Whether you’re an avid Amazon Prime user or a dedicated Netflix viewer, you’re likely no stranger to subscription and membership programs. Now, consumer brands are rolling out these new programs in order to drive recurring revenue for their business. Insider Intelligence research indicates that U.S. subscription ecommerce sales will continue to see double-digit growth over the coming years, swelling from $33.48 billion in 2022 to a projected $43.13 billion in 2024.
While growth is on the horizon, brands need to ensure their programs meet, even exceed, consumer expectations. They need to ensure their programs are too valuable to cancel, which is why some companies are:
- Assessing their program benefits and expanding their tiers;
- Making the program registration and customization process easier; and
- Using data to personalize and better curate their programs.
Even extremely niche brands like Neuro Gum, a gum and mint brand with products designed to increase energy and mental focus, can benefit from the model. Each of Neuro Gum’s SKUs are available for subscription, a way to seamlessly embed the products into consumers’ daily habits, according to Co-founder Kent Yoshimura.
“Instead of supplements that sit in bottles in your medicine cabinet, our belief is that health should be readily available in your pocket,” Yoshimura said. “There’s a plethora of daily health supplements we take to improve our health, and Neuro Gum aims to be the one that fits your schedule, rather than the other way around. Health should be accessible, shareable and available to you at any time of the day. And for that reason, I think subscriptions and us being a part of our customers’ daily lives is the intention we aim for.”
For obvious reasons, diaper brand Freestyle also has made subscriptions core to its business strategy. In fact, the brand’s hyper-absorbent bamboo diapers are currently only available through subscription, although there are plans to revisit that decision as the company’s assortment grows.
“Since each order includes six packs of diapers, approximately a four-week supply, the subscription program revolves around a monthly delivery model,” explained Mike Constantiner, Co-founder of Freestyle. “Given the nature of diapers, and the long-term economics of a subscriber versus a la carte shopper, we offer a 15% discount on a diaper subscription and make it the default selection on our website.”
If brands don’t go the extra mile to create value and build a foundation for long-term engagement, their subscription programs will stagnate, no matter how quick their initial growth was.
“After a certain amount of time, brands will eventually tap into their total addressable market from an acquisition side of things,” explained Paul Chambers, CEO and Co-founder of the Subscription Trade Association (SUBTA). “You run so many ads on Facebook [and other channels], and it gets more and more expensive, so you start to plateau. That’s because you just focus on acquisition, or you just focus on retention. What you’re not paying attention to is the referral opportunity, where you can go to those loyal fans and give them incentive to share what they love so much about your brand with everybody else in their network.”
Driving Growth Through Subscription Services
Executives from various CPG brands offered insights into how they have embraced the subscription model to drive long-term growth for their organizations:
Tip 1: Leverage subscriptions to drive customer acquisition.
Superfood wellness brand ARMRA has seen many net-new customers immediately subscribe to its products, which is why CMO Molly Murphy recommended that all brands add subscriptions to their acquisition funnels.
“We initially thought we’d bring people in and then upsell them to subscriptions, but people are really open to subscribing right off the bat,” Murphy said. “It works perfectly to get them to establish that consistency early on, and promoting flexibility of the subscription program has seemed to be one of the most important things for these customers.”
ARMRA also has added bundled products to its subscription offering, which has proven to support customer acquisition. “Our entire line of ARMRA’s Immune Revival is available for subscription, including our bulk jar and our convenient stick packs,” Murphy explained. “We recently launched the duo as a bundle, and we’ve had a lot of customers who immediately subscribed to the duo.”
Tip 2: Tailor marketing and advertising to customers’ relationship status.
Slate is a line of all-natural, lower-sugar, higher-protein and lactose-free chocolate milks and lattes. The protein powder and beverage market is extremely saturated, which means the marketing team needs to focus not just on building brand awareness but showcasing the value of the product through different use cases. While the brand’s marketing and advertising strategies are focused on these goals, the tactics vary based on whether the brand is engaging new or existing customers.
