say value is the second most important reason for opting into this subscription category.

If your customers love exclusive deals, consider offering an access subscription. Although more niche than other categories, access subscriptions give consumers exclusive members-only perks for a monthly fee. NatureBox’s subscribers save up to 40% on all snacks with this option.

Before picking a subscription category, understand who your customers are, what your subscription service solves, and feature a clear value proposition.

Focus On Customer Retention

For subscription models, customer acquisition is half the battle. 72% of subscription customers fail to make a repeat purchase in the 12 months following their first purchase, and 40% of eCommerce subscribers have canceled their subscriptions. Although churn is inevitable when running a subscription model, the following strategies encourage increased loyalty:

  1. Predict Churn: While win-back campaigns are great, they’re also reactive. Take a proactive approach and use predictive analytics to explore customers’ behavior and identify those most likely to cancel their membership. Entice borderline churners with great offers to keep them on the right path.
  1. Offer New Products: Expand your box offering to keep customers pleasantly surprised and dedicated to your brand. As of 2016, 40% of Dollar Shave Club monthly subscribers ordered non-shaving-specific items. When expanding your offerings, stay within your niche and launch trial kits to gauge how your new products are received.Source
  2. Deliver Personalized Experiences: 28% of access and curation subscribers believe a personalized experience is the most important reason to continue their subscriptions. Utilize data from subscriber profiles to determine your customers’ preferences and send them the right product selection. Brands like Birchbox and Stitch Fix combine customer data with artificial intelligence to customize products for each subscriber.

Engage With Customers

The success of your subscription model doesn’t just depend on transactions. Customers who are fully engaged represent 23% in terms of wallet share, profitability, revenue, and relationship-growth compared to the average customer. A few ways you can connect with subscribers:

Informative Content: Informative content can drive consistent consumer interest. Over a quarter of survey respondents reported that informative content is most important to them, with 60% placing that feature within their top two must-haves. To keep subscribers engaged with content, Play! creates videos giving subscribers a peek at what to expect in their box.

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Educate your audience with videos, info cards that describe how to use items in your box, or branded magazines like Dollar Shave Club’s.

Offer Incentives: Rewarding subscribers is a great way to drive engagement. Reward customers when they make a purchase, referral, write reviews, or engage in social sharing.

Birchbox’s loyalty program rewards members with points when they shop, refer friends, or review samples.  Each point translates into money that customers can spend in the Birchbox Shop or their NYC store.

When using this strategy, keep in mind that freebies can be costly. Consider small gestures and constantly test your incentives.

Build a Strong Community on Social Media: Engaging with customers on social media is a great way to remain top of mind and build relationships. To build a connected community, posts relevant content, respond quickly, and ensure that your brand’s identity and persona remains authentic. Influencers within the product community can help achieve a strong customer connection.

The subscription model always puts the customer first. Invest in forming personal connections and building relationships by treating every engagement as a unique conversation.

Make Unboxing Memorable

In an age where there are YouTube channels dedicated to box reveals and one in three people share photos of their boxes on social media, the unboxing experience can create a feeling of child-like anticipation – and it begins with packaging. Seven out of 10 consumers say custom packaging is important to their subscription box experience, and 30% are more likely to continue a subscription simply because of packaging aesthetics.

To make your boxes more appealing, select a design that aligns with your brand and let your individuality show through. The Play! subscription package features a vibrant playful design.

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To streamline the creative packaging process and ensure consumers receive quality materials, it might help to enlist outside packaging firms.

Include packaging inserts in subscription boxes to add additional value. These inserts could be thank you notes, product instructions, or coupon codes customers can use in-store or online. For instance, every Play! box comes with a card that customers can use to earn rewards points and one-on-one tutorials from a Sephora consultant.

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Create a special hashtag so that upon unboxing, customers can easily share their packages with other followers. Make the outside as interesting as the contents for easy social media shares.

Give Your Customers Control

From same-day delivery to ‘try before you buy,’ consumers love options. Providing several choices wherever possible gives them more reason to try more of your offerings at their own pace, and specifically opt for products they’ll enjoy.  Below are a few ways you can allow customers to call the shots in your subscription model.

Customize Product Selection: Allow consumers to customize their monthly orders as FabFitFun does, giving subscribers the option to include discounted add-on items with each seasonal box purchase. When offering this option, ensure that your inventory management and fulfillment solution is agile enough to handle changes.

Frequency Of Delivery: Your box recipients might want to skip a month or two from time to time. Give them the option to pause deliveries. You can do this by sending an email reminding customers that their boxes are about to ship, allowing them to decide if they want to receive or skip the order. This option helps build trust with customers and shows them you’re not all about the money.

Payment: The degree of flexibility offered with your payment options could mean the difference between keeping and losing consumers; in fact, 90% of the top subscription services offer flexible plans. It’s also a good idea to support multiple currencies and payment models such as digital wallets. Whichever payment options you offer, be clear with your billing practices.

While it’s true that consumers want control, don’t overwhelm them with too many choices. Keep things simple and allow them to adjust preferences with the click of a button.

 Conclusion

Though building a successful subscription can be challenging, it’s certainly possible. For long-term success, implement a subscription management platform to achieve insight into everyday subscriber activity. Develop a strategy to drive customers to your online or physical store as a way of conquering subscription fatigue. Finally, remember that consumers will only subscribe if you give them tangible benefits. Do your research.

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