Subscription eCommerce is one of the best ways to increase the lifetime value of your customers and create recurring revenue in your business.
But creating a great subscription program that doesn’t result in tons of customer churn takes more than just sticking a subscribe & save on your product page.
Today’s guest is Ben Fisher, Founder and CEO of Rodeo, a subscription platform for Shopify. He started his development journey as a kid, selling strawberries door-to-door so he could buy programming books. He went on to create Carthook, a post-purchase upsell app for Shopify which he sold in 2022. Now he helps 8-figure DTC brands that use subscription models to maximize customer retention and lifetime value.
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What is the Current State of Subscriptions for DTC Brands?
Subscriptions really started in the SaaS space with brands like Adobe and Netflix. Traditionally it’s always been about recurring revenue as the holy grail of business models because consumers who subscribe to things generally spend more money. it also opens up your market because the entry price is much more accessible. Instead of spending a ton of money upfront to buy a software like Photoshop you can subscribe for a low ticket monthly price, but you’re ultimately paying for that forever; in the long run the consumer spends more.
Then we saw Birchbox and other companies like Boxy Charm come on the scene which was the catalyst for the physical product subscription. Now around 70% of consumer product brands have some sort of subscription element to their business.
How Have Subscriptions Changed in the Last Few Years?
Over the last few years, subscriptions have become a really mature market… but that has ultimately introduced new problems. It’s sort of cannibalized itself because so many brands are now asking you as the consumer to commit to marriage, which makes people more reluctant to subscribe at all or they’ll only have so many subscriptions in parallel.
Because consumers are being more selective with their subscription options we’re seeing a lot more cancellations happening, usually, because they had a bad experience with one or more of them.
What are the Biggest Mistakes You See with Most Subscription Programs?
There are so many arbitrary time-based subscriptions, 30 days, 60 days and it doesn’t take into consideration the life and habits of the customer.
The number one reason people cancel subscriptions is that they have too much product. Brands should be more thoughtful and intentional when developing their subscription program and try to match the packaging to the cadence of the customer’s consumption.
Brands also need to provide more flexibility in the subscriptions they do offer because people’s lives vary and life happens. Sometimes they’re consuming more or less of your product, sometimes they’re traveling, sometimes they have to store their paper towels in their freezer because they live in a tiny NYC apartment and so they cancel their subscription because they didn’t have any other option.
The reality is, that in a lot of ways, subscriptions can be more inconvenient than convenient for certain types of customers.
Common Misconceptions About Subscription eCommerce
The truth is that subscriptions aren’t actually recurring revenue because people skip months of their subscriptions all the time. If you have 100k subscribers to your program are you charging 100k people every month? Most of the time, the answer to that is no.
How Can Brands Create a Better Subscription Experience for Their Customer?
It all starts with remembering that the goal of an eCommerce business is not about getting subscriptions, it’s about increasing customer lifetime value. Subscriptions are just a mechanism to do that. The ultimate goal is to pair the right sales mechanism with the right customer.
Some customers want the convenience of “set it and forget it.”
There is another subset of customers who don’t want to set it and forget it, they want more control. And for others, maybe they’d rather bulk order or get a reminder that they can confirm whether or not they need more. They don’t necessarily want you running their credit card without their express permission each time.
Traditional subscription eCommerce was all about either the customer subscribes, cancels, or watches their inbox to make sure they remember to skip each month they don’t need your time.
To create a really great subscription experience you want to create something in the middle, to give your customers options based on their own needs and preferences. You also want to eliminate fear around the purchase by helping the customer make the right decisions for them.
How to Choose the Right Subscription Frequency
Instead of asking your customers to figure out how often they need your product, do the work for them. Put together a quick onboarding quiz that asks them about their habits with a product like yours and tell them what the right interval is.
A great example of this is All Girl Shave Club. They don’t ask how many razors do you need, they ask how often you shave. If I asked you how often do you buy shampoo, would you know the answer?
if you’re not sure what the ideal frequency should be, look at the data of your one-off purchases and see if you can find an average return purchase rate. How often do your customers come back and buy this particular product?
Let them Try the Product First
Asking for a subscription too soon in the sales process might prevent people from purchasing at all. Remember that your goal isn’t to necessarily get the subscription. Having someone subscribe only to skip repeatedly or cancel quickly isn’t going to serve you in the long-run. Instead, make sure you have a follow-up marketing strategy to “sell” them into the subscription once they’ve been qualified as the right customer.
Don’t Discount Your Subscription So Much that it Attracts the Wrong People
If you’re going to offer a subscribe and save option, don’t make the discount any more than 15 or 20% otherwise you will attract people who sign up for the subscription just to get the discount but then they quickly cancel because they don’t actually want to be subscribed.
You’ll end up eating into your margins and the lifetime value of that customer will now be X% less than it could have been.
Subscriptions don’t always have to be about a discount either. There are plenty of other ways that you can add value to your subscribers. For instance, giving them access to exclusive products only available to subscribers.
There is also a lot of value in community and MudWtr does a great job of this.
