This is a guest post from Polina Kulikova. Polina is a digital marketeer at Growave, and she is passionate about creating content for e-commerce businesses to help them succeed. Growave is the all-in-one marketing platform for small and medium-sized Shopify stores. Growave helps to drive conversions, boost sales, and build brand loyalty. Some of Growave’s features are Reviews, Loyalty and Rewards, Wishlist, Social Login, Instagram and UGC.
Many companies are struggling to retain their loyal customers, as more shoppers get less committed to any one brand. With so many choices on the market, shoppers are more likely to switch between brands based on price, shipping, platform, convenience, and a number of other factors. However, retaining your customers is nearly 25% more cost-effective rather than acquiring a new one.
One great way to make your customers stick with your brand is to introduce a subscription model. Subscriptions are the holy grail of eCommerce, able to help you retain customers in a set-it-and-forget-it system that extends your customer lifetime value (CLV).
According to research from Zuora, 71% of adults from 12 countries are using subscription services, and 74% believe that more people will start using subscriptions. Nowadays, subscriptions are available from grocery delivery, online streaming, and newspapers to entertainment.
The subscription model streamlines the buyer experience and makes it convenient for your shoppers, ensuring they never run out of an item and get automatic replenishments. One common example is having shaving kits delivered every month, right about the time a shaver would be getting dull.
In this article, we will dive into five examples of how you can increase your customer lifetime value with subscriptions.
Types of subscriptions
Before diving into tactics with which you can increase your customer lifetime value with subscriptions, let’s discuss what types of subscriptions are there:
- Digital subscriptions: Usually applies to non-tangible products such as membership. For instance, Spotify premium, Netflix, or online magazine.
- Monthly box: A curated box with various products delivered to your doorstep. For instance, hygiene kits, beauty products, or snack boxes.
- Auto-ship: Applies to items that are often used and need to be purchased more frequently. For example, supplements, medicines, or pet food. For instance, Chewy has such services specifically catered to save you a trip to a pet store.
How to increase your CLV with subscriptions
1) Make it convenient
The success of the subscription model lays in its convenience and affordability for customers. According to a study, 52% of customers say that more than half of their purchases are influenced by convenience. Therefore, it is essential to provide convenience to your subscribers to increase their lifetime value and encourage them to stay on a plan longer.
Subscriptions are usually suitable for products that easily run out and have an ongoing need, such as hygiene products, makeup, groceries, and others. The simplicity of paying a set monthly price to get necessary items delivered to your door is often easier than purchasing them in-store.
Source: Passionate Penny Pincher
A great example of this is the $1 Shave Club, where you receive a shaving kit at your doorstep monthly. It is crucial to make your customers realize the benefit of subscription if they frequently purchase from your store. You can showcase the overall value that they can save by subscribing to receive your products every month.
2) Leverage emotional engagement
Another great way to increase customer lifetime value is by providing subscriptions with items that inspire awe and curiosity. When customers discover new products, they build an emotional connection with a brand. According to a study, emotionally engaged customers spend up to two times more on brands. Subscription boxes for surprise items, or makeup and self-care products are gaining demand among millennials because they create a sense of mystery.
A great example of a monthly subscription box is Ipsy. The company sends five beauty products such as lipstick, mascara, or eyeshadow for only $10/month. Ipsy is successful because of the low cost and mystery products each month. Customers stay longer on a subscription plan because they can discover new brands they have never used before. Additionally, Ipsy offers affordability and flexibility to get their customers to stay on their subscriptions. Ipsy creates an emotional connection with their subscribers by recreating the feeling of opening a surprise gift every month.
The role of customization in subscriptions is significant in improving customer lifetime value. According to research, 1 out of 5 customers are willing to pay up to 20% extra if they can customize the product. Customers are more likely to stick around longer on a subscription plan when customization is available.
Most companies offer subscriptions with different plans depending on how many months and the price customers are willing to commit. Generally, longer subscriptions offer the best price value and can be easily extended or canceled. Additionally, many companies provide subscriptions specifically customized for each clients’ needs.
Source: Hello Subscription
A great example of this is PupBox, a monthly box for dogs with products in each box that are hand-picked for their growth stage. PupBox offers various plans to customize the box depending on allergies, toy preferences, or training needs.
Personalize your experience
Customers are more committed to the brand that offers personalization. According to Epsilon’s research, 80% of customers are more likely to purchase a product or service from a brand that provides personalized experiences.
The best example of a subscription with a personal touch would be Netflix, a well-known streaming platform with a wide selection of movies, series, and TV shows. Netflix is successful not only because of its content, but it also invested in smart software. The algorithms create personalized movies and series recommendations depending on customers’ preferences and watching habits. Therefore, users do not have to spend a long time searching what to watch, and they can simply choose from a recommended section.
Additionally, Netflix offers various plans to its users to suit their incomes and watching habits. For instance, in India, Netflix offers affordable mobile-only plans to serve more price-sensitive users.
Provide value for time and money
When it comes to retaining your customers, the best way is to provide information about what benefit they will get out of the subscription. For instance, how much time they can save with not having to do grocery shopping every week.
Source: Hello Fresh
Hello Fresh is a company that offers meal kits delivered to your door weekly. The meal-kit includes all ingredients and a recipe with instructions, so you can prepare a meal in under thirty minutes. Hello Fresh can help to reduce the stress of planning on what to cook for dinner and going grocery shopping.
The customers see the value of meal kits because they can save a ton of time and money. Additionally, Hello Fresh is successful because of its referral program, where customers can send a free meal kit to their friends. Often, they get hooked on it because of the value and quality they can get out of the subscription.
Subscription models play a massive role in extending customer lifetime value because of their convenience, personalization, customization, value, and sense of discovery. It is up to you which type of subscription model to choose for your business.
Also, by introducing a loyalty program into your subscription model, you can engage your customers and drive more sales.
Remember, it is vital to cater to the subscription model to suit your customers’ needs and give them a unique experience.
With a great experience and emotional connection to your brand, your customers will stay loyal and remain on the subscription plan longer.
We hope that you discovered a new idea of introducing subscriptions to your customers and gaining loyal subscribers.