There’s one thing in ecommerce that’s for certain; subscriptions are here to stay. If you keep up with our blog, you may have seen previous articles we’ve written about subscriptions but we haven’t yet talked about membership offerings. Both are interesting options for ecommerce stores, with some bigger players opting to incorporate both. Whether you go for one or the other or both, it’s important to understand what benefits you’ll actually get as a store owner from either option. Let’s dive in!
Subscriptions
The idea is pretty straightforward – a customer pays a set amount of money at a set time period and receives products. There are two main ways that this model operates:
Option 1: Subscription Boxes
The box model is the one most people are familiar with, there are plenty of examples like FabFitFun and Hello Fresh. A customer pays a set price every 2 weeks, 4 weeks etc. and receives a set of products. It doesn’t necessarily have to be a box of mixed products; for example, a customer could pay $15 every month and receive a fresh bag of new coffee beans to try. The basic principle is the same no matter what you’re selling or how many products you get; pay a fee via direct debit every so often, get products.
Option 2: Product Replenishment
Another option we’ll all be familiar with is the “Subscribe and Save” model of subscriptions; the biggest example being Amazon on pantry and household products. Customers set the time frame they want to receive the same product, and pay for that product at that set time oftentimes with a small discount. This is an easy way to get involved in subscriptions if a box based subscription is too high a commitment for your store’s current operations.
Alright, so we know how people use subscriptions, but what are the benefits to ecommerce store owners?
Introduce customers to products
This benefit is more applicable to the box model, where through subscriptions you’re able to introduce your customers to other products that you sell that they might not otherwise have thought to order. This can be a great opportunity to bundle less popular products with more popular products, which can help you both introduce them to customers but also cycle through stock that isn’t shifting as well. It can also be a way to market new products; sending them as part of a subscription helps show subscribers what’s new to your store, and through requesting reviews on subscription items you can gather valuable social proof for new products to help market them to new customers.
Convenient for customers
Whether it’s a box or a product replenishment, there’s no denying that a subscription on products is convenient for customers. They know they pay a certain amount of money every two weeks or month or whatever other period of time, and they know they’ll get a certain value of products from your store. For replenishment customers especially, they don’t need to remember to order something or go through the annoyance of running out of a product. If you go with a box model and it involves new products and an element of discovery for your customers, they don’t need to go and research a lot of different products and suppliers, they know they’ll get to try something new and interesting every time their subscription order arrives.
Build strong relationships with subscribers
Having a subscriber base to draw on means you’ve got an active, interested audience of regular purchasers ready made for you to engage with. To subscribe to a store, a customer needs to buy into your brand, so you don’t need to worry about getting their initial interest. You can focus all your direct marketing efforts on building that relationship, showing the things you’re doing to improve customer experience, giving them access to brand insights, first peeks at new products, and more. And best of all? You know they’ll actually care about the marketing activity you’re putting effort into.
Sell more products regularly
Subscriptions allow you to get more product out the door faster than fulfilling one-off orders. With the box model, you’re basically able to bundle your products putting complementary products together and offering them at a slightly discounted price meaning customers can experience products they may not have thought to buy if they were placing a one-off order. Customers might then go back to your site to order more of the products they like from their subscription, giving you even more opportunity to sell.
With the replenishment model, you’re not relying on someone remembering to order something every few weeks, you’re guaranteed a regular order of that product. This not only helps with cash flow, but with forecasting for stock and operations.
Valuable customer data
Customer purchasing data is invaluable to any ecommerce business, and subscriptions give you access to a lot of information. If you’re running a box model, you can see what boxes perform better than others, what products customers liked and didn’t like, what products customers purchased after receiving boxes etc. With a replenishment model, you can see how regularly people are choosing to receive products, which products people subscribe to most, etc. On top of that you can also get valuable demographic data about your customers to build a very strong image of who your customer demographics are allowing you to be more strategic in your marketing and product development processes.
Memberships
On the flip side, you’ve also got memberships - these are often programs where customers pay a fee to gain access to perks or services not open to regular customers. There are a huge number of ways you can run a membership program, from month-to-month to yearly payments, discount perks to bonus products, sneak-peeks at new products to early access, and more. There are plenty of great examples out there, the biggest being Amazon Prime offering access to better shipping times/rates, as well as Shopify merchant Freshly Picked offering 20% off, free shipping, and store credit for monthly subscribers.
Low barrier to entry
The problem with some subscriptions is they can cost a large amount of money, which can lock out a significant portion of potential customers who can’t justify the cost. Getting 10% off everything without having to commit to a subscription for any particular product could mean customers are more open to trying new items while regularly receiving the ones they already love, therefore generating additional revenue.
Low time and financial cost to business
Running an ecommerce business takes a lot of time and effort regardless of how big or small you are. Running a subscription service might be something that doesn’t suit your current operations, and memberships can bridge that gap. Subscriptions take a lot of marketing effort, plus product development, supplier sourcing, fulfillment time etc. Whereas memberships take considerably less set-up and maintenance time. You can change the perks, you can add extras on, you can create membership tiers, etc. but it won’t take too much extra time or money for you to develop.
Higher potential for customer retention
Because you’re offering a service for a lower cost than offering a set of products for a high cost, there’s a high potential for your customers to remain on the membership scheme as opposed to a subscription service. Subscriptions often cost more, more frequently so there’s a higher chance that eventually a customer will unsubscribe. But if your membership model is a minimal cost and offers perks like discounts, early access etc. then there’s a higher chance customers will keep their membership.
Increased brand loyalty
Customers who are subscribed to a VIP program are going to naturally be more loyal customers - they’re paying monthly for something, after all! Everyone loves to be a part of a special club, and these customers are no different. They’re more likely to tell their friends about the membership program they are a part of and the benefits they receive.