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eCommerce is growing continuously due to the unprecedented pandemic and greater time spent on social media. You might think this is all great news if you are a business owner, but is it really? Today it is more accessible than ever to start selling online. There are little to no barriers to join a marketplace such as Etsy, eBay, Amazon or to build your own store. However, competition is fierce. This merciful context is a prerequisite for change.  

As it stands in 2021, the number of digital buyers is 2.14 billion. That makes 27.6 % of the 7.74 billion people in the world.

Customers are constantly bombarded with ads by brands of all sorts. They have endless possibilities of choice. That’s why the power has been shifted from the manufacturers into the hands of the customers. Indeed that’s why businesses are looking to retain customers by capitalizing on their acquisition. Thus loyalty programs make perfect sense today. Today, increasing customer lifetime value is the focus of a sustainable business strategy. However, what do you need to know to do that? 

In this article you will learn more about:

  • What is a subscription plan? 
  • Which eCommerce businesses can offer a subscription?
  • How can eCommerce stores adopt subscription models?

What is a subscription? 

Perhaps you have used or at least heard of a subscription-based e-commerce model by now. Primarily service types of businesses use such business models. You can think of companies like Spotify, Netflix, Audible, Patreon, Google Drive, and many more. 

“Spotify’s quarterly revenue in its 2020 Q1 was at $2 billion out of which $1.84 billion was due to Spotify Premium subscribers” 

That’s almost 90% of the revenue due to their subscribers! Of course, you don’t have to deploy solely in your business strategy. It could be a part of the mix while you offer one-off services and purchases available they might not appear like an offer to your customers.

In essence, a subscription is a paying method that provides customers with the service they love regularly. On the other hand, businesses get a steady income stream by charging recurrently for their services. Subscriptions are the ultimate example of “set it and forget it.”

What are the inherent characteristics of a well-designed subscription plan? 

  • Simple process to get started
  • Flexibility is King
  • Speak to a pain point

The first impression is key. You want to make it as easy as possible for your potential customers to understand what it is that you offer. Draw a clear picture of how their ongoing expense is justified. Include details of how they are going to receive the service or product. Also, keep the sign-up process short and easy. Subscribers might change their preferences over time. That’s why it is vital to make your plans flexible. Use customer surveys to generate ideas and develop your plans. Depending on what your business is offering you can provide more options for delivery. Think about frequency, channels, convenience, devices, and feedback. 

Before you get customers to change their purchasing behaviour and become subscribers you have to make them aware of the benefits. A step further is alleviating their pain and distress. You are solving a different problem with your subscription even though you offer the same products and services for purchase.

What makes a subscription model compelling? 

Creating a subscription model in addition to your eCommerce store is designing a customer experience. The key to success is to align your business with customer goals. In essence, you are developing your customers and that process is worth measuring. What are good KPIs to measure the effectiveness of our subscription plan?

According to research done by Gartner, 5 metrics matter for your customer experience (CX): 

  • Advocacy/reputation/brand
  • Customer loyalty/retention/churn
  • Customer satisfaction (CSAT) 
  • Quality/operations
  • Employee engagement

Your brand’s reputation is a vital resource and a sign of its longevity. Reviews determine the quality of your advocacy and position on the market. Paying attention to customer feedback is valuable and could be used to strengthen your mission. It is best to stay as close as possible to your customers to establish trust by allowing an instant connection. 

Like having a newsletter, you should also manage subscribers over time. It is good to have fresh leads into your funnel, but it is more important to strive for customer retention. The question here is “What is going to increase the overall lifetime value of customers?”. By adding more value to your customers you are dealing with churn. 

Churn is an expected part of the equation of a subscription model, just like a newsletter list. However, a strategic approach to adopting such a model in your eCommerce needs a plan to minimize churn. That’s why the focus is worth pointing at what each segment needs. You can survey the people who are worth the most to your business to discover what they are missing or what works best for them.

Here are 4 questions for interviewing customers:

  • What do we do good?
  • What we don’t do well? 
  • What do we need to start doing?
  • What do we need to stop doing? 

Customer satisfaction also known as net promoter score is measuring the overall customer perception of your brand. Here it stands the question “How likely is it that you would recommend [brand] to a friend or colleague?”. Use a survey to assess from 1 to 10 how likely are customers to promote your brand. Anything below 7 is leading an army of detractors who can cause damage to your business. 

If you score between 9 and 10 it means you are doing amazingly well. Having promoters on your side contributes to the growth of your business. 

It is often neglected how buyers interact with your product. Once sold a customer is yet to discover the true worth of your business. Pay close attention to what confuses him, what gets him excited, and what satisfies him while using your product. The way to go about this may be exceptional customer service. Is it natural for your employees to engage with customer’s problems? If the answer is no, think of what you can do to inspire them. The longer your customers pay the more valuable they become to your business. 

What eCommerce businesses can offer subscriptions?

Customers changed their online purchasing habits due to the pandemic last year. A good example is food delivery. It isn’t a new thing, but subscription-based delivery is changing how that works. More online grocery stores are opening doors and some are offering a subscription. With a valuation of US$ 13.23 billion in 2018, the Global Subscription E-commerce market is currently anticipating reaching US$ 478.2 billion by 2025. A decade ago, less than 1% of eCommerce shoppers had a single subscription. Today that number is over 15%.

This makes it easy for a variety of businesses to directly provide convenience to their customer’s door. If you are just starting to think about how you can adopt this model in your business,  consider the following steps.

Subscription models fall into three major categories:

  • Subscribe for Curation 55%
  • Subscribe for Replenishment 32%
  • Subscribe for Access Perks and Discounts 13%

Online grocery stores make it easy for the customer to subscribe with offers like boxes of extra foods and selections of organic vegetables. Instead of going to the store and wasting time, now you shop from home and decrease food waste as well by doing so. This is a replenishment type of model. Other services like Spotify and Medium focus on curation. The mix of personalized and quality content makes it valuable for subscribers to consume readily without ever getting bored. Excitement and novelty are also driving factors in this case. 

Patreon is an example of high ticket access. Creators use it to create a steady income with subscriptions and to engage with their audiences. This gives access to private shows, limited edition products and patrons essentially are a secret community. It is a great tool for transferring a fan base into a customer base.It is interesting to note that men tend to have more subscriptions than women. That holds especially for convenience cases such as replenishment services. Conversely, more women use subscriptions but tend to have less than three and mostly only one active subscription.Here are 5 pointers on how to start adopting a subscription-based model in your store:

  • Analyse your existing customers
  • Segment frequent buyers
  • Separate women and man 
  • Select a target that most makes sense
  • Design service for your target

Summary

Adding a subscription model to your business is a great strategy to accelerate your eCommerce in 2021 and onwards. This is possible by motivating customers and potential customers to think long-term of your business instead of just a 1-off purchase. Adding more value over time for subscribers increases the lifetime of your customers. Otherwise, capitalizing on short-term memberships could lead to a higher churn rate after a while. There are many tools and tactics that we are going to cover in the second part of this article series. You are also going to find more information on how to adopt the right category of subscription for your specific business.