In the midst of uncertain economic times, many businesses are considering subscription business models and how they can be used to drive customer loyalty.
But as the competition for wallet share intensifies, customer expectations for eCommerce subscriptions have grown higher — requiring B2B and B2C companies to consider how they’re providing value with this offering long after the customer hits ‘complete purchase.’
Despite the economic conditions, the subscription economy remains strong —the overall market has a predicted worth of up to $3 trillion. But while it remains popular among consumers, the churn rate is high. According to Mckinsey, one-third of consumers will cancel their subscription in less than three months after signing up, and over half will cancel in six months.
Whether you’re a B2B company selling recurring services or a DTC company selling product subscriptions, customer retention and happiness are at the core of a successful business.
In this article, we’ll outline four strategies to help boost your retention rate and discuss how technology will help you implement these strategies.
Reward customers with discounts
As consumers look for cheaper alternatives to the products and services they use regularly, subscriptions can be an attractive option with the right discount. Discounts will be particularly important for families — a Kibo product subscription survey found that as household size increases, they are more likely to look for more convenient and cost-effective ways to purchase items.
Here are some common ways subscription companies leverage discounts to improve their customer retention rate and foster loyalty:
- Percentage off the first order and a smaller discount for each recurring order
- Free delivery for each recurring order
- Buy more, save more, or subscription tiers
- A larger discount for a specific number of orders
Keep in mind that a discount strategy for one product may not make sense for another. Try to find a subscription management platform that allows you to customize discounts on a product-by-product basis. This ensures you’re not diminishing margins while offering an attractive enough discount to improve retention.
Try testing different pricing and discount strategies to see what works best with your target audience based on conversion and retention rates.
Empower customers to self-service
By signing up for a subscription, a customer is saying they trust the company enough to deliver a needed product or service on time. But many consumers are not as willing to give up this much control over to the company. According to Kibo’s survey, 55% of consumers don’t sign up for subscriptions because of the lack of control.
Offering self-service encourages these shoppers to try out a subscription service and helps retain existing customers. Self-service allows customers to edit or update their account details, manage their subscriptions, check order status, and find other important information without speaking with a customer service representative.
Self-service is quickly turning into a must-have for eCommerce businesses. 70% of customers expect a company’s website to have a self-service portal, and 40% of consumers prefer self-service over human contact. When comparing self-service channels, a study found that consumers prefer a company’s website over social media, SMS, and live chat.
When building out a self-service portal, consider adding the following customer functions and features:
- Ability to order now, delay a shipment to a specific date, or skip an order. A customer may have vacation plans, delayed a project, or miscalculated their use of the product or service.
- Ability to update their shipping address and payment method. This ensures that there’s no disruption in the customer’s subscription, and you as a business don’t experience involuntary churn from declined payments.
- Ability to pause or cancel. There are many life circumstances that require someone to pause or cancel their subscription—don’t frustrate them during the process. By giving them a frictionless experience, you improve the chances of the customer returning or telling their friends and family about the service.
- Ability to swap products or services. Customer needs and wants naturally evolve over time—make it easy for the customer to swap out a product or service to avoid voluntary churn.
- Ability to change frequency. A customer may have realized they use the product less or more than what they thought they needed.
By allowing customers to customize their subscription experience based on their exact needs, you can minimize churn and drive customer retention. Once you have self-service in place, leverage it as a value proposition in your promotional messaging to entice customers to subscribe.
And for the subscribers that prefer to reach out to customer support…
Make sure your customer service team is empowered to update subscription accounts and orders. If your customer service team has access to subscription and order data in the same UI, they can more easily solve customer issues and prevent customer churn.
Get the right product to the right customer at the right time
You can’t rely on your typical eCommerce operations to sell subscriptions — the recurring business model adds a layer of complexity that requires seamless inventory and order management. Any disruption or miscommunication between these systems can result in a poor customer experience.
Here are three ways inventory management can help you enhance the subscription customer experience and enhance operations:
- Keep track of both subscriber and one-time purchaser inventory needs in a single UI to accurately track customer demand.
- Use inventory levels to inform promotion plans — if you predict excess inventory, offer discounts to new customers. If you predict you’ll have too little inventory, pause any upcoming promotions.
- Understand how customer behavior is changing based on what they’re subscribing to, how often, and what they’re canceling or pausing.
For an optimal customer experience from pre- to post-purchase, you need to factor in order management. Some modern subscription management platforms support order processing beyond order capture, but many of the traditional options are simply recurring billing solutions.
Using an order management system that can support recurring orders ensures the customer receives the order on time. If a customer chooses to order their product subscription now instead of waiting until the next scheduled shipment, how quickly can your system turn that subscription into an order? What if a shopper wants to skip an order? You need to consider these scenarios when evaluating subscription management platforms and how they work with your order management system.
Drive customer satisfaction with transparent communication
In the current economic environment, transparency has become the new battleground for customer attention. Consumers are more cautious about how they spend money – they need easily accessible information they can trust.
This is especially true for subscription products and services as customers are relying on these companies to fulfill the order at the right time. What types of communications can you provide subscribers to ensure they have a transparent experience?
- Provide real-time updates throughout the delivery process, including when the order ships, when it reaches a checkpoint in the journey, and when it gets delivered to the individual’s home.
- Send an email reminding the customer of the deadline to make any changes to the subscription order before it’s delivered.
- While no one likes to hear bad news, it’s critical to communicate to the customer when an order is delayed or an item is out-of-stock.
- Send regular reminders to customers to update their payment and address information.
Keep in mind that transparent communication requires an overlap of operational efficiencies and customer experiences. You can’t send an out-of-stock notification without real-time inventory visibility or provide an accurate fulfillment date without intelligent order orchestration.
Finding a subscription management platform that will help you drive customer retention
Recurring revenue is one piece of a subscription business model, but you also need a platform that can help you prioritize your customer retention strategy and ultimately increase customer lifetime value. When evaluating subscription management platforms, consider the following:
- Does it give you control over the end-to-end subscription business?
- Can it support the order process beyond order capture?
- Can it support various subscription types, discounts, and billing plans (tiered or variable, fixed, custom B2B pricing, etc.)?
- Does it have a composable architecture that can seamlessly integrate with other tech stacks?
- Does it have native capabilities across subscriptions, eCommerce, and order management in a single UI?
If you’d like to see a modern subscription management platform in action, register for a free 15-minute demo.