Most Consumers Use This Retail Channel. Most Retailers Ignore It.

New privacy regulations and changes made by Google
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, Apple
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and others are making it harder than ever for retailers to access the information they need to advertise with the right product to the right person at the right time.

Paul Chambers, CEO of the Subscription Trade Association (SUBTA), says companies offering subscriptions can access the information retailers need “better than any other business,” including personal data, shopping behavior, shopping habits and personal preferences.

And yet, most retailers aren’t in the subscription business even though almost every retailer has at least some products that are suitable to it.

Sometimes it requires thinking about products differently. Panera Bread
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has over 50 million consumers in its loyalty program. It uses that program to market a subscription to coffee and other drinks; when you’re a program member, you get unlimited coffee/drinks for a monthly flat fee. That isn’t how coffee is typically marketed but Panera now sells more and has more loyal customers by thinking about selling differently.

Subscription is thought of as a way to sell news, information or streaming entertainment. But it can be used for selling a far wider variety of products than in the past.

Why Subscription

Subscription is convenient for consumers. It provides things they need to effortlessly replenish or it brings a surprise package every month or quarter with new discoveries for consumers.

SUBTA is presenting a report next month to attendees of its SubSummit annual trade show in Dallas. Among other things, the report shows that subscription can lower marketing costs, one of the biggest challenges to retailers and brands right now. SUBTA says:

• Retailers selling products that are regularly replenished can offer lower prices in return for a subscription commitment which reduces marketing costs. Subscribe and save programs have the highest customer retention rates of any kind of subscription.
• A loyalty program that rewards subscribers and asks for personal information in exchange for free shipping is comfortable for over 90% of consumers and gives retailers the most valuable information they need to keep customers.
• Restructuring pricing in a way that facilitates subscription can boost sales and make a product more accessible for consumers. A Dutch company called Homie sells its washers and dryers by charging per use instead of for the machine so consumers who can’t come up with the full price can still own a washer or dryer.

But do consumers want subscriptions? The data in the SUBTA report says they do: Over 95% of consumers have at least one subscription and slightly more than half are likely to give a subscription as a gift in 2023.

How Subscription Is Changing And Still Unique

Chris George, Chairman and Co-Founder of SUBTA, says that now, “for every subscription a customer adds, they cancel another.” It’s one of the ways, the SUBTA report explains, that consumers see every brand as replaceable.

But subscriptions have the advantage of giving marketers first-party data (that’s where consumers willingly share information about themselves or where their behavior can be tracked). That allows subscription businesses to have a better chance to offer personalized products, customer attention, rewards and benefits that are the proven ways to keep customers loyal.

Why Consumers Join And Quit Subscriptions

According to SUBTA and a study it conducted, the top five reasons consumers renew a subscription are:

1. Great customer service
2. The brand is more valuable than they previously understood
3. Added perks for subscribing
4. Timely shipping
5. Unique product/service

That’s different from what most brands and retailers will say is the most important. Brands will tell you “great product is always #1,” but as it turns out, it’s #5.

That doesn’t mean the product can be second-rate, it means other aspects of the service also need to be great.

Why do consumers cancel subscriptions? The top five reasons are:

1. Price
2. Poor customer service
3. Product defect
4. Boredom
5. Shipping delays

What drives great customer service and satisfaction in subscription? Two key elements keep coming up in the research:

Quitting is easy. If consumers find it’s easy to leave, they are far more likely to come back later. I found it so hard to leave my subscription to Sirius XM Radio when I moved that even though I want it back again for the summer, I’m not signing up because I know how hard it will be when it’s time to quit again.

Chambers of SUBTA sums it up when he said it’s essential that “flexibility and functionality with the subscriber relationship” is the core to the recurring revenue of subscription.

Bundling. 70% of U.S. consumers say they are much more interested in brands that offer the “perfect bundle.” Add-ons, samples and free gifts increase lifetime value or average order value by averages of more than 20%.

The Future Of Subscription

It’s simple: Subscription will keep growing because consumers want it.

Over time it’s inevitable that retailers and brands will rethink how they sell and fit more things into a subscription model, like Panera Bread has. They will figure out that selling products automatically, month after month, is better than having to find new customers all the time.