Insights

Managing Subscription Fatigue

THINKING OUTSIDE THE SUBSCRIPTION BOX

We are moving into a new type of economy — the post-ownership economy. What does this mean? That more and more, Americans have access to a product or service rather than owning it themselves. According to a survey by McKinsey & Company, close to 50 percent of U.S. consumers pay for an online streaming service, while 15 percent subscribe to an ecommerce service to receive products regularly.

The subscription model is gaining popularity. In fact, it’s hard to find an industry untouched by this business type. Between mystery boxes and streaming services, everyday essentials and entertainment, brands are finding ways to pivot the traditional model of selling goods and services. Even B2B company Adobe is leading the way in the software market, moving its core creative software business to the cloud, and transitioning customers to a monthly subscription fee model.

Yet, one major issue subscription businesses face is subscription fatigue. An undesired state where consumers feel underwhelmed, dissatisfied, and outright uninterested in a product or service to the point of cancellation. But, there are a handful of tactics retailers can use to keep subscribers engaged.

Understanding the subscription landscape

Subscription-based businesses follow a business model that charges customers a recurring fee — typically monthly or yearly — to access a product or service. The subscription model has gained momentum, thanks to the development of digital payment platforms, advances in logistics and next-day delivery, and consumer insights provided by analytics platforms.

Brands benefit from this model by having a constant revenue stream that allows them to forecast, budget, and plan with more certainty. At the same time, consumers appreciate its convenience, affordability, and sustained value.

How to wake up the sleeping customer

Offer multiple pricing tiers

There’s never a one-size-fits-all solution; consumers want options. Think Netflix. It offers three pricing tiers, Basic, Standard, and Premium, each of which varies in terms of viewing quality, number of viewing devices, and monthly fee.

Pricing tiers allow flexibility. Consumers can choose the membership level that best suits their needs and budget while having the power to adjust if necessary. This is also a great upsell opportunity for brands. Netflix, for instance, receives a revenue increase of 44 percent anytime a user upgrades from Basic to Standard, and then earns an additional 23 percent when they reach Premium status, all with little added costs to the business itself.

Add-ons

Because it is difficult to continuously delight customers with new, unique products, subscription boxes are especially vulnerable to fast fatigue. Plus, customers often build brand loyalty towards certain products, which will sway them to purchase directly from these specific brand sites instead.

On top of providing a box full of surprise health and beauty products every season, FabFitFun offers its customers an opportunity to buy add-ons. Members can browse the product catalog and add extra merchandise to their quarterly boxes. This a la carte solution helps retain customers by making it convenient for them to purchase their favorite branded products and receive their discovery box at the same time and in the same place. Not to mention that this cross-selling initiative helps increase the average revenue per user (ARPU).

Customizations

Creating a personalized experience has become an industry standard across all retail experiences. Meal-kit company Blue Apron, for example, asks subscribers to choose meal sizes, ingredient preferences, and dietary restrictions. Another great example is Fabletics. They ask all new members to take a lifestyle quiz at sign-up so that they can send personalized outfit picks.

Consumers find more value in products they feel are personally tailored to them. And since the subscription model commonly uses a value-based pricing strategy — where companies base their prices on how much the customer believes a product is worth — consumer’s perceived value is crucial. And personalizing packaging, products, services, and overall experience can significantly boost what consumers are willing to pay.

Value Nurturing

The moment a member fails to recognize the value of a product or service, they will typically opt out. Think of all your favorite subscription-based companies; Netflix is frequently releasing binge-worthy specials, Ipsy is sending the latest beauty products in seasonal shades, and Grammarly is continuously updating its dictionary. This is all in an effort to keep members engaged long after initial sign-up.

With engagement at the core of the subscription model, it’s having a constant value stream that will keep members active. Value nurturing feeds consumers’ appetites for the latest and greatest, keeping them in the delight stage. And as long as a customer doesn’t reach the phase of fatigue, they will continue to pay for a product or service.

Final Thoughts

Customer engagement is more important than ever when it comes to subscription-based businesses. And with this business model being prone to quick maturity curves and fast fatigue, it can be difficult to maintain members month after month. Yet, having an ongoing interaction versus a one-and-done transaction provides a unique edge in the market. And with the right mix of flexibility, convenience, personalization, and consistent value, retailers can keep members engaged long enough to transform their subscription brand into a lifestyle choice.