Subscription services have long been a core offering for Direct to Consumer (DTC) brands. In the post-pandemic world, they are even more important than ever. 75% of DTC brands will offer subscription services by 2023, according to the Subscription Trade Association, and the global subscription commerce economy will account for nearly 20% of the market.
Why DTC Brands Win Big With the Subscription Model
A subscription service is a natural fit for brands selling consumer goods or refillable products, the team at Churn Buster writes. “You want to make it easier for your customers to constantly have your product in stock (and to never run out.) Plus, there’s a novelty element: Customers like knowing they’ve got something coming their way every single month.”
They also make business sense, says eCommerce consultant Dan Barker. Subscription services offer higher margins for DTC brands, lower retention spend, greater predictability in terms of stock levels and cashflow, and a faster feedback loop.
The subscription model means greater customer lifetime value, too, writes Danette Acosta, Editorial Lead at ProfitWell. “The best way to build a stable and scalable business is by creating a pool of loyal customers. Adopting the subscription model allows you to create long-term relationships with customers, maximizing their lifetime value for your company.”
The regularity of subscription boxes helps DTC brands get closer to their customers. Matt Hiscock, UK General Manager at Harry’s, explains that this relationship makes it much easier to improve products. “We receive tons of feedback from customers that helps us make improvements to our products. For example, we added a trimmer blade to our second generation razors because we received so many requests from customers saying how much more beneficial it would be to their shave.”
Andrea Marchiotto at Philips considers subscription boxes the “antidote” to Amazon’s ultra-efficient and impersonal shopping experience. That’s why customers love them so much. Since they are “inherently personal (most are personalized to consumer tastes or can be customized), focused mainly on curation, value and with the element of surprise built in, subscription boxes bring a bit of playfulness back to shopping,” he writes.
Subscription models matter more than ever because they are a clear win-win for both retailers and consumers. “For customers, it’s an easy and simple way to receive the products they normally use on a timely basis, and generally at a lower price point,” says Haydn Reece, Product Manager at Scalefast. “Still other types of subscriptions aim for a ‘surprise and delight’ angle designed to keep their customers engaged by offering new products each cycle while offering exclusive or early access to products. The end result is a happy customer.”
The Subscription Model Makes Sense Post-Pandemic
Subscription-based businesses remained resilient throughout the pandemic, according to a report by subscription management platform provider Zuora. Half of the companies were still growing during that time and did not see a significant impact on subscription growth. Almost one in five (18%) experienced an acceleration of subscriber growth. That growth was due in part to changes in consumer shopping habits. During the pandemic, customers made less frequent grocery store visits, and they became more comfortable with buying directly from consumer packaged goods brands, writes RetailWire Editor Matthew Stern. Some of these brands, he adds, “have subscription elements to their direct-to-consumer offerings.” Those new shopping habits dovetail nicely with the benefits of subscription sales models.
Subscription services offer new ways for shoppers to browse
In-store shopping is a key part of the buying experience for certain product categories. Think skincare products or perfumes. When people were unable to wander the aisles of stores to try out new lipsticks or fragrances, subscription boxes offered a new way to sample products and brands. This dynamic also works for household CPG products such as dish soap or diapers or coffee.
People can use subscription services to replenish items
“The most obvious draw of the subscription model is that it eases the need to replenish the basics that a consumer uses regularly,” the team at DTC Magazine writes. During lockdowns and with concerns about social distance, this is an obvious benefit. But even as in-person retail reopens, consumers will still desire this convenience.
Subscription models make it easier to forecast demand
This is a major benefit for retailers and brands, says Mallory Walsh, Director of Marketing at Chargebee. “In the months following the pandemic outbreak that led to a surge in online orders, some eCommerce businesses struggled to estimate consumer demand and thus adequately respond to volatility in demand cycles.”
How to Get Subscriptions Right
Though subscriptions services have proven to be effective, their success is not a given. Brands must create a strategy when they are designing their subscription model. Centering the customer is key. These five tactics can help.
Only Sell One Product
Many DTC companies started out selling just one product, explains CB Insights. “Casper began by selling what its founders thought was a ‘perfect’ bed. Bonobos started with 1 pair of men’s pants. Harry’s started with 1 type of razor — 5 blades, plus one for trimming.” Focusing on one product allows these brands to elevate themselves above competitors to grab customer attention and position their item as the best in the industry. It also allows them to quickly make adjustments as customers only have one product on which to provide feedback. Customers like it when a DTC brand focuses on one product, too. They may think they want lots of choices, the team at CB Insights writes, but brands like Casper that eliminate choice are actually preferred.
Anchor Subscriptions to Recurring Events
Not every product is a good fit for the subscription model. “Products that aren’t tied to recurring events are the hardest to turn into subscription models,” writes Board of Innovation’s Nick De Mey. A subscription service for underwear doesn’t work well because that product isn’t replaced every month, for example. The fix is to link products to something that does occur regularly wherever possible.
Offer a Choice of Replenishment Dates
Brands should offer customers multiple options for how regularly they receive products, write Alex McPeak and Amanda Keshian at email marketing platform Klaviyo. “Not only can this help alleviate some shipping and supply issues, but it can also improve the overall customer experience.” Make it simple for customers to edit their subscriptions, too. For example, a beauty brand could allow customers to easy adjust the frequency of their replenishment. The more control they have, the better the overall experience.
Create a Great Customer Experience
Successful brands demonstrate why customers should sign up for their subscription service by providing a compelling and pleasurable experience. “The entire subscriber experience — every touchpoint, from promotions and product to customer support and billing — is delightful every time,” explains Dan Burkhart, CEO and Co-Founder at billing management service Recurly.
Make it Easy to Cancel
The vast majority of top brands also make it easy to cancel. “90% of the most successful brands gave consumers extremely clear instructions on how to cancel their service at any time, should the customer feel so inclined,” writes the team at subscription platform Ordergroove. This may seem counterintuitive, but an easy opt-out can convince reluctant customers to sign up for a trial subscription.
The Subscription Model Works for DTC Brands
Subscription-based DTC brands proved extremely resilient during the pandemic, with many growing subscriber numbers. Post-pandemic, they are more important than ever. The benefits of the model are apparent: Predictable revenue, higher margins, supply chain control and fostering great relationships with customers.