In 1946, a food service company called Rich Plan launched as one of the first brands to pioneer a home delivery service. Consumers flocked, subscribing to the company’s meals for three main benefits: price, convenience, and health.
Fast forward to today: A lot of things have changed, but Rich Plan’s home delivery service isn’t one of them. In a race to win customer loyalty, many retailers are revisiting the notion of adding convenience to their customers’ shopping experience through subscription-based services.
It’s always been more profitable to retain an existing customer than to obtain a new one. In fact, studies show that it costs six or seven times more to acquire a new customer than to keep an existing one.
Despite launching over 60 years ago, Rich Plan got quite a few things right. They established an effective sales and marketing technique that combined the power of a convenient service with the value and ease of receiving recurring deliveries of high-quality products.
Breaking Down Subscription Commerce: Convenience vs. Discovery
Today, subscription commerce falls into two categories: “convenience commerce” and “discovery commerce.” The difference between the two boils down to necessity.
Convenience commerce is aimed at customers who need certain products regularly and find value in having them delivered in timely intervals. This service gives marketers license to regularly market to their most loyal and profitable customers.
One of the biggest draws to today’s versions of subscription programs is the ease and simplicity of customer control. Customers select which products get delivered and when they’ll be delivered, and they have the ability to accelerate or opt out of the subscription at any time.
Discovery commerce, on the other hand, is geared toward the customer who wants to try something new. This type of commerce is about “surprising and delighting” customers, making the act of discovering a product an enjoyable and curated experience. Startups like Birchbox and Barkbox both adhere to this model – and it serves brands well on the customer acquisition side of marketing.
Why Convenience Commerce Wins for Big Brands
Unlike startups and smaller brands, established companies have the benefit of leveraging a customer base that’s taken years – sometimes decades – to build. While both subscription commerce business models foster brand loyalty and increase sales, many large retailers, including Amazon, CVS, Freshpair, and Lancôme, are finding that convenience commerce is a more effective channel for maximizing customer lifetime value, purchase frequency, and profitability.
Five Steps to a Successful Convenience Commerce Model
For brands wanting to implement a subscription program, there are five ways to make it both convenient for customers and profitable for your business:
1. Obsess Over the Customer
Give customers control over their subscriptions. Let them change, skip, or accelerate deliveries. Allow them to opt out when they want. It seems counterintuitive, but it’s crucial for subscription success. Keep asking for their feedback. Build trust so they remain loyal customers.
2. Test and Offer the Right Incentive
When you offer an incentive for a subscription signup, such as a discount, free shipping, or new product samples, be sure you’ve done your homework and are delivering significant value with each delivery. What do your customers buy, how often do they buy, and which price points attract them? Test, analyze, and measure different offers so you’re pushing the right incentive to maximize responses.
3. Stay Focused on Retention
Studies show that a 5 percent increase in customer loyalty can translate to as much as an 85 percent increase in profitability. Retailers must ask lots of questions to get the best results. When are customers opting out of subscriptions? Is it before the first two deliveries or after? Did they sign up for the wrong reason? Did they end up with too much product? Analyze retention to optimize subscribers’ lifespan and drive profitability.
4. Introduce Upsell and Cross-Sell Opportunities
A week prior to a subscription order being scheduled to ship, deepen the relationship with the customer by offering complementary high-margin products that can be added to the subscription delivery. It emulates the in-store experience of walking in for one item, yet leaving with four others.
5. Get Subscription Payment Processing Right
A successful subscription program will need a sophisticated credit card optimization platform. This means that retailers need to integrate credit card systems and utilize data-driven subscription content to make sure a customer’s payment experience is flawless. If they don’t, they’ll be unable to provide the level of customer service today’s shoppers expect.
Convenience-based subscription programs go the extra mile to connect with high-value customers by saving them time and money while simplifying lives. When done right, subscriptions enable retailers to provide both a product and service to their most valuable customers – a surefire way to keep them coming back for more.