Subscriptions: Fostering Consumer Loyalty with a Recurring Revenue Model

This blog is an excerpt from our latest e-book “Turning the page: Preparing for the next frontier of e-commerce” by Ghost, the world’s largest B2B marketplace for surplus inventory. You can check out the rest of the e-book here.

Over the last year, businesses have seen their acquisition costs rise considerably. As we approach 2024, achieving revenue targets will be more challenging than we’ve seen in previous years. The combination of increased competition for qualified traffic, rising inflation, and reduced consumer spending requires brands to reevaluate their strategies. Subscriptions offer a solution to enhance consumer loyalty and establish a reliable revenue stream.

Embracing subscriptions: The key to loyalty

Subscriptions offer a path to increase loyalty in an unpredictable market. They foster deeper connections between consumers and brands, which leads to increased retention rates and customer lifetime value.

Subscriptions make it easier for businesses to collect valuable First Party Customer Data, enabling personalized interactions in an era where privacy concerns restrict third-party data usage. With more customer data you can better personalize your marketing campaigns and onsite experiences.

Subscription revenue is more consistent throughout the year. Where one-off purchases are likely to have big sales spikes during key selling periods it is simpler for merchants to plan their forecast and inventory when a significant portion of their sales come through a subscription model.

By embracing subscriptions, brands can navigate the evolving landscape of consumer behavior and secure a more predictable revenue flow throughout the year.

Diverse subscription models

The subscription model landscape is vast, catering to diverse consumer needs. From product replenishment to exclusive memberships and curated boxes, businesses have ample opportunities to engage their audience. Tailoring the subscription offering to match the specific product line is crucial. Surveys among existing customers can provide valuable insights, ensuring the chosen subscription model aligns with consumer preferences.

In 2022, Mintel's findings revealed that over half of consumers (55%) currently or have previously engaged with subscription services. The most promising category is replenishment, which boasts the highest level of participation compared to memberships or curated boxes.

It may be easy to assume that most consumers will rely on Amazon for their product replenishment subscriptions, but a recent poll by Yotpo found that over 57% of U.S. subscribers are subscribed to products directly through a brand website.

With consumers more open to subscribing outside of Amazon, there is clear untapped potential for brands to establish and grow a thriving subscription business.

Strategies for success

Acquiring subscribers

Motivating factors for consumers to subscribe are convenience and cost savings.

• Offer initial discounts and recurring savings, along with transparent delivery frequency.
• Include guidance for the recommended quantity and frequency of the subscription.
• Ensure your subscription offering provides value above and beyond the deals you offer during regular promotional periods.

Retaining subscribers

The top cited churn reasons are budget and quantity (too much or too little). Subscribers expect flexibility and control over their subscriptions and need consistent confirmation that their subscription provides value to their lives.

• For subscribers seeking flexibility and value allow easy adjustments to subscription frequency, incorporate seamless use of loyalty points, and offer guidance on product quantity and delivery cadence.
• Give subscribers the choice between SMS and email communication, and leverage your relationship marketing channel to go beyond transactional communication with personalized content.
• Reduce churn due to expired credit cards by leveraging third-party tools to proactively reach out to customers to update payment.
• Build an advanced cancelation flow with incentives.

A subscription model gives you the opportunity to gain a deeper understanding of your customers' needs and motivations. Leveraging the qualitative and quantitative data you generate to build actionable insights and continuously improve your offering and customer experience is the single most important thing you can do to grow your subscription business.

A profitable investment in loyalty

By embracing subscriptions, businesses can weather the challenges of the market, secure customer loyalty, and ensure a prosperous future in the ever-changing landscape of consumer preference.

In our latest e-book, we into what e-commerce businesses should be thinking about as we turn the page and head into 2024. Ryder and a handful of our top partners are bringing clarity to an uncertain landscape where recession is looming and customer retention has never mattered more. Download “Turning the page: Preparing for the next frontier of e-commerce.”