B2C Commerce: How to Capitalize on the Subscription Service Model
The subscription model is an age-old idea: a periodic fee to ensure the delivery of goods or services, most commonly magazines or newspapers, to your door. Well-known companies like Amazon, Netflix, and Spotify have perfected the service subscription model.
Today, retailers and manufacturers have begun to capitalize on subscription services for B2C e-commerce. Companies such as Dollar Shave Club, Stitch Fix, Fab Fit Fun, and many others have built their primary business model around recurring subscription. This trend has exploded in the past five years, seeing growth of more than 100 percent a year.1 Since 2011, this represents an increase in value from under $60 million to over $2.6 billion.
If you are a retailer interested in adding a subscription service, it may seem daunting thanks to decisions over added software, costly customizations, unknown logistics, updated customer management, etc. The best tip is to start small. Determine your subscription model, test a few target items, and continue to tune toward your market demographic.
4 Tips to Subscription Success
So, how can your organization capitalize on this trend?
1. Look for Purchase Trends.
Many traditional B2C retailers do not have a defined “box” subscription model, but don’t let this diminish your potential subscription revenue. Review your sales data and identify products in your catalog with repeat purchase rates.
Here are a few suggestions for potential subscription products across retail markets:
- Fashion Retailers: Socks & Intimate Apparel
- Beauty: Cosmetics, Perfume, Lotions/Body Care
- Consumer Product Goods: Lotions/Body Care, Razors, Cleaning Supplies, Household Supplies
- Health: Vitamins, Weight Support, Exercise Supplements
2. Offer a discount for recurring purchases.
Entice customers to purchase subscriptions by offering a discount. Savings always spur action. Leverage your existing e-commerce promotion engine to offer a tiered discount based on the length of subscription selected.
Don’t know how much margin to discount? The average discount rate for subscription services is 16.7 percent, a somewhat odd-sounding number. However, it calculates to a “two months free” offer on an annual plan; an 8.3 percent discount reflects a “one month free” offer on an annual plan.2
3. Use Consistent UX to Inform Your Customer
Don’t simply market your subscription benefits on the Product Page. Make sure your user experience on- and off-site is consistent and engaging.
- Add Subscription calls to action (CTA) on landing and detail pages: Use these pages to market the benefits of subscription services, add a “learn more” CTA to elicit engagement.
- Use Upsell Slots on the Cart Page: Capitalize on the active purchase behavior. Use a prominent placement on the cart page to upsell the subscription service. Keep the copy consistent from the Product Page.
- Communications: Use your marketing materials to inform and entice customers. Make sure to use a consistent voice and messaging across all platforms; emails, social posts, in store signage, etc.
- Analytics: Integrate your storefront with predictive analytics to identify customers who are likely candidates for subscription offers and to assess purchase trends and behaviors across subscribers and non-subscribers.
4. Make it Easy to Up-Sell: Use a CRM or Subscription Email Service Provider
Make sure to inform customers that their item is due to ship, and use that email real estate to target up-sell or cross-sell products they may want to add to their shipment. These targeted emails remind customers that they may need additional items they hadn’t previously purchased as a subscription.
Remember to capitalize on that reminder email!
Need More Convincing?
The subscription trend isn’t going away anytime soon. Major retailers have proven that a subscription model can offer more predictable revenue and improve customer retention. Now’s the time to take a look at your product assortment and see how you can leverage subscription for your target audiences.
Interested in the History of Subscriptions?
According to an article published in 1931 on the origins of subscriptions, their first documented use was in 1600s, when the East India Company was permitted to issue stocks — an early form of subscription — to provide a communal sharing of its enterprises.
Other industries, including life and fire insurance and publishing firms, quickly followed suit. Patron subscriptions to playhouses also became popular as theaters sought ways to stabilize and sustain revenues to mount plays and pay actors.
Over last 350 years, the subscription model has continued to grow and is a prominent theme in almost all industries. With the onset of e-commerce and modern technology, today’s growth in subscription services has attracted “traditional” e-commerce retailers and consumer goods brands, like Walmart, Sephora, P&G, and Minneapolis-based Brandless, to enter into the space.
- Sarah L. C. Clapp. “The Beginnings of Subscription Publication in the Seventeenth Century.” Modern Philology29, no. 2 (1931): 199-224. http://www.jstor.org/stable/433632.