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Analysis

Take Notes: This Is What Retail Marketers Can Teach Us About Subscription Churn

Old-school marketing problems call for old-school marketing solutions.

Marshall Lemon
September 26 2019

Despite proclamations of its rapidly approaching demise, retail is still very much alive. Only 14.3% of sales in the US last year were eCommerce-based, despite the overwhelming prevalence of smartphones and web technologies.

While retail certainly hasn’t gone extinct, it is facing some of the highest churn rates of any industry. One Statista study found that the average US retail customer churn rate in 2018 was 27%. For hybrid retail-eCommerce solutions like subscription boxes or meal kit services, churn can increase to 40%. What’s more, retailers often struggle to measure churn due to the unreliable nature of drop-in customers. Yet retail persists, thanks to effective churn-reducing strategies.

Reduced subscription churn ultimately improves customer retention across both retail and digital marketplaces. What’s more, the latest trends suggest that high retention is an important indicator of future success. So, what lessons can retail marketers teach us when it comes to combating churn?

Get Proactive About Reducing Churn

Instead, physical retail focuses on identifying customers likely to churn and attempts to address pain points before the relationship ends. One excellent example is this SSRN study, which generated a 3% revenue increase and 6% churn reduction using proactive retention management techniques.

Proactive management may be an emerging science, but it’s one with well-documented benefits — just look at the oft-cited Bain & Company study showing that acquiring new customers is five to 25 times more expensive than retaining old ones. Potential VIP customers are great assets, which is why HubSpot suggests you start “leaning in to your best customers.” After defining a core customer group with high potential lifetime value, marketers can offer incentives that appeal to them. This strategy offers a higher ROI than broad discount sales which reacquire lapsed customers for a brief time.

Account for Customer Behavior Patterns

Subscription churn metrics can also provide insight regarding digital churn. Currently, consumers are unsubscribing from HBO en masse because Game of Thrones ended, but many will re-subscribe in a few months to watch other shows. In retail markets, this is referred to as purchase frequency or a re-buy period. A customer’s re-buy period measures the length of time before they return to a retailer for another purchase — a key consideration in the fashion and furniture industries.

Understanding a customer’s purchase frequency helps marketers understand when or how often a ‘seemingly-churned’ customer will return. If they are only interested in a service during certain periods or for a specific purpose, a new subscription model can be tailored to retain that customer over the long term. It may also encourage businesses to offer additional or more frequently released content to nudge customers to maintain their subscriptions.

Meet Customers Where They Are

One key retention strategy in modern retail is catering the journey for customers. Offering a unique experience — be it physical, emotional, or mental — typically convinces customers to return to your store. This goes beyond simple branding — as customer service consultant Micah Solomon noted, “Customers almost wholly lack awareness of, or interest in, your other customers and your other priorities as a company.”

It might sound odd to data-focused professionals, but this isn’t mysticism — data and personality science of a psychological approach to marketing. Retail marketers are masters of crafting specialized in-person experiences which generate critical mass through local relevance and word-of-mouth advertising. This local relevance takes time to establish and represents old-school marketing methodology, but it’s a practice with great results.

Physical businesses serve as examples for simple, localized messaging. Simply knowing which holidays customers celebrate is valuable for retail brands as they plan peak purchases. With enough insights, marketers can get even more specific. For example, most Americans don’t see a lot of advertisements for defense contractor Raytheon, but they will when accessing the internet around the Pentagon or when traveling on Washington DC’s metro lines — locations guaranteed to house defense establishment officials and contractors.

Build A Customer Experience

The head of marketing at Google Canada, Fab Dolan, shared this insightful quote on how retail and eCommerce relate to one another: “The brands that are winning are the ones that understand and own the fundamental interplay between experiential and transactional.” In other words, a customer’s transactions with a brand are associated with an overall experience. Physical retailers with a deep understanding of their customers can shape the experience into something that’s worth coming back to.

Cosmetics brand Lush is just one of those companies winning by providing catered experiences. Lush has a strong product narrative, customer service that gently educates consumers, and catered in-store experiences that encourage them to linger and sample products. These experiences pushed Lush’s sales into the billion dollar range using little more than word-of-mouth marketing, reaching 1.3 billion people in 2017. Lush’s strategy is simple but effective: encourage shoppers to return by providing an experience they’re excited to share with others. Every product they sell has a story, and one of those stories is bound to hit home with a customer.

Adapting catered strategies to digital subscriptions isn’t always obvious or simple, but it is possible. Consider BARK’s journey to profitability. Where other subscription services have faltered, BarkBox sends subscribers a curated selection of dog toys, treats, and foods from a variety of brands each month.

Each BarkBox is more than a random scattershot of new items, however. Subscribers are encouraged to send in feedback about the toys, rated by whether their dog likes them — data which feeds back into customizing future packages. Each month’s box also delivers a narrative theme like “fairy tales” or “high school” using unique branding, tags, clever newsletter copy, and themed illustrated wrapping paper on the interior. If nothing else, it’s likely that BarkBox’s marketers have succeeded in earning word-of-mouth marketing from people explaining why their dog has a squirrel lunch lady as a squeak toy.

Don’t Forget the Basic Lessons of Personalized Marketing

To survive in an increasingly competitive market, retail businesses are innovating and reimagining the basics of customer service. Their techniques are perhaps less obvious compared to eCommerce-driven strategies, where the majority of marketers are more familiar with data-backed digital techniques. But while data analysis is certainly important, the classic lessons of retail-driven customer experience still carry value in digital spaces. According to one McKinsey poll, 28% of subscription box customers claim that a curated, personalized experience is their primary reason for subscribing. Satisfying this customer need reduces churn and makes the subscription box field viable in the long term.

“The customer is always right” might be a worn-out idiom, but it still highlights an important truth: customer-centric strategies can reduce churn, increase retention, and maximize performance for marketers across other metrics. Putting the customer first in terms of brand identity and the user experience is a crucial step to building a successful business — be it physical or digital.

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Marshall Lemon

Marshall Lemon is a writer, editor, librarian, and game designer. As the Content Marketing Manager at Fluid PR Group, he helps businesses craft engaging stories within the context of well-researched industry data. He lives in London, Ontario with his wife and two adorable puppers.

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