How to Win Customer Loyalty with E-commerce Subscriptions
- 5 minutes read
- Author: Greg Fritz
If you’re selling directly to consumers online, one of the best ways to enhance customer loyalty is through eCommerce subscriptions. That means enabling customers to automatically replenish supplies that they use on a regular basis – from you, their favorite brand.
Being successful with subscription commerce, though, requires proactive management, integrating your back-end data sources to support your eCommerce flow, and sometimes, a customized solution to drive competitive advantage.
The Rise of Direct-to-Consumer Commerce
Digital commerce has seen an explosion of merchants selling direct-to-consumer in the past few years. In fact, Shopify reported that while eCommerce is expected to account for 6.6% of all consumer packaged goods sales, the direct-to-consumer (DTC) movement accounts for 40% of the sales growth in the sector.
The reason for this is that it’s a win-win. Consumers benefit from direct-to-consumer commerce due to lower prices, greater selection, and enhanced personalization. Merchants also benefit from direct-to-consumer commerce, since direct access to end-users enables them to iterate and respond more quickly to customer preferences and trends.
The DTC trend was amplified by Covid, with more and more consumers preferring to shop online from their favorite merchants. McKinsey reported that 10 years’ worth of growth in eCommerce happened in just 90 days during the height of the pandemic.
But the flip side of the coin from a business perspective is that the cost to acquire a new customer is also skyrocketing. Customer Acquisition Cost (CAC) is up 60% across the board, while Customer Lifetime Value is declining, according to Profitwell. Today, more than ever, retention has overtaken acquisition and conversion as a top priority for many businesses.
Subscription Commerce Builds Retention
One way to retain loyal customers is through subscription commerce. This is when a person schedules regular shipments of dog food, razor blades, vitamins, etc. to be delivered to their doorstep on a regular basis. Subscription commerce use cases are most commonly thought of in the food and beverage space, however they’re equally applicable in B2B, manufacturing, construction, as well as wellness, pharmacy, and others. Some companies are also innovating with new business models, such as value-added services as a subscription.
For consumers, subscriptions provide convenience, relief from one less thing on the to-do list, and usually, perks like free delivery or usage/volume discounts. For businesses, subscription commerce provides a reliable, recurring revenue stream, lower cost of revenue collection, as well as improved customer retention rates and customer lifetime value.
Zuora’s Subscription Economy Index shows that subscription organization sales saw their annualized sales grow by 12% in the second quarter of 2020, while S&P 500 annualized sales declined by 10% in the same period.
Subscription is the fastest-growing segment of eCommerce. In fact, the Subscription Trade Association (SUBTA) predicts that by 2023, 75% of direct-to-consumer brands will offer subscription services. And Gartner predicts that 20% of revenue growth for digital commerce organizations will come from subscriptions by 2024.
Being Successful Requires Being Proactive
Managing subscription commerce can be complex – especially if you offer different plan lengths, incentives, and communication throughout the customer lifecycle. Also, transitioning from one-time sales to a subscription-based model may require changes in product designs and operational capabilities. You may have to build out new capabilities in supply chain, distribution, customer service, finance, or sales.
Subscription commerce does not guarantee lower churn rates. In fact, it requires ongoing, proactive management. Fortunately, there are various SaaS platforms available to help companies with subscription service management. These off-the-shelf platforms aid in the design of your subscription program and provide guidance to help you proactively manage the customer lifecycle through activation, usage, and renewal.
Integrating Your Back-End Data Sources to Support Your eCommerce Flow
Many of the subscription service platforms have productized integrations with other vendors for a seamless experience across the customer journey. CoStrategix, for instance, developed one such integration between eCommerce service provider BigCommerce and relationship management platform OrderGroove. This integration is now available for any new customer on either platform. The integration creates a seamless customer experience by:
- Changing the user interface to display a subscription option when a product added to a cart is subscription-eligible
- Checking whether there’s a valid credit card on file before permitting a subscription purchase
- Updating product feeds and product catalogs regularly, and matching products added to a cart with product availability
- Initiating replenishment orders based on subscription settings
- Recognizing changes to subscriptions and updating account information in both platforms
- Making analytics available for account management
With a good subscription services platform and proactive program management, most companies can be highly successful. OrderGroove cites an average of 60% increase in customer spend just 6 months after subscription enrollment.
When to Customize Your Solution
But sometimes your company needs something different, and that’s where CoStrategix can help. We specialize in technology modernization and user experience design for digital commerce.
Here are just a few use cases when additional design, integration, or strategic support may be needed:
- Designing custom branded interfaces
- Creating an interface with your back-end systems (e.g., fulfillment system) to both complete the fulfillment/delivery process and also track the shipment across the last mile
- Mixing and matching products or components from various sources – for instance, different store locations or warehouses
- Customizing the commerce flows on your website – for instance, when a company that traditionally sells physical goods adds a service into its eCommerce flow
- Integrating sales flows, product feeds, or product catalogs with channel partners or other third-party vendors
- Personalizing bulk orders – so customers don’t have to enter each product individually but can order a large number of items with personalizations for each item
- Mixing subscription options such as contract lengths, billing frequencies, bundling, add-ons, or discounts
- Developing or integrating with a complex price-and-quote engine
- Adding a recommendation engine – so consumers see recommended products based on their own viewing or purchase history
CoStrategix helps businesses modernize their digital commerce systems, from strategic planning through user experience design and technology implementation. We can help you integrate your systems, processes, and customer journeys to optimize your subscription commerce efforts.
If you’re interested in learning more about how to use subscription commerce to elevate your direct-to-consumer experiences, drive toward frictionless commerce, or build recurring revenue streams, please get in touch with us.
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