“For current customers who aren’t subscribed, we target them with very specific ads about ‘drinking moments,’’’ said Ron Lubin, Senior Marketing Manager for Slate. “The ads help them realize that they can use the product in various ways, from breakfast to mid-day boost and a post-workout. The message is, ‘We already know you like the product, you can use it in these different ways, and you can save some money when you subscribe.’”
Lubin and his team also use pop-ups and email flows, powered by Klaviyo, to further tailor the customer journey by using data to activate different flows that drive upsells. If consumers purchase the same Slate product twice within a 60-day period, the brand pushes a suggestion to try a subscription.
The pop-ups’ content is tailored for new customers, current customers or subscribers, Lubin explained: “The pop-up that shows up has a discount if you’re a new customer and have never ordered,” he said. “That completely changes when we recognize that you’re a customer coming back to the site for a new purchase. The same thing happens with the ads. The pop-up lets the customer know you can save money if you move into a subscription. The returning customer will also get more information on drinking moments and various use cases.”
Tip 3: Create subscriber benefits that are too good to pass up.
When visitors become subscribers, brands have a unique opportunity to showcase the benefits of becoming a long-term (and loyal) customer. That’s why Neuro Gum tailors marketing messaging to focus on the exclusive perks and benefits of being a subscriber.
“We default to subscriptions in much of our messaging,” said Neuro Gum’s Yoshimura. “For example, using email segmentation, we grant subscribers additional benefits, whether it be early access to new products or exclusive rewards for subscribers only. We try and create merchandise on a quarterly basis, so depending on how long they’ve been a subscriber, we try and reward them with the merchandise. Another example of how we reward subscribers is through one of our tech partners, Aisle, which allows us to Venmo subscribers’ money back.”
Tip 4: Make it easy to subscribe and customize buying options.
Chambers noted that customer journey mapping can make or break a brand’s subscription model. Teams need to constantly test the subscription registration, customization and even cancellation processes to ensure the entire interaction is seamless.
For example, Freestyle implemented Smartrr to “make the subscription account signup process incredibly simple for customers,” Constantiner shared. Consumers can “check out as they would in a normal Shopify checkout and [also] have the ability to manage their subscription in Smartrr’s intuitive customer account portal.” This allows subscribers to update diaper sizes as their babies grow.
Slate takes a similar approach by allowing consumers to easily alter the size and frequency of their orders. However, the brand also uses this capability to offer steeper discounts as members grow their basket sizes.
“We offer a 12-, 24- and 48-pack with increasing discounts as the quantity goes up,” Lubin explained. “We also offer increasing discount percentages on our subscription for each pack size. With the increased cost of shipping, we can pass on the savings to the customer. The customer can choose to buy twice the amount of the product less often for a discounted price. Because our product is shelf stable, it doesn’t need to be refrigerated, which makes it ideal to subscribe for large quantities.”
However, the most critical (and often overlooked) part of subscription commerce is making it easy as possible for consumers to cancel their memberships. It may seem counterintuitive, but for some consumers, cancellations may initially be short-lived. Chambers noted that the experience they have will ultimately impact whether they decide to return in the future.
“The fear has always been that consumers are going to cancel, but really, you need to worry about them leaving forever,” Chambers explained. “It’s OK if they pause for a month or two. If you make it easy for them to do that, their customer lifetime value (CLV) is going to be better in the long run.”
Tip 5: Use data to continually improve your model.
All the executives interviewed stressed the importance of setting and revisiting KPIs as a brand’s subscription model spends more time in-market. “Always test your offering and structure,” Constantiner noted. “Just because something seems to be working fine doesn’t mean there isn’t room for improvement. Ensuring that you’re providing the best subscription experience for customers is understanding your own metrics and living in the dashboard, specifically analyzing active subscriptions and retention rates, comparing month-by-month.”
This article was adapted from a feature previously published on Retail TouchPoints, a website and newsletter designed to inform retail executives about new trends and technologies driving the future of retail strategy and experience.