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Using Loyalty Marketing to Think Outside the Subscription Box

From beauty products and clothing to snacks and wine, there seems to be a subscription for everything. Everyone from Uber to MoviePass are joining the ranks of fixed-priced products and services, but in the world of loyalty, how do we reward and recognize subscription members?

Alignment is key. What behaviors are we trying to incentivize? In a subscription model, purchases aren’t enough, especially when offering a discounted or bundled price as part of the subscription. Is the goal customer acquisition? Frequency of purchase outside of subscription for new products or services? Reduce inventory on seasonal items? Or is the end goal simply renewal and retention?

According to a Hitwise study, in April 2017 subscription company websites attracted about 37 million visitors, across beauty, food and apparel and others* categories, which was a significant increase from 722,000 visitors in 2013.  And there are approximately 5.7 million subscription box shoppers in the US today characterized as college educated, female, liberal, with a household income >$100,000 and/or households with children ages 3-5. Although these numbers are impressive, it’s increasingly difficult to hold onto subscribers with 72% of customers failing to make a repeat purchase in the 12 months following their first purchase, according to a Retention Science study. So how do you motivate repeat purchases?

Personalization and Differentiation

Of those 37 million visits mentioned above, 53% were attributed to mobile devices, proving that mobile- enabled experiences are a necessity. In addition to rich demographic insights, we can use data collected within the customer profile, transactions, and behaviors (i.e. social media engagement) for personalization to drive program key performance indicators (KPIs).

Subscription box companies have a lot of opportunities to, well, think outside of the box. Historically, retailers have tried the same loyalty program formula other retailers have used for years (i.e. points per dollar spent, get $5 off, free shipping on order of $100+, etc.). However, it’s not differentiating nor as engaging. For instance, in a 2016 Accenture study 71% of retailers surveyed claimed their program was “differentiated” or “significantly differentiated” from competitors’ programs. However, other research has shown that one third of their loyalty members cross-shopped at competitors, and nearly half of members surveyed stated it would be easy to replace a retailer’s loyalty program with another competitor’s program. So much for differentiation.

So what’s the Prescription for Subscription?

First, work with a retail loyalty expert who can help you identify the right program design approach for your brand. An alignment study can help your stakeholders understand what they are trying to solve for and how to plan for that success, ensuring the right program approach is developed. Do you focus on reducing churn or are you hoping to acquire new customers? One thing a loyalty program can’t do is solve issues around product and price. If customers simply feel that the products or services they receive every month aren’t good quality or worth the price, that’s another issue altogether. For example, I subscribed to a Bourbon of the Month club a while back, but the bottles came in a ho-hum box with no literature on the product, no relevant communications, and the bottles I received were of less value than the monthly fee. Naturally, I cancelled that subscription, because the benefits were not apparent and I felt no emotional tie to the brand whatsoever.

Second, financial-modeling due diligence is key in understanding what you’re willing to give away and how much you are willing to invest to get the desired behavior. Sure, asking customers to respond to a survey or post on Facebook isn’t the same as them making a $100 transaction, so understand what you’re leaving on the table. And never underestimate the value of creating the right Terms and Conditions. The right Terms and Conditions provide guidance to avoid loopholes that may cost you in the long run. Furthermore, clarity and simplicity help customers understand what they have to do in order to get what they want out of the program as well.

Third, know your customers. How do they engage with your brand? What customer touchpoints are they using? Where are you losing them? Where are your opportunities to engage? If you’re using data to select those subscription products, use it to communicate and personalize their experience. Have an objective party do a deep dive on your customer personas and journey mapping.

Sound recommendations aligned with your stakeholders and customers’ needs can be the foundation for providing members with opportunities that go beyond discounts:

  • Recognition and rewards for renewals (i.e. if you renew by x date, renew for x years)
  • “Gift” a subscription to friends and family as a tool for customer acquisition
  • Rewards for brand advocacy (i.e. reviews, social media sharing, etc.)
  • Recognize and reward the anniversary of their subscription (i.e. 1 year, 5 years, 10 years)
  • Tier based benefits (i.e. expedited shipping, freebies, etc.)
  • Co-creation (i.e. influencer on customer panel, assist with product and services selection, future loyalty program features or offerings, etc.)
  • High-touch customer service (i.e. personal stylist, member priority, etc.)
  • Member only content and events access
  • Community (i.e. encourage member interactions, allow them to nominate other members, focus on charities, etc.)

Just as brick and mortar retailers have had to evolve over time, subscription companies will also have to find ways to differentiate themselves in the marketplace. Ultimately, with the right approach, companies can reduce churn through engagement, provide engagement with their consumers and create a more personalized experience. If you’re interested in learning more about how to differentiate your brand email us at info@kobie.com.

Author: Kobie Marketing

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