What eCommerce Brands Can Learn from Subscription-First Models
The modern world of digital commerce is fast-paced and the pressure on businesses to produce a predictable stream of revenue, establish long-term customer relationships and stick out in a competitive crowd is greater than ever. In the last decade, a subscription-first approach had emerged as a juggernaut strategy to reach these objectives. Consider Netflix, Dollar Shave Club, or even software companies such as Adobe, these are companies that have completely changed the way in which we look at value, and even loyalty.
A lot can be learned about subscription-first companies by eCommerce brands, who especially those attempting to expand beyond a one-time purchase model. The article is a breakdown of how these operations are performed, their success drivers, and how eCommerce brands may borrow some of their ideas to enhance customer retention and brand loyalty as well as cash flow.
The Rise of the Subscription Economy
Business models based on subscription are not that new, but the manner in which it was utilized during the digital era is novel. Subscription companies are not about the transactions, it is all about the lifetime value of the customer. They spend on maintaining monthly involvement of customers by building experiences and services and not merely the product.
The subscription economy is growing, and it offers services (streaming services), curated meal kits, or even pet supplies. Zuora Subscription Economy Index shows that subscription companies have seen their revenues increase at almost 4.6 times the rate of the S&P 500 companies in the past 10 years.
Then, what are they getting so right and how can eCommerce brands capture the same concept?
1. Predictable Revenue = Smarter Planning
The most appealing thing about subscription models is that it can be predictable. By knowing what revenues they will earn in the next month (or even the next year), it enables companies to make better decisions relating to amounts to be purchased (inventory), amounts to hire (new employees), how much advertising to do (marketing), and how much to expand (growth).
In the case of eCommerce companies feeling the highs and lows of an annual promo cycle and seasonal sales, the incorporation of subscription-related features is bound to flatten it all out. Consider the examples of such brands as BarkBox that created a strong following of their lovers of dogs because they sent them a surprise treat on an ongoing basis each month. They have better scaling capabilities with the help of a predictable revenue base.
2. Build Stronger Customer Relationships
It is an average eCommerce store that spends so much time and money to attract new customers. Yet, what would happen in the case when you could strengthen your existing associations with the people you know?
Businesses which revolve around subscription are long-term. To establish emotional connection and brand trust, they apply all touch points with a customer, including their onboarding emails and packaging. Those are not customers but members.
Making the transition into full subscription is not the only way available to eCommerce stores to use such techniques. The same experience of an ecosystem that has the element of being constantly thinking about the customer can be achieved by delivering loyalty benefits, recommendations based on behavior, or even reorder reminders.
3. Data-Driven Personalization
Access to deep customer data is one of the least noticed benefits of subscription lessons. Since the subscribers have direct communication with your brand, you get to know about their folds, choices, and actions.
Big-box companies such as Stitch Fix take advantage of the information to make clothing recommendations even to the size and style of an individual. The result? The customers will feel like they are heard and thus will tend to be long-term customers.
In case of eCommerce even a simple repeat-customer stream can prove to be a goldmine. Customize the marketing messages along with upsells using the data you already capture such as previous purchases, frequency, and product types. The more personal the experience, the more appreciated the customer is.
4. Community-Driven Retention
A subscription-first brand does not only build a service, but a movement. Consider an example of Peloton that transformed fitness equipment into a social network. Or like the Glossier that negotiated its skincare empire by taking its users as a community and not an audience.
Communities in eCommerce can be generated by encouraging users to create content, reward loyalty incentives, discussion boards and communicate with the customers via social media.
Your job is not that you are selling a product, but you are giving your customers an idea to believe in.
5. Operational Efficiency & Automation
Since the subscription companies are aware of when they will bill their customers and when their products will be delivered, operations could be streamlined, demand could be forecasted, resulting in minimal wastages. That is an immeasurable advantage over conventional or legacy eCommerce where only the demands are unpredictable and the logistics reactive.
Better automation can be followed by eCommerce brands on the same lines. Make consumables auto-shippable, set email workflows following a purchase as a way of being engaged with the product even after purchasing it, and use predictive analytics to adequately restock on it in time. This is how these little actions equate to easier operations and more satisfied customers.
6. Opportunities for Upselling and Cross-Selling
Subscribers are already on a standing contract, and they are accustomed to believe in your brand. This paves the way to smart upsell, cross selling and bundling. It also does not seem intrusive when it is done in a right manner.
With eCommerce brands, you can replicate the same by making value-added purchases, suggestions of products wanted by past purchases, or special deals to repeat clients.
Your regular customers are bound to become converts easily than the new ones- make use of that trust.
7. Handling Customer Churn Gracefully
Although wildly successful with their retention model in mind, the subscription businesses are also aware not all their customers will remain forever. So that is why they implement churn reduction measures in the customer journey; including win-back email campaigns, and a pause, as opposed to cancellations.
The same is to be done by eCommerce brands. Don t allow the customers to walk away without a farewell or an offer. The opportunity to make another purchase in the future can remain open through exit surveys or win-back discounts or useful re-engagement material.
8. Flexibility Builds Trust
In the contemporary market, consumers cherish freedom. Since customizing brands and pausing or skipping their deliveries is a subscription-first behavior, it is possible to trust such brands and be less prone to canceling them.
Such an idea can be applied in the context of eCommerce by offering flexible shipping, simple returns, and a user-friendly straightforward experience. The less difficult you can make it with persons in doing business with you, the more are you likely to get them with you again.
Final Thoughts: Blending the Models
You do not need to make your company a subscription business to take advantage of the subscription mentality. Even such small additions as a recurring order, personal recommendations, or loyalty-based mailing flow can make your eCommerce store closer to the level of customer relations that subscription-first companies have achieved.
And as competition in digital channels becomes more intense, those brands who contemplate the long-term will be the brands that shine; whether that is building community, delivering value in a consistent and prolonged way, and gathering customer data and learning about it.
Even your infrastructure is important in case you are seeking to create greater continuity and security in your operations as a business. As an example, it is just as essential to ensure that you backup sensitive customer data and ensure that your systems are well fortified against failures as it is to ensure that you deliver a great service. If you ever face storage-related issues, click here to explore a reliable solution for data recovery.
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