In the eternal quest for the all-important repeat customer, subscription or membership marketing appears to offer some obvious benefits on the surface. With the subscription-based economy growing at a rate of 350% between 2012-2019, it’s certainly seeing an astronomical rise in popularity and revenue.
Attracting and retaining customers to a subscription-based business has its own challenges. How do you find the right customers? And how do you keep them around? Let’s talk about that.
What is subscription marketing?
As the name would suggest, subscription marketing means marketing a subscription to repeat purchases or access to goods or services. This can come in many forms, some of the more well-known being boxes full of things the customer doesn’t choose but generally knows the category of (think makeup, skincare, pet supplies, etc), or a monthly credit system where customers are offered a discount every month.
Benefits of subscription marketing
For both consumers and retailers, subscription marketing has many benefits.
Remember the humble roots of Netflix? The younger generations may not know this, but the streaming giant was once an experimental service offering DVDs through the mail. Convenience is a huge benefit to customers, and subscription marketing services offer it in spades. Netflix was a success because people didn’t need to make a trip to a physical location any longer.
Convenience doesn’t just come in the form of not making you get off of your couch, either. Retailers that allow customers to subscribe to automatically renew purchases before they run out of their products (for example, the giant we love to hate, Amazon), see huge success simply by automating product replenishment.
Convenience is all well and good, but how can your customers know they need something if they’ve never tried it? Another benefit to subscription-based services is discovery. Offering a selection of curated, new, and exciting products gives customers a chance to try new products. Some really great examples of this are BirchBox and BarkBox, offering makeup and dog products, respectively. Some companies even take this to the next level by shipping boxes of sample-sized products with the option to purchase full sizes at a discount.
The real benefit to subscription services for consumers is almost always the potential savings. Whether a service is giving customers the option to purchase products at a discount or just offering a certain amount of product for a discounted price, the concept is the same: by agreeing to pay monthly, you receive some sort of discount or benefit in return.
Challenges of subscription marketing
Of course, every business model has its challenges. Here are a few to be aware of:
The true challenge of subscription-based marketing is actually what happens after the sale. Offering a discount upfront and then ending it tends to encourage churn, as does poor customer service. Remember, the traditional marketing funnel doesn’t apply here: your real challenge is retention.
Pricing and discounting
Knowing how to price your products to maximize profit and remain competitive is a dance that takes quite a bit of trial and error to learn, and the same is true for discounting.
Keeping the benefits and pitfalls of subscription marketing in mind will help you as you think about ways to market your business. Here are some things to try:
1. Offer a free trial or free version
Free trials have been instrumental in the success of a few companies you might recognize, including Drip! Offering a free trial or even a free version with some features reserved for paying customers is an excellent way to let customers test out the features of your product or service before they commit to a subscription. Help your trial customers get the most out of their experience with customized recommendations and tips along the way, as well as customer service support.
If possible, offering a completely free version is a good option as well. The challenge with this method is making sure your free version is set up to offer enough features and benefits to demonstrate the value of your product, while still giving customers enough incentive to upgrade to the paid version of your product. Clear messaging and clear pricing around what you offer goes a long way here.
Working with influencers can offer huge benefits for companies looking to expand their reach, especially for industries like beauty and fitness. The key to doing it well is working with influencers who can help you reach your target audience. Often, this means choosing influencers with smaller followings, as they can appear more approachable and have audiences in tighter niches. Getting the most out of working with influencers comes down to setting a reasonable budget, identifying the right audience, and a clear understanding of industry rates and practices.
3. Loyalty programs
Loyalty programs are tailor-made made to increase customer retention. They can be particularly useful for increasing the lifespan of a subscription when done correctly. Instead of rewarding things like dollars spent, consider offering perks like free shipping, or rewarding sharing content or links with friends. The right mix of rewards depends mostly on what industry you’re in and the products you’re selling.
4. User-generated content
We love user-generated content, and you will too. Utilizing the content your customers have created helps lend more credibility to your brand and the products you sell by showing how real customers use them. Contests with incentives tend to offer the biggest return on investment, but you can absolutely get creative with what you ask users to post, and where you ask them to post it.
5. Differentiate your product
With the rise of subscription marketing, you likely already have competitors. That’s a good thing! The more you understand what already exists within your space, the more you can differentiate your product from your competition. Finding your niche is a process that requires careful research and study of what has worked and what hasn’t. You didn’t get into the game to make the same things as everyone else, right? Do your research so you know how your product is different, and tailor your message accordingly.