Pass the parcel: Why subscriptions are the future
August 5, 2021 •Sorcha O'Boyle
26% of UK consumers regularly receive a food and drink or recipe subscription service. In real terms, this translates to £1 billion in sales last year alone (up from £420 million in 2017) and the industry is forecast to exceed £1.5 billion by 2025, according to the Royal Mail.
That’s a lot of boxes.
The reasons behind the boom in subscription or continuity services are well-documented: an already-growing market went stratospheric during the first lockdown of 2020 and was buoyed by the recurring lockdowns that followed through to 2021. In many ways, it was the perfect storm for subscription businesses, many of whom found themselves struggling to keep up with demand when faced with huge influxes of new customers
But what makes a great subscription offering? And should non-subscription brands think about diversifying?
Essential items with predictable replenish dates are the most natural fit for subscription boxes which is why food and beauty boxes were among the first to embrace continuity models. Remember that the male subscription grooming market grew 107% between 2017 and 2020, reaching a value of £41.7 million last year – not bad for a market that would have been considered niche just five years ago. But consumable products aren’t the only ones that fit into a continuity model: by 2023, 73% of D2C brands are expected to offer a subscription service.
So what should you consider if you’re thinking about adding a subscription service to your brand? And if you’re already doing subscriptions, what do you need to get right?
As with all things, it starts with the customer. Keeping a relentless focus on your customer will keep you on the straight and narrow (and help you avoid expensive pitfalls).
Here are 4 golden rules for building a successful subscription offering:
1. A triallist is not a customer
Many subscription businesses offer a free trial which, while effective in some cases, can be a double-edged sword. Offering a free trial will bump your customer acquisition rate (who doesn’t want a free box of chocolates?) but you will need to be confident that your retention rate will be strong enough to offset acquisition cost and the inevitable lapse of triallists who never convert into paying customers.
It’s all about retention when you’re dealing with a continuity model. At more2, we advise our subscription brands not to think of triallists as customers until they’ve bought a full-price box at least once (and sometimes even twice). Until then, they’re just trying you out until you convince them you’re worth sticking with. Don’t factor these triallists into your forecasting, they’ll just skew your revenue forecasts and you’ll get an inaccurate view of your customer lifetime value – nightmare.
2. Customer success isn’t just for B2B
A subscription is like a gym membership. When you join a gym, you’re trying to solve a problem; you want to feel better and stronger, be healthier and, if we’re honest, look better too. Subscriptions do the same thing. Freddie’s Flowers makes your home more beautiful and welcoming while Oddbox and Farmison take the monotony out of shopping for groceries and teach you how to make new dishes to boot.
When a customer (or triallist!) signs up for a subscription service, they’re telling you they have a problem they want you to fix. Whether you’re making their skin look better with your monthly skincare box, giving them a tasty treat with your delicious chocolate delivery or helping them discover new fashion trends that will suit them, you need to think a little differently about how you look after your customer.
Subscription services are made for building strong customer relationships and you have so many opportunities to surprise and delight your customer: if a customer is in danger of lapsing, think about sending a surprise gift based on their personal buying habits. Have a customer who only ever buys one product? Pop something extra in their parcel for them to try out – they’ll probably love it. Need to boost your customer acquisition for peak? Throw in a discount code for your customer to give to a friend – referrals are the best-quality customers you’ll ever get and they’ll cost you next to nothing.
3. Embrace the cancellation flow
Has your customer fallen out of love with you? All is not lost! Use your cancellation process as an opportunity to remind them how much they mean to you: offer a discount for their next box (or three), give the option of pausing instead of cancelling or suggest alternative plans instead. It’s not rocket science but small touches like this show your customer that you really care.
4. Don’t limit yourself to digital channels
The boom in subscription businesses has coincided with the rush for digital transformation and massive growth in digital channels. But that doesn’t mean that traditional channels are dead and gone – far from it. In a world where customers are bombarded with digital content, it can be hard to differentiate your brand from the pack so think about going old-school and using Direct Mail and print advertising.
The shift to digital channels means that your Direct Mail campaigns will have greater cut-through with customers than before (as fewer catalogues are jostling for attention on the hall table) and the continuing trend for WFH gives customers more time to see your paper mailings. Add to that the huge leaps that have been made in using recycled paper and granular targeting and Direct Mail becomes one of the most powerful channels available to you.
These are just a few things to think about when you’re creating (or perfecting) your subscription service. As the world of direct-to-consumer brands continues to evolve, brands who want to grow have to do more than just open new stores to attract new customers. You need to find new ways of engaging with your customers and helping them to love your brand and subscriptions are a brilliant way of doing so – just make sure you get it right.
Want to see how more2 can help your brand to grow? Get in touch below!