Customers are looking for subscriptions that can save them money, time and hassle. They are also looking for a memorable experience and high-quality, unique products that suit them.

Melissa Pegus, senior vice president, strategic partnerships, MPP Global

Melissa Pegus, senior vice president, strategic partnerships, MPP Global

From emerging e-commerce brands to big-box stores, retailers of all shapes and sizes are embracing subscription models as a way to generate recurring revenue, increase the lifetime value of a customer and drive loyalty. As a result, the subscription e-commerce market has grown by more than 100 percent a year over the past five years. But that doesn’t mean launching a subscription business is easy.

Subscriptions, and the challenges associated with this business model, are new territory for many retailers, but they are familiar ground for media companies, many of which have been innovating traditional subscription offerings to compete with new players and, as a result, have learned valuable insights based on their failures and successes.

The questions that are top-of-mind for retailers are the same questions the media industry has been asking and innovating around for decades, including:

  • What are different tactics I can employ to improve acquisition?
  • How do I build my brand to the point that a customer sees enough value to make a regular financial commitment to me?
  • How can I deploy a subscription service as a tool to strengthen my overall brand, even if my business model isn’t wholly focused on subscriptions?
  • How do I improve customer engagement across a diverse customer base?
  • How do I increase the lifetime value of my customer?
  • How do I leverage analytics to strengthen my offering?
  • How do I deliver the most value possible to ensure retention and curb churning?
As you make changes to the program, reach back out to previous customers and let them know about the improvements.

Retailers are often targeting the same customers as media companies.Research from McKinsey found that almost half of consumers who use subscription retail services also subscribe to an online streaming service like Netflix. Whether you are selling a digital product or a physical product, the end goal is the same: to establish a relationship that increases your customers’ lifetime value and keeps them coming back at regular intervals. Let’s consider some best practices from the media space and how retailers can use them to improve their own subscription-based services.

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Build detailed customer profiles

Subscription models help eliminate comparison shopping and ensure that every time a customer is in-market for a particular product, they come back to you. As a retailer, you need the ability to recognize signals that a customer might be a strong prospect for a subscription program. For example, if they are buying the same product on a regular basis or regularly sampling a variety of products, there could be an opportunity to take the relationship further.

Just like media companies, retailers need to invest in tools that allow them to collect and utilize data—including behavioral data, volunteer data and data from external parties—and create detailed customer profiles. Doing so will allow you to better target subscription program prospects, promote the program more effectively, and make smart iterations to the program to improve its effectiveness.

Design a personalized subscription offering

A common mistake subscription media companies make is offering a one-size-fits-all approach, regardless of customer preferences and activity. The same holds true for retailers. One of the reasons people churn is because they are not getting enough value from a subscription. By personalizing your programs and allowing a degree of customization, you can create more valuable experiences for your customers. For example, rather than only offering one type of subscription box, you could allow people to opt for smaller versions of the program, to choose more or less of certain categories, to specify the brands they do or do not want and/or to buy one-off products. This type of flexibility is empowering for consumers and allows them to derive the most value possible from the program.

Avoid a common subscription disruption

You work hard to acquire new subscribers, so, of course, reducing churn and improving retention is paramount. One of the most common causes of churn—for both retail and media subscription companies—is involuntary payment breakage, which is caused when a customer’s credit card expires or is canceled and they fail to update the payment method linked to their subscription. They may forget to do so or simply decide it is not worth their time to renew.

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When considering a digital platform to support your subscription model, be sure to choose one that can account for payment breakage, for example, by automatically detecting that a customer’s payment method is set to expire.

Offer an olive branch

You should be using data to constantly improve your subscription offerings. If a customer cancels a subscription, find out why by requiring them to fill out a brief survey. As you make changes to the program, reach back out to previous customers and let them know about the improvements. This tactic has worked well for media companies.

Additionally, consider using promotional tools such as loyalty programs or discount codes to entice consumers to come back. Take time to think about the tone of your communication. Telling customers that you value them and miss their business can go a long away, especially if you can communicate that you have addressed their reason for leaving.

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Brand building and omnichannel loyalty

Many subscription retailers do not have a brick-and-mortar presence. That is one of the benefits of an e-commerce platform—you don’t have to invest in a physical space. But retailers like Nordstrom, Target, Gap and Walmart also have good reason to develop subscription programs. They build loyalty, and loyalty is omnichannel. Your subscribers receive routine reminders of your brand, via the products they are receiving, as well as from program-related communication. Subscriptions help drive people in-store, whether it is to return something, shop for similar products or simply because your brand is top of mind.

Subscriptions also allow retailers to collect valuable data. They can see what items people are responding well to and use these insights to improve their e-commerce and in-store strategies.

Remember why they chose you

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Since 2014, the number of monthly visitors to subscription company sites has grown by more than 800 percent. Consumers are drawn to subscriptions because they are a convenient way to get the products they want and/or to get introduced to new personalized offerings. Whether you are a media company or a retailer, you must never lose sight of why customers signed up for your services in the first place.

Customers are looking for subscriptions that can save them money, time and hassle. They are also looking for a memorable experience and high-quality, unique products that suit them. Branding has never been more important. You must weave thoughtful brand stories and work to win customer trust so you can build the type of long-term relationships subscription models are based on. You must also create clear value propositions that distinguish your brand from competitors. Additionally, don’t overlook the details. From the shipping confirmation email to your packaging to what is inside, every element should be on brand and cohesive, creating a memorable experience that the shopper deems worthy of ongoing investment.

For retailers, there is no reason to reinvent the wheel. By considering what has worked well for media companies, you can improve your own subscription model and devise effective programs that drive both revenue and loyalty for your business.

Melissa Pegus is based in the New York office of MPP Global, an international company headquartered in the United Kingdom that provides a subscription management platform designed to help media organizations and retailers identify, engage and monetize customers.

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