The Rise And Benefits of Subscription Services in Loyalty Marketing
Quick query: how many subscription services are you currently signed up to?
We’d be willing to bet that it’s a lot more than ten years ago – and if that’s the case, you’re far from being alone. In fact, subscription services grew by over 300 per cent between 2012 and 2018.
Unsurprisingly, this trend has accelerated since the start of the ongoing pandemic. According to a report conducted by the Royal Mail, consumers spent almost £1.4 billion on subscription-based deliveries in 2020. Current projections estimate that the market will be worth over £1.8 billion by 2025.
The evolution of subscription services
Before the internet, subscriptions were generally limited to newspapers, magazines and milk deliveries.
Since the early 2010s, subscription services began to evolve into something else entirely. Entertainment and music subscription services like Netflix and Spotify began to emerge, granting their customers access to vast media libraries for a set monthly fee.
Companies selling physical products soon started to jump onto this trend. Social media allowed them to connect with their target audiences and online payment evolution made convincing these users to sign up easier than ever. The market is now filled with subscription box services: from recipe boxes such as Hello Fresh, to hygiene products like the Dollar Shave Club, to sock and underwear subscriptions – whatever you’re in the market for, there’s almost certainly a subscription service for it.
A win-win arrangement
Subscription services are a hit with consumers for a number of reasons.
First of all, there’s the convenience. People don’t like having to remember to buy the same items every month: if they can spare themselves the hassle of remembering to buy toilet paper, for example (not to mention the indignity of running out), it’s one less thing on their to-do list. Subscription services also often work out as cheaper than buying the same product one at a time, because brands often reward their customers for their loyalty.
Secondly, subscription services foster a sense of community. They’re often presented as ‘clubs’ rather than just a transaction. This approach has proven to be a powerful marketing strategy.
Thirdly, the subscription service model often comes with a ‘treat yourself’ factor. People love receiving things in the mail – even if they ordered it themselves.
Importantly, the subscription model is just as beneficial for brands. Subscriptions promote loyalty, make it easier for businesses to predict revenue and provide brands with a wealth of now essential first-party data on their customers.
Additionally, it’s been found that people are more likely to write positive reviews of brands they’re subscribed to. Studies on the human brain have shown that people like things more when they’re exposed to them regularly, which might explain why subscribers are more likely to spread the word about your brand.
The challenges
If you’re thinking of starting a subscription service, it’s important to be aware of the potential pitfalls.
The first hurdle is successfully communicating why your service is worthy of a subscription. People are reluctant to make a commitment, so the value needs to be clearly established. But don’t think it’s just about saving money: according to McKinsey, “high quality” and “good variety of items or experiences” are both more important to customers.
Perhaps the biggest risk is churn: customers signing up and then cancelling (sometimes after their trial period). While some companies successfully factor a high churn rate into their business model, this can be a real problem for smaller companies or if you’re just starting out.
More recently, there’s been talk of ‘subscription fatigue.’ This is the notion that customers now feel that they have too many subscriptions. So before you jump in, ask yourself whether your offering is genuinely worthy of a reason to stay subscribed.
Two types of subscription service
Subscription services are often thought of as falling into two categories: SaaS – or ‘software as a service’ – offerings, and physical items delivered to your door.
From a marketing perspective, it may actually be more useful to divide them into ‘need to have’ products (usually purchased for practical reasons), and ‘nice to have’ products (purchases often led by emotion). This approach gives us more insight into why people subscribe, and what makes them stay or leave.
While it’s tempting to think that people are more likely to cancel their ‘nice to have’ subscriptions, this isn’t always the case.
Surprising new adopters
As a result of its proven success, more industries are finding creative ways to trial this business model – some more surprising than others.
Increasingly obscure subscription boxes have emerged over the years. Introverts retreat provides a monthly box of goodies for self-identifying introverts, pickle lovers can sign up for a pickle of the month service, and doomsday “preppers” can top up their survival kits thanks to Welsh company The Bug Out.
Meanwhile, long-established industries are dipping their toe into the world of subscriptions. Companies like Zipcar grant their customers car access in exchange for a monthly fee…something we’re likely to see a lot more of in the future.
Education, too, is becoming subscription based. In a world where employees are expected to regularly “upskill”, websites like Skillshare, Masterclass and Codecademy give subscribers access to a library of online classes.
Tips for good practice
- Make your service niche, but not faddy
As the subscription-based market becomes more crowded, you’ll need to make your offering as specific as possible to stand out. This appeals to the previously-mentioned sense of community that subscription services can create.
For example, if you’re thinking of offering a monthly box of dog treats, you’ll already be competing against hundreds of other businesses. But homemade, organic, vegan dog treats?! …You may have found yourself a niche.
Be wary, however, of crossing the line into fad or joke territory. While people may love the idea of regularly receiving hot sauce or clothing with their pet’s faces on them, the novelty is likely to wear off quite quickly.
- Mix it up
Variety is key. This is just as much the case for subscription boxes as it is for streaming platforms. While it’s particularly important for those ‘nice to have’ subscriptions – people care about the variety of their beauty products and television shows, less so of their toilet paper – you should always think about how you offer something unique to your customers. Think about sample products as an example.
- Prioritise retention
Keeping your customers happy before attracting new ones is more important than ever if you’re running a subscription service.
You need to build a long-term relationship with your customers. Fail to do so, and you’ll miss out on all the benefits of this business model: predictable return on investment, increased loyalty, the ability to gather long-term customer data, to name just a few.
- Make things easy for your customers
While retention is important, it should never be at the expense of the customer experience.
Some brands have learnt this the hard way. Beer delivery service Beer52 has been widely criticised for making it next to impossible for customers to cancel their subscriptions, while popular fitness service ClassPass have come under fire for their costly ‘freeze’ fees and even more expensive reactivation fees.
While these strategies might increase short-term retention, they won’t inspire brand loyalty – and will make people think twice about future subscriptions.
Instead, give your customers as many options as possible. This includes offering memberships at different levels and price points to suit different needs. And if your customers want to leave, let them go.
- Put data first, second and third
If you want your subscription service to be a success, you need to be led by the data. This means accruing as much information as possible about your customers, their spending habits, when and why they sign up for your service and at which points they leave.
The better you understand what makes your service stand out, why people subscribe and what keeps them loyal, the more likely you’ll be to keep your subscribers happy.
This article was created by Mediareach Advertising, a leading London-based digital and social media marketing agency.
