How to win the subscription game with lasting perceived value

by Ana Lopez

Sagar Rajgopal is the president and chief customer officer (CCO) of Ubiquitya leading outsourcer for disruptive brands.

From Amazon to Netflix to Spotify, subscription commerce has been one of the defining trends of the ecommerce era. It has become so ubiquitous that consulting firms have coined a term before: “all-as-a-service.” Subscription companies have also adjusted customer expectations: customers are willing to pay more for added value and preferential pricing. But who determines that value?

The global subscription e-commerce market size is expected to increase from $72.91 billion in 2021 to $120.04 billion in 2022 at a compound annual growth rate of 64%. two-thirds of companies surveyed by Ernst & Young believe their valuation will increase by 50% as they move to all-as-a-service models. Subscriptions are aimed at increasing customer lifetime value through convenience, benefits, preferential pricing and other benefits.

The challenge now is that the market is saturated with subscription-based offerings. At the end of last year, the average consumer in the United States had five retail subscriptions. The plethora of subscription-based offerings put companies under more pressure to deliver value to earn ongoing subscription revenue. So how do you stand out? And how can you ensure that your “perceived value” remains?

Here are some tips to help your subscription programs succeed.

Keep it simple to use and understand.

Convenience is the backbone of any e-commerce subscription, whether searching for an item, comparing item details, checking out, delivering or returning. A 2020 study by the National Retail Federation found that 97% of consumers abandoned a purchase because it was deemed inconvenient. An example of a brand that won on convenience is HP. According to Dave Prezzano, HP’s general manager for the UK and Ireland, Instant Ink, a subscription-based ink and toner delivery service, will grow by 30% by 2021, with more than 11 million subscribers worldwide. Customers paid fees based on the number of pages they printed rather than the amount of ink they used – a convenient and cost-effective approach.

The simplicity of a product offering also translates to the customer logistics part of the equation. Just as customers want track their deliveries in real time, they are also drawn to an easy product return experience. A 2020 study (download required) of repeat customers found that a third of repeat customers would leave the retailer if they had a difficult return experience.

Put customer needs before novelty.

Subscription-based businesses must offer a range of products relevant to consumer needs. For example, Nordstrom, which one purchased subscription clothing Trunk Club for $350 million in 2014, the company reportedly closed this year as the company struggled to make it profitable. Company its investments diverted to styling services. That’s because customers who interact with stylists, whether in-store or online, spend seven times more and report higher customer satisfaction.

“We are shutting down Trunk Club and redirecting our resources to the services our customers tell us they value most,” said Erik Nordstrom, CEO of the company. said.

The lesson from this example is that subscription companies should base their offerings on a deep understanding of customer needs rather than assuming that the customer will purchase a service just because a similar service is popular.

Make sure customers feel that the ‘perceived value’ is consistent.

In a tough economic climate, a compelling value proposition should be the secret sauce that fuels conversion. A 2021 McKinsey study found that the strongest driver for acquiring new subscribers is good perceived value, meaning “the right combination of offers and pricing”. The study emphasizes that a perception of good value means going beyond promotional gimmicks. Researchers wrote, “As consumers become accustomed to promotions, brands should actively re-evaluate their pricing strategy to ensure that their promotions – if they use them – are worthwhile.”

Use data to offer relevant content.

Brands that don’t continuously study purchase and return patterns risk becoming irrelevant to their customers. A lack of connection between customers and product offerings can drag down revenues for subscription-based businesses, resulting in subscription box fatigue.

Edward Yruma, general manager and senior research analyst at Piper Sandler, recently told CNBC that consumers can sign up for subscription services when they’re on the cusp of a major change in their lives, but that enthusiasm wanes over time. “People return too much stuff with these boxes, and you just can’t make enough profit from them,” Yruma said.

Top brands scrutinize return data to drive further customer acquisition and retention. Subscription service veteran Amazon is one example applying performance insights (paywall) to inventory planning, product descriptions, and customer recommendations. To use data effectively, companies must invest in technology monitor customer behavior closely.

In addition, to ensure that the customer is connected to your brand, companies need to provide relevant content for subscription-based offers. The aim is to become a reliable source of insights and advice. Some content marketing products that can help keep customers’ attention on your site according to RetailNext, include user experience studies, interactive quizzes and questionnaires, videos that can be shared on social media, and interviews with experts. By studying how customers interact with content, brands can learn how they may want to respond to changing e-commerce trends and policies.

Subscription-based e-commerce businesses offer great opportunities for brands if they think strategically about what “value” means to their customers. The pandemic and other economic forces, including inflation, have changed the behavior and expectations of some consumers. It’s up to the brand to prove to the consumer that its product lines offer value for money beyond the initial excitement of signing up. To win the subscription game, e-commerce companies must also make the necessary investments in technology to understand what motivates consumers to form a long-term relationship with a brand.


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