How Subscription Model Helps Online Businesses Boost Client Retention

Published: | By Shanice Jones

Each year, more and more purchases are being made through a subscription model. Research shows that 15% of online shoppers are paying for a subscription box product, while 59% are paying for a subscription service. Considering over 2.14 billion people shopped online in 2021, many shoppers have adopted subscription commerce.  

Subscribers graph

Source: McKinsey & Company

One of the main reasons why eCommerce businesses are opting for the subscription model is because it helps boost customer retention. Subscription modeling is crucial, considering that increasing customer retention by a mere 5% can lead to a 25-95% increase in revenue.

However, simply adopting a subscription-based model for your eCommerce business doesn’t automatically lead to increased customer retention. In this article, we’ll look at strategies you can use to increase retention for your subscription-based business.

Offer a Personalized Experience

Modern consumers want products and services tailored to their unique wants and needs. For instance, if you sell a pet food subscription box, customers want the ability to choose what’s in their package based on their pet’s breed, size, age, and so on. 

If you can’t provide this level of customization, your subscribers won’t stay. According to the McKinsey study, 28% of subscribers say that personalization is the most critical consideration when deciding whether to continue their subscription.

Fortunately, offering a personalized experience doesn’t have to be complex or costly. You can learn about your customers’ unique wants and preferences with a simple questionnaire at sign-up. 

For example, when you sign up for Barkbox, a treat box for dogs, they ask you multiple questions about your pet, including the name, sex, size, age, breed, and even allergies. They then use this info to deliver fully personalized treat boxes for your pet, including sending free treats on your dog’s birthday. 

BarkBox Questions to their subscribers

Source: Barkbox

The aim is to learn as much as possible about your customers and tailor your subscription product to each customer’s unique needs and preferences.

Constantly Engage Your Subscribers

Just because a customer has signed up for your subscription doesn’t mean they are your customer for life. If you forget about them, they might forget about the value they get from your service and decide to cancel their subscription.

To avoid this, you need to continue engaging them throughout their subscription. Reach out to them to share interesting tips, give them offers and promotions, ask for feedback, create content that helps them get more value from your service, share news about new products, and so on.

An excellent way to keep your subscribers engaged is to create multiple touchpoints. For instance, you can use SMS marketing to send them time-sensitive offers, social media and blog content to share tips and other content, and email to ask for feedback and share product news. Such constant and multifaceted engagement builds a close relationship between your subscribers and your brand and helps build brand loyalty.

Create a Rewards Program

Besides delivering what your subscribers signed up for, it’s also a good idea to set up a loyalty program to reward your best customers. Rewards show your appreciation and act as an incentive for your customers to continue subscribing to your service. According to Invesp, 83% of consumers say they are likely to continue doing business with a brand because of its loyalty program. 

83% said Loyalty programs make them more likely to continue doing business with certain companies

Source: Invesp

A reward program can also turn most of your subscribers into brand ambassadors who drive customer referrals.

Examples of rewards you can give to your loyal subscribers include:

  • Free months where customers get your product or service without paying for it.
  • Access to private forums
  • VIP customer support
  • Exclusive discounts and offers
  • Exclusive contests and giveaways
  • Adding complimentary items to a customer’s box

Another crucial aspect to driving the success of eCommerce subscription models is understanding the value of a membership based business model, which nurtures customer loyalty and lifetime value in a way traditional retail models seldom achieve.

Offering tailored experiences and multiple pricing tiers can significantly appease the demand for personalized services while ensuring that your offerings remain accessible and attractive to a broader spectrum of customers.

Make It Easy for Customers To Renew Their Subscription

Involuntary cancellation is one of the biggest causes of subscriber churn. This customer loss happens when a payment-related issue prevents subscribers from renewing their subscriptions, so it gets canceled. 

For example, problems like false declines and other payment authorization issues can prevent a payment from going through. According to a study by FlexPay, payment-related problems account for 48% of all customer churn. 

Insights about failed payments

Source: FlexPay

Additionally, missed payments can be an issue due to expired credit cards. If a subscriber’s credit card loses validity, the following payment won’t go through, resulting in a canceled subscription. Not only can an expired credit card hurt your customer’s credit score, but it can affect business credit as well by limiting available cash flow. 

To avoid this, you should make it as easy as possible for your customers to renew their subscriptions. For instance, updating payment details for expired cards should be effortless.

A detailed invoice reminds them of the value they are getting for their money. It’s also a good idea to send monthly invoices with an itemized list of everything they have received for their money. Without such an invoice, they only get a charge on their card and could easily see it as an unnecessary expense.  

Offer a Downgrade Option

Sometimes, customers cancel your subscription not because there’s anything wrong with your product but simply because of financial reasons. The product has become too expensive for them.

Cancellation Reasons' pie graph

Source: Business2Community

One of the eCommerce mistakes that could be causing you to lose subscribers is not offering different product tiers. Instead of letting a customer go just because they can no longer afford your product, you can get them to stay by allowing them to downgrade to a cheaper version of the product. For example, selling a grooming subscription box with seven products can offer a more affordable version with only four.

Offering a downgrade is a lot better than letting the customer go. First, you’ll still be collecting a subscription from the customer. Second, it’s easier to get them to re-subscribe to the full-package option once their financial position improves than it is to get them to re-subscribe if they had canceled their subscription.

Build a Community Around Your Product

Building a community around your product makes your customers feel like they are a part of something bigger, making them more likely to stick around. The customers feel like they are part of an exclusive club that one can only join by becoming a subscriber; therefore, canceling the subscription means they are leaving the club.

An excellent way to build a community around your product is to encourage customers to share user-generated content – unboxing videos, photos, and videos of them using the product, reviews, feedback, and so on.

Wrapping Up

The subscription model is one of the most attractive eCommerce models today because it helps boost retention. However, retention isn’t an automatic outcome for all eCommerce subscription businesses

To maximize retention, you must focus on offering your subscribers a fantastic experience. You can do this by personalizing your products, rewarding loyal customers, constantly engaging your subscribers, making it easy for subscribers to renew, offering a downgrade option, and building a community around your product.

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