How Subscription Services Can Help Brands Improve Sales, Add Customers

Walmart recently announced it was launching a new membership program that brings together in-store and online benefits to save customers money and time.

Walmart+ will use the company’s 4,700 stores, including many that offer delivery as fast as same day. The program will cost $98 a year or $12.95 a month and includes a 15-day free trial period.

The move was made to compete with Amazon, which has also launched new subscription services. One is called Luxury Stores, a new shopping experience offering both established and emerging luxury fashion and beauty brands. Iconic fashion house Oscar de la Renta unveiled its first store featuring its Pre-Fall and Fall/Winter 2020 collections, inclusive of ready-to-wear, handbags, jewelry, accessories, and a new perfume. Children’s wear is coming soon.

Other retailers have also launched subscription-type services, including Target. In late 2018 the retail giant began a curated box service for infant items, with a subscription option, for their popular private label children’s clothing line, Cat & Jack. Each box is fixed at $40 and filled with six to seven apparel items that have not yet debuted in stores.

Earlier rollouts included Boxed, and its premium service dubbed Boxed Up, with a slew of membership perks and exclusives for $49 per year, the company told Retail Dive in an email.

Subscriptions Popping Up All Over
Gap also has a robust subscription offering, including its newest introduction, the babyGap BedtimeBox, a sleepwear subscription service.

Atlas Coffee Club allows customers to subscribe to one or two bags of origin coffee every month that has been farmed using sustainable and eco-friendly practices. Customers can choose their preferred roast, select whole bean or ground coffee, and it comes delivered with a postcard from a new country.

Startups like Dollar Shave Club and Birchbox have also joined the subscription service industry in order to build a customer base and make shopping easy.

Tom Caporaso, CEO of Clarus Commerce, says brands are missing out by not offering a subscription service, especially in regard to loyalty programs. He says today’s consumer’s expectations have changed, and that’s why they hear so much more about subscription services in retail, including premium loyalty programs.

“Brands are continuing to create these programs because consumers are embracing them,” Caporaso says. “Our 2020 premium loyalty data study found that 70% of those not in a premium loyalty program would join if their favorite retailer offered one and the benefits were valuable.”

Deepening Customer Connections
Kerri Corry, Group Vice President for Product Management at cxLoyalty, says subscription services are not a new trend. They continue to see success with their partners offering subscription services that deepen customer connections with their brand while providing an additional source of revenue.

“Many companies, like retailers, have been doing this for years, and each of their programs is aimed to drive repeat purchase behavior back to their stores, but to also give the customer more value so they feel good (and emotionally connected) to the brand,” she says. “It is what loyalty is all about. Some of our partners have cited that customers that have a subscription service, spend more than 40% with their brand than those without. That’s powerful.”

Corry adds that integrating the subscription services into existing platforms is very important. A well-rounded marketing strategy is always best, she says, and it starts with providing awareness of the program through communications with existing customers, in store displays, and making it a part of the employee-to-customer “conversation,” whether it be through sales interactions or customer service calls.

“We’ve seen the biggest take-rates at the point of sale or in the e-commerce purchase flow,” she says. “Once a customer makes a buying decision, it’s important to demonstrate how the brand/company can provide immediate and ongoing value by offering them a proposition with relevant, rich offers and ongoing savings and benefits that keep them engaged with the program and the brand.”

Caporaso says an effective approach can be introducing a subscription-based premium loyalty tier into an existing program. The company’s 2020 premium loyalty data study found that 67% of consumers are likely to join a premium loyalty program if they already belong to that retailer’s free loyalty program.

“So, consider offering a free program with a subscription-based tiered,” he says. “Your free program can get new customers into your ecosystem and your premium tier will grow relationships and engagement with your best customers, increasing AOV and purchase frequency.”

Making Consumer’s Lives Easier and Better
Caporaso says loyalty is built by making your customers’ lives better every day, and subscription-based premium loyalty programs do that. Their premium loyalty data study found that of 88% of consumers who belong to a retailer’s subscription-based premium loyalty program are likely to choose that retailer over a competitor that is offering a lower price.

“And 89% of consumers would recommend a retailer to family or friends if the retailer’s premium loyalty program offers valuable benefits,” he says. “Plus, 94% of those in premium loyalty programs shop with those retailers at least once a month. That is true loyalty. And it’s what retailers need going into 2021.”

Corry says there can be some negative effects from launching a subscription service.

“If a brand/company does not fully adopt the program by supporting a comprehensive marketing plan which will demonstrate the ongoing value of the program, customers will attrite and the program will not be successful,” she says.

Caporaso often hears about subscription fatigue, but reminds brands that they have to look at the real reason people cancel.

“It’s because they are no longer getting the value that they are paying for,” he says. “If your program differentiates and offers value, consumers will join it and renew.”

Ability to Offer a Unique Value
A lesson in that came when Walmart Shipping Pass failed by trying to copy Amazon Prime. Caporaso says people wondered if there was room for Prime and Walmart+, but each program offers unique value.

“That’s why 11% of Americans subscribed to Walmart+ within two weeks of its launch,” he says. “Amazon Prime may win out in terms of product assortment and streaming content, but Walmart+ is more focused on grocery delivery, gas savings, and in-store experience, leaning into its 4500 physical locations.”

Caporaso feels that Walmart has created something unique that captures the right mix of price, market, and value. And there is room for that in the market: he points to how many people belong to both Netflix and Disney+, and that 45% of Walmart+ subscribers also have Prime subscriptions.

“Our premium loyalty data study found that 69% of subscription-based premium loyalty members plan to join additional programs,” he says. “The only negative comes when your program isn’t unique to your customers and they don’t feel like they’re getting the right value out of it. That’s why you need to keep your customers at the center of everything you do and continue optimizing your program over time.”
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