The Five Tenets Of A Sticky Retail Subscription
Subscription offerings from brands and retailers have been popping up everywhere. But as many subscription services have found — and Rent the Runway’s recent IPO filings also underscore — creating a compelling subscription includes getting customers to subscribe and then keeping them subscribed, with continued value from that subscription. Otherwise, churn and operational complexity can eat away at the potential benefits.
Despite the challenges, retailers and brands will keep experimenting with subscription models. Why? Because they unlock recurring customer relationships and are sources of predictable revenue. Additionally, in mature e-commerce markets such as Japan, the UK, and the US, where most adults are online buyers, growth depends on increasing the wallet share of existing online buyers versus bringing on net-new buyers. And digitally advanced customers are the most likely of any consumer to adopt new experiences, but they’re also the most likely to abandon them. Still, interest is growing: In 2018, only 33% of US online adults said they were interested in a scheduled delivery service. In 2021, 44% of US online adults said they were interested in receiving automatic shipments of products they use frequently.
Following are Forrester’s five tenets of a sticky subscription. Like rowers in a boat, for every tenet your offer is missing, the harder the others must work. Retailers should design subscriptions that:
- Prioritize consumer value and evolve this value over time. Prior to the pandemic, frequent travelers lamented that lines were getting too long in airports. CLEAR solved that problem with its expedited security clearance membership program. It expanded its service beyond security lines to airport lounges, rental car businesses, and sporting stadiums. This move adds value for existing CLEAR members at no additional cost. Plus, it opens new revenue streams in the data that it can sell to those venues (e.g., customers in attendance, what they’re buying).
- Offer differentiated convenience. Amazon’s grocery delivery service offers a “buy it again” persistent scrolling banner that makes reordering a breeze. But it could be enhanced: After a few deliveries of nearly identical groceries, Amazon could auto-create an editable “staples” bundle for a one-click reorder by customers. Retailers and brands must ask themselves if a regular shipment of their products is more convenient than picking them up at the store. Even if the subscription adds convenience enough to get sign-ups, retailers must offer the convenience that consumers require to stay subscribed (e.g., preference management, pausing and rescheduling delivery, etc.).
- Are highly personal. A stalwart in the subscription box category, Stitch Fix has weathered the rise and fall of the trend by doubling down on personalization. It uses its more than 100 data scientists to work on its personalization algorithms. It also created a Tinder-like “like/dislike” shuffle game with product imagery so that consumers can provide them more data on their fashion preferences and enhance the algorithm over time.
- Fit into a larger ecosystem. The BarkBox subscription box is somewhat personalized to the styles of toys and snacks that the customer’s pets prefer, but BARK has a whole ecosystem — including a content business, an e-commerce business, and an events business — to keep customers engaged. Aside from capitalizing on an important cultural moment of pet adoration in the US, the ecosystem that BARK has built around its subscription box incentivizes its customers to stay subscribed.
- Appeal to consumer emotion. Insurance provider Progressive’s Snapshot changes the emotional tenor of its customer relationships. Previously, in the best-case scenario, a Progressive auto insurance member wouldn’t have contacted Progressive at all until renewal time. If they did, it usually meant something stressful happened (e.g., an accident). With Snapshot, a usage-based insurance plan, members earn discounts based on good driving. This means that Progressive can proactively communicate positive messaging (“You just earned a 5% discount. Keep up the good work!”).
What do you think of our tenets? Would you add any others? How might you apply them to your offerings? Forrester customers can schedule an inquiry with me to discuss it further.