Understanding eCommerce Subscriptions
“Seventy percent of organizations are deploying subscription business models to sell directly to consumers–thereby creating recurring revenue and customer loyalty.” - Future of Customer Engagement and Experience
B2C subscriptions involve an agreement between a business and an individual consumer, with the promise to deliver a product on a regular schedule or as an ongoing process. Typical providers may ship consumable goods (like subscription boxes or wine of the month clubs) or provide online services (like online streaming or media sites).
Subscription Models and Customer Experience
“The subscription model offers new opportunities for businesses to enhance the value of their offerings as they become more embedded in the changing context of their clients’ customer journeys,” states research from Forrester.
Forrester reports continued acceleration in subscriptions with a jump in 2018, from 33% of US adults online using services like scheduled deliveries to 44% of US adults online in 2021 saying they were interested in receiving automatic product shipments.
Further data categorizes subscriptions by services, boxes, and digital content–spanning applications like beauty, personal care, food and beverage, fashion, health, and entertainment. Projected increases in subscriptions are expected to jump from sales of $72.91 billion in 2021 to $120.04 billion by end of 2022 at a compound annual growth rate (CAGR) of 64.64%. Globally, the ecommerce subscription market size is expected to reach $904.28 million in 2026 at a CAGR of 65.67%, featuring major players like Amazon and Netflix, but also Dollar Shave Club, Blue Apron, PetSmart, Hello Fresh, Birch Box, Sephora, and more.
For companies engaged in maintaining B2C connections online, the outlook is obviously positive—but hinges on meeting customer demand with speed and quality and high value in terms of convenience and personalization. Forrester points out that companies like subscription box provider, Stitch Fix, are laser focused on studying their customer base and improving their experience–working with data scientists on personalization algorithms, as well as interviewing customers regarding preferences.
“Through subscriptions, customers access a product or service for a certain time, a set usage volume, or a defined business output. Startups in all sectors are already targeting profitable market segments with subscription offerings, and traditional firms are following…”
Digital Subscriptions and Recurring Delivery
As purchasing paradigms shift–and especially with younger generations less concerned with ownership or even tangibility of products–subscriptions are becoming increasingly more indispensable. Companies like Netflix offer digital access with a monthly fee while Amazon Prime charges fees for membership and resulting discounts. Recurring deliveries continue to be popular as well, encompassing a wide range of items from shaving supplies to groceries.
A definite shift in spending trends began with the pandemic, and continued. Consumers were struggling with uncertainty, while simultaneously seeking new ways to stay organized through online orders, pickups and deliveries.
Along with lifestyle changes such as remote work, many consumers discovered more efficient and comfortable ways of living and shopping. This overall attitude is positive for B2C subscriptions, but businesses still have their work cut out for them in overcoming competition and battling the ever-present issue of churn.
History of Subscription Services
The subscription model has evolved over time, harkening back to the 1800s as consumers became eager to sign up for product subscriptions like magazines. Previous to that, heads of households in the 1700s were ordering more primitive ‘subscriptions’ like dairy deliveries–services are still in demand or now coming back in some areas.
The typical B2C subscription has morphed into services most people could not have imagined just a couple of decades ago–now completely bypassing long-time consumer habits like buying bestsellers from bookstores, purchasing DVDs, and spending substantial sums on software packages for the home and office.
With omnichannel selling, subscription services can now be used, managed, and promoted through websites, apps, messaging, and brick and mortar locations.
Designing the Subscription Experience
Selling subscriptions begins with identifying the target base and offering a product that meets customer wants, needs, and expectations. Ultimately consumers must be directed to a website landing page set up solely for the purpose of subscribing and setting up an account. Email and social media are extremely effective ways of sending customers there directly, promoting subscriptions with a simple ‘click here’ style. Partnering with social media influencers is trending upward as a popular method of advertising too.
After customers subscribe, the goal is to keep them. One of the most popular and successful methods for getting subscriptions is through offering trial periods, but retaining them requires continued work in cultivating the long-term sales relationships–especially as drop-offs are extremely high with limited promotions and freemium offerings. Add-ons (like an extra movie channel) can be an excellent way to upgrade accounts for nearly any type of subscription too, as well as cross-selling other products.
Sustaining Accounts with Good Subscription Management
Most businesses offering B2C subscriptions require a robust eCommerce system comprising streamlined tools for sales, marketing, and customer service. It must be easy to invoice customers, draft subscription payments, and track revenue–along with scheduling and tracking products and services. Subscription management features should also make it easy for customers to pause a subscription, skip a month, or enable a subscription that was previously canceled (and still pulling up past history and account features).
Subscribers typically do not spend much time worrying about what goes on behind the scenes to offer services via omnichannel. They don’t worry much about how a company goes about updating accounts, sending notifications, or streaming all the latest content. In the current climate of omnichannel convenience, consumers expect fast service in gaining access to the latest products and services–on as many platforms as possible.. For the business offering B2C subscriptions, sophisticated tools are necessary, and they must be continually evaluated and approved.
The key is to create a sustainable model that allows for customization, strong support, and ease in use. As the B2C subscription sales model evolves, companies must continue to strategize regarding price points or create different tiers, discounts, and more.
To launch or optimize your subscription services, and your customer subscription experience, contact us anytime.