Subscription-based ecommerce businesses have been booming in recent years. In fact, according to an article by Forbes, the number of subscription-box website visits has increased by over 800% in the past 3 years. This model is increasingly popular with shoppers of all age groups and backgrounds, especially in ecommerce. In the 2015 holiday season alone, 8.6 million Americans visited a subscription box website.
Subscription platforms like ReCharge have made it easier than ever for ecommerce businesses to sell and manage subscription-based products and sustainably increase their expected customer lifetime value (CLV) in the long term.
As a shopper there are countless reasons to be excited about purchasing a subscription or subscription box rather than individual items. Chief among them are convenience and curation.
Convenience is a primary driver for the modern consumer: people do not want to spend more energy on a particular task than they need to. Buying a subscription eliminates several additional steps that shoppers would have had to take, from revisiting the store that they liked all the way through to entering their address and credit card information.
Curation is also more and more important in today’s trust-driven sales climate. Shoppers who decide to regularly purchase from a brand typically have developed a degree of trust in the brand as an educator. After all, in the age of the informed consumer, businesses with answers tend to win sales more often than not. A curated subscription box is a formal expression of that well-developed relationship. Consumers trust in the brand to evaluate their products and select the ones that shoppers want and need.
How Can You Get Even More Value From Selling Subscriptions?
The subscription-box model is enjoying vast success, but a small number of speculators believe this industry has transitioned from a boom into a bubble ready to bust. These studies cite slumps from top performing subscription box companies such as Birchbox and a recent decline in venture funding in the space.
At Swell we don’t agree that the subscription box industry is a bursting bubble. In fact, we are firm believers in the power of subscription sales in ecommerce; however, these articles did get us thinking about potential issues that subscription sellers could run into.
An interesting omission from the argument of subscription-box naysayers is the ecommerce industry as a whole. They agree that ecommerce is a booming industry that is projected to continue growing rapidly into the coming years. So what’s the difference they notice between ecommerce subscription businesses and the rest of their ecommerce peers?
The best way to understand this question is to approach it from a consumer’s perspective: how do shoppers view a subscription purchase differently than a one-off purchase?
The answer comes down to perceived commitment.
When a shopper makes a purchasing decision they are always directly comparing the value they receive to the costs they must pay. As we mentioned earlier, when shoppers decide to buy subscription based products they receive additional value that they would not with a one-off purchase (namely convenience and curation). This added value, not unexpectedly, comes with a few additional costs as well, which are all tied to perceived commitment.
People tend to hesitate when they are asked to commit to more than one purchase at a time. Even if a business doesn’t require a customer to initially commit beyond the initial subscription purchase, for most consumers, perceived commitment tends to remain high.
Eventually, doubt can creep in as shoppers wonder if they have selected the right duration for their repeat purchase, or if they want to try another brand next month, or if they’ll even want this type of subscription box at all two months from now. These “doubts” don’t typically outweigh the great added value of a subscription purchase, but sometimes they can add up and make a final purchasing decision quite difficult.
Using Incentive Marketing to Maximize Your Subscription Sales
This is where Swell comes in. We are excited to announce our new partnership ReCharge.
This is one of our deepest integrations yet and will allow merchants to offer flexible incentives that work to foster even better customer-brand relationships and offset the costs of “perceived commitment”.
Drive More Dependable Revenue From the “Average” Customer
The 80/20 rule applies relatively broadly in ecommerce. This dictates that 20% of shoppers contribute 80% of the total value a brand receives. Catering to the 20% and building a powerful relationship with them is very important.
Because high-performing customers are far more likely to be responsive to promotions and engage with the brand as a whole, this creates a positive feedback loop that is greatly beneficial to both parties. Businesses run promotions directed at those high-spending customers, who spend more money, and in turn, receive more promotions in the future.
A common side effect of this positive feedback loop is that the 80% become forgotten. To begin with, these consumers are less likely to make frequent purchases and more likely to “churn”. Typically offering points or discounts for purchases is a highly effective method of stretching one-off shoppers into repeat purchasers, but offering flexible incentives for subscription purchases opens up many new possibilities.
Depending on what metrics are most important to your business, you can offer free products to merchants who purchase a subscription, 20% off their next purchase, an upgrade to VIP status, and more. Our integration allows you to select the incentives that are most likely to convert your “forgotten 80% shopper” into a high-performing, high-lifetime value customer.
Leverage the Power of Word-Of-Mouth Marketing
The benefits of word-of-mouth marketing are well documented, especially on our blog.
Word-of-mouth marketing is recognized by many as the most powerful and cost-effective technique to create sustainable long-term success. The benefits allow businesses to enjoy substantial growth in sales while laying a foundation for an ever-expanding customer base.
.Referral marketing is implicitly based in trust, which makes its value very unique. A Boston Consulting Group study stated that shoppers are as high as ten times more likely to trust a word-of-mouth referral than paid media. A separate Nielson study showed that customers are four times more likely to buy a product when they’ve been previously referred by a friend. In many cases, word-of-mouth marketing can literally multipy conversion rates.
The benefits of this underlying trust apply even more to subscription purchases. Think back to the perceived commitment issue we discussed earlier. Intuitively, shoppers whose friends recommend a particular subscription product to them are much more likely to purchase than the average site visitor. After all, their friend has used the product and decided that the perceived commitment does not outweigh the great value of purchasing a subscription.
The Swell-ReCharge integration allows you to offer a reward to referrers when their friends make their first purchase via ReCharge. This gives your business a new trusting customer who is now a high-value subscriber, while also strengthening your relationship with the original referrer.
Increase the Accessibility of Your Subscription-Based Products
Converting shoppers who typically opt for one-off purchases into subscription shoppers can be a difficult task. Sometimes even shoppers who purchase from your store relatively frequently can be reluctant to adopt a new subscription box you’ve launched.
Many consumers are creatures of habit. Once they’ve gotten used to the experience of ordering from your website when their needs arise, it can be difficult for them to understand the full value of purchasing a subscription (especially the convenience aspect). Offering a free month subscription can be a great “gateway” to convert your one-off shoppers.
Our integration gives your store the ability to allow shoppers to purchase subscription products directly with their points. Using this feature will allow you to organically increase subscription sales without paying for advertising or additional marketing.
If you’re looking to get this integration setup for your store right away, please reach out to us at firstname.lastname@example.org. Our Customer Success Gurus and Client Success Managers are standing by to help you implement this feature today!