The Three Things Subscription Services Need To Create Lasting Loyalty
By the end of Q3 2021, fashion rental platform Rent The Runway’s stock value had tanked by nearly 50%, and its market cap shrunk by half as the company reported widening losses and its struggle to revive its active subscriber base back to pre-pandemic levels.
Fast forward to Q4, the company significantly narrowed its net losses and grew its active subscriber base by 110% from year-ago levels. The uptick in subscribers came as the company offered additional benefits such as at-home pickups, access to a wedding concierge, and positioning itself as a “value-oriented way to get dressed for multiple events.” Of course, consumers’ interest in resuming pre-pandemic social lives also helped.
Key takeaway: Acquiring and retaining subscribers in today’s environment requires subscription services to offer more than just the discounted value of a product.
And winning subscription service providers also know that creating value starts with enabling a membership-like experience for their subscribers, Bold Commerce’s Co-Founder Jay Myers told Retail Bum.
Here’s how they do it:
Creating the right subscription value stack
Offering an optimal subscription experience comes down to three things that together represent the subscriptions value stack:
- Providing easy and convenient access to products and services
- Curating the right products and services
- Delivering a seamless replenishment experience
The problem is, many subscription offerings today focus on creating value around one of the three pillars when in fact, they should be offering all three.
“Brands that have the fastest growth and lowest churn are those that have an aspect of each value pillar their subscription,” Myers said.
Case in point: Lifetime Fitness, which operates nearly 200 locations across the U.S. and Canada, now gives its customers not just access to gym locations and trainers but also offers tailored subscription meal plans to help members attain their fitness and nutrition goals. Enabling access to meal plans is not just a great upsell for the company, but it also unlocks extra value for gym members.
“What most gyms offer is a standard membership, and that’s it. But, the value their members want, and what gyms are actually able to offer, is so much more. Lifetime Fitness sees around the corner in their industry and realizes fitness coaches and tailored meal plans are a part of that value stack,” Myers said.
“If I am a Lifetime member, I am going to be far less likely to churn because now, if I switch gyms, I lose my meals, my gym and my coach. I lose the whole membership value stack.”
Enabling a holistic subscription experience — one that extends value beyond just offering subscribe and save options — thus helps brands increase the perceived value in the eyes of their customers. It also sets them apart from other players in the space.
One of the biggest risks to the sustainability of a subscription program occurs when there is a singular focus on replenishment of a product or service — an attribute that is commonly seen among laggards in the subscription space.
On the contrary, top-performing brands understand that what they are actually selling is a membership, Myers said.
“Don’t be fooled into thinking that your product is what is going to keep your customer around forever. Everyone will eventually get tired of your product,” he said.
“The best brands understand that it is a lot more.”
Winning subscribers for the long haul
Brands spend a lot of time, effort, and money figuring out how to best increase their subscription offering’s perceived value.
However, one often overlooked approach is educating customers at the right time and place. For example, when a customer first subscribes to a product or service, their excitement is at its peak. Yet, the majority of subscription services complete the order with just a plain confirmation message.
Myers pointed out that the confirmation page and email have the highest engagement rate and represent a prime opportunity for brands to tell their story and share information such as how the product is made.
Additionally, it’s an opportunity to inform customers how their purchase contributes to the company’s social mission and the direct positive impact that their single purchase creates. That said, educating customers on these things is key to raising the perceived value of the subscription service.
Maintaining an open line of communication between the moment a customer places the order and when their subscription arrives is another approach that brands can take to drum up excitement.
A protein shake brand, for example, can use this time to send emails to customers and educate them about the unique ingredients in the product and how to obtain maximum health benefits from its use. On the other hand, a wine subscription service can share meal pairings or complimentary privileges to virtual tastings with the sommelier.
This form of communication not only helps consumers feel confident about their purchase, but it creates moments of surprise and delight that also encourage them to recommend the subscription to their friends and family, Myers pointed out.
“Perceived value doesn’t just help with retention for that subscriber, it arms customers as brand ambassadors,” he said.
“That is a big opportunity for brands.”
Seventy percent of business leaders see offering subscriptions as key to their revenue prospects in the years ahead.
That perhaps comes as no surprise as the subscription industry as a whole has outpaced the S&P 500 by 4.5 times over the past decade.
“The industry is realizing the value, not just because it gives them a stream of recurring revenue, but the fact that subscription is the only type of transaction where both the commerce experience and the customer relationship is baked into the transaction,” Myers said.
With this shift, the industry is moving toward the concept of the “whole-as-a-service” model, wherein consumers access not only basic household products and services through subscriptions but also more expensive things such as restaurant meals and flight tickets.
That being said, as more businesses roll out their own subscription offerings, it is going to become increasingly important for them to differentiate themselves by extending a superior experience.
Those that succeed in creating the right value stack will emerge on top.
Originally published at https://retailbum.com on May 16, 2022.