Using a more creative as well as analytical focus on data, brands can not only defend but also grow their subscription businesses and retail offers to drive more revenues and increase customer loyalty, says Jason Smith, VP at MoEngage.
There have of late been a few high-profile stories about failures in the subscription industry, but what this reveals is that this is a market that changes quickly and dynamically, and the players seeking to operate and succeed within it need to be more agile in responding to the trends that are affecting their business models.
Overall, the global subscription box industry, worth an estimated $22.7bn in 2021 according to imarc, is expected to grow to $65billion by 2027. The demand is healthy; according to Zuora, 78% of international adults are currently signed up to subscription services, up from 71% in 2018. Three-quarters (75%) of these respondents say that they plan to subscribe to more services in the future, in contrast to owning more physical ‘stuff’.
However, the original assumption when subscriptions first came along that once hooked, customers would stay hooked, has been blown out of the water. Despite the huge uptick in demand for streaming services during the pandemic while people were in lockdown, since then, in the face of inflation that is eating into their disposable income, they have left in droves, often never to return or only to ad-based services that retail at a lot less per month.
So, even while the market continues to grow, consumers are dramatically changing their choices, and brands will need to take a much closer look at what attracts them in the first place and how cancellation rates can be reduced.
The first good news is, our latest ebook found that nearly two-thirds of subscribers (64%) feel more connected to companies with a direct subscription experience than to companies whose products they simply purchase as one-off transactions. But there are a series of steps that need to be followed to get non-customers on board, sell to them and to win them back if they look like they might stray or lapse. Given the high dropout rate at this stage, it is important to entice them back not just with offers, but mechanics that get them engaged, such as a challenge. The invitation to sign up must then be simple, compelling and with a high perceived value, which may be an offer but equally, it may be a simple set of instructions on using the app or service.
Crossing the chasm between free trial and moving to charging can be daunting but rather than waiting until the trial ends, the journey should be populated with communications that make it easy for them to sign up, such as emphasising the value of particular features and showing how these can be used.
Once they have signed up, the engagement should accelerate, not in a way that is intrusive, but helpful and again emphasising value such as moving to a premium level service. If a customer looks like they might cancel or has asked to cancel, brands need to go into recovery mode rather than give up, which might mean free periods, reminders as to why they subscribed in the first place or free gifts, all communicated over time rather than all at once. Or it may mean changing the offer entirely, as 18% of customers say they cancelled their subscriptions because their needs changed.
Key to success here and then to building loyalty and repeat business is insight into customer types and therefore behaviours.
One size does not fit all, and while your different offers can never be as varied as your customers’ different types, behaviours and preferences, you can test and learn to build a picture over time and segmenting based on what you get or do not get back. Giving all the goodies away to everyone on day one is costly, unsustainable and certain to create an entitled set of customers who soon get bored; better to start small and build over time with a breadth of benefits provided at regular intervals.
Building these insights will depend on asking questions such as, what content they consume the most; which subscriber cohort is most likely to be a brand evangelist; what drives my subscribers to engage with me; is it price, feature updates, usage-based rewards, or exclusive membership upgrades drive engagement; what product features do your most engaged subscribers adopt more frequently than your churned subscribers; what channels are your subscribers most active on; and, what is the time your subscribers will most likely respond to communication?
Putting all this data to best use will depend on a platform that can handle the complexity and help brands to understand and optimise a customer’s lifecycle, from registration to renewal, necessitating a platform that captures data through apps or websites and provides personalised communications, which are highly contextual for customers across channels.