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Retail

A Subscription Service Can Increase Your Bottom Line

Subscribers are an average of 217% more profitable than one-time customers.

As an uncertain holiday shopping season approaches, brands must find innovative ways to drive growth. One strategy that’s often overlooked: subscriptions. But companies that do build a subscription model often unlock more revenue — subscribers are an average of 217% more profitable than one-time customers.

Consider these success stories:

Yankee Candle — a college dorm room staple for years — now offers a Fragrant Flight subscription. Using a guided quiz, customers can select a subscription based on their fragrance preferences. This feature has helped the company earn 343% revenue growth since March.

Relationship commerce company Ordergroove saw a 40% increase in consumer subscription enrollment after the pandemic hit — particularly in health and wellness, grocery, and essential goods.

New to subscriptions and want to get up and running fast? Here are tips to get started.

1. Make subscriptions the lynchpin of your direct-to-consumer (D2C) efforts

In this suddenly all-digital world, don’t consider subscriptions an afterthought. By 2023, 75% of organizations selling DTC will offer subscription services with global subscription commerce accounting for 18% of the market. So, get ahead of the competition by making subscriptions part of your digital strategy from the get-go.

Take KIND Snacks for example. In 2017, KIND recognized an untapped D2C opportunity — a new digital channel to reach customers directly online. The company’s early investment in D2C paid big dividends when traditional retail was interrupted by COVID-19, and its subscription boxes became one of the top-selling items on its site.

To get started, have a plan for how to include subscriptions on your website.

  • Add your subscription offering to both your home page and product detail pages.
  • Offer a promotion for signing up for a subscription.
  • Add a subscription signup to your checkout page as a last-stage incentive or impulse buy.
  • Consider building a guide or interactive experience to boost the subscription shopping experience.

2. Hone in on the subscription type that works for your brand

Not all subscriptions are created equal. Decide on the type of offering (or offerings!) you want to provide your customers. Here’s what to consider:

Autoship subscriptions

An autoship subscription is the most popular type of brand subscription. These subscriptions enable customers to choose an option for an automated recurring order. This both adds convenience and cost savings (with a “subscribe and save” order). Autoship subscriptions work best with regularly purchased items — like diapers or healthy snacks.

Box or club subscriptions

Box or club subscriptions is when a customer receives a recurring shipment that includes new and differentiated products. This type of subscription was made popular by Birchbox and Stitch Fix but has quickly expanded. Customers enjoy the experience of receiving new items regularly — and this can often become a brand promotion experience. This type of subscription is better for companies that differentiate themselves on a personalized customer experience and want to increase upsell opportunities.

Access subscriptions

These subscriptions provide customers access to a service based on recurring billing. Netflix and Amazon Prime are two popular examples of companies offering access subscriptions.  Access subscriptions are growing in popularity across entertainment, educational, networking, and even retail sites as a way to offer customers a differentiated and premier experience. This type of subscription is best if your customers typically buy many of your products or services

Regardless of the type of subscription you choose, start small and add on as your business grows — don’t try to do all these types at once.

3. Think bundles, not single products

When setting up your subscriptions — particularly box or club subscriptions — make sure to align your merchandising and product bundling strategy. This gives you better insight into future product needs, generate additional perceived value, and introduce your customers to new products.

You can build bundles in many ways. Think complementary items (printer ink and paper), varieties of a single product (like a snack subscription box), or mixing standard and new or limited release items. Bundles can also help you move stagnant inventory. And when offering items separately or in a bundle, if the bundle price is lower than each individual price, you are generating perceived value for the consumer. 

4. Analyze performance with forecasting, churn, and cohort analysis

Once you set up subscriptions on your website, use your subscriptions for insight into future inventory needs. For example, if you have 1,000 monthly subscribers, you can plan for that much monthly demand and recurring revenue.

You can also better test emerging products and consumer trends. Take again, KIND Snacks for example. In the physical store, customers may only see a handful of products. But online subscribers have access to the full selection of bars, which give better insights into buying behaviors. By viewing your subscribers as a group, you pick up on trends and directions from shopping behaviors — such as seasonal preferences or new items that become favorites and standard items that fall out of favor. This can help you decide what items to keep, remove, and introduce to other channels and markets.

Getting started

In summary, subscriptions are a win-win. Consumers get the products they need at consistent and predictable intervals, and brands can build lasting relationships and a stable source of revenue.

Discover more about getting up and running with subscriptions with our Quick Start Commerce for Subscriptions Solution.

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