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Subscription Commerce Companies Embrace New Loyalty Paradigm

There seems to be a subscription for everything these days — essential items, entertainment, clothing, groceries, snack foods, pet supplies, the list goes on and on. In fact, 81 percent of the U.S. population has a subscription, according to PYMNTS 2021 Subscription Commerce Conversion Index, up 12 percent from last year. Moreover, 34 percent of all subscribers (14 million U.S. consumers) have signed up for at least one new subscription plan since the pandemic began and the number of consumers with retail subscriptions has increased by 99 percent since 2020.

While that sudden growth spurt has left many wondering if consumers are oversubscribed and if the pandemic era boom-trend is now due for a bust, CEO Brian Bogosian isn’t one of them. If anything, he noted in a recent On The Agenda Conversation with Karen Webster, Bespoke Post Co-CEO Steve Szaronos, Amora Coffee CEO Jim Fosina and Freshly CEO Michael Wystrach on the future subscriptions here in the U.S.: subscriptions are just getting started.

“I really do believe the sky’s the limit on subscriptions because it does provide value, convenience and a number of other satisfaction-related things to consumers,” Bogosian said. “The data a merchant gets from consumers who are in a subscription is far more insightful, rich and complex and tells really interesting stories. I think this data allows merchants to refine their offerings, to ensure that they continue to be appealing to the consumers they’re selling to.”

Subscriptions, the panelists agreed, despite all the public angst over them and whether consumers are oversubscribed from the pandemic, will still be going strong long after COVID-19 is an unpleasant memory. The panel also agreed that merely launching a subscription opportunity is not sufficient to build a program and there is no such thing as a simple blueprint a potential player can build off of to create a program in an increasingly crowded subscription market.

The only rule, the panel agreed, is simple to say and hard to execute.

“Make sure you’re matching the customer and the product offering at day one and being sure that you really are adding value to the consumer’s life with your product and your subscription,” Freshly’s Michael Wystrach said.

Smart Models Don’t Solve Product Problems 

The entire panel agreed that subscription models are powerful tools for reaching, building and maintaining a customer base over time. However, the panel also agreed that subscription programs were just that: a tool for building a customer relationship. While it may be a powerful tool with many uses, the subscription model can’t replace what each merchant needs — a product worthy of subscriptions.

“We’ve used subscription as a tool in our toolkit, but ultimately the product offering has to be strong and there has to be a certain level of quality and value delivered to customers. And if you don’t have that, then it all falls apart,” said Bespoke Post’s Steve Szaronos.

He posits that all the talk about the glut of subscription services is because there are so many subscription commerce companies that cover a lot of verticals and subcategories within them. If the offering is good, Szaronos said, and differentiated, it will resonate with consumers. If not and it won’t and a lot that didn’t aren’t in the market any longer.

Ultimately, the panel agreed, subscription works well when the product characteristics are such that consumption is regular and reordering is frequent.

“Do people feel like if your product disappeared and went under, [would] their life would be worse [or] do people view that you make their life better?” asked Freshly’s Wystrach, noting that these are the driving questions for any entrepreneur considering subscriptions.

He went on to say that such a feeling can exist for many reasons — because of the product itself which is unique and useful; and because it’s a surprise every month that makes the customer feel good about discovering something new they might not have ever uncovered themselves. But whatever the reason, the goal is to have the consumer believe not having that subscription means missing out on an experience they value.

Reimagining The Meaning Of Customer Loyalty

The conventional wisdom is that the way to a subscription consumer’s wallet is via a free trial. Maybe for some. Szaronos noted that the price point for Bespoke Post makes it impossible to offer a free trial, but what it offers instead is a first-time purchase discount. It also makes the subscription offer part of the process further down the funnel — after that first deal has been done. Before doing that, Szaronos said that consumers signed up without knowing what they were signing on for and Bespoke Post faced massive churn in subscriptions. Moving the offer down the funnel improved the quality of their customer, and the quality of its subscription economics even if it did impact the number of people who filled the top of the funnel.

Such a strategy, the panel agreed, underscores why there aren’t any silver-bullet solutions when it comes to optimizing that initial customer acquisition. Free trials may do much to attract new subscribers, but many will leave when they have to pay for a service. Moreover, the panel agreed that the era of paying for those free offers with a VC’s checkbooks is gone, therefore limiting the practicality of excessively generous free offers.

A good rule of thumb, the panel offered, is that the bigger a change one asks the consumer to make — the bigger the initial incentive offer should be. Consumers don’t like changing their behaviors and generally need a pretty strong financial or other incentive to do so.

Loyalty To The Customer

Amora Coffee CEO Jim Fosina said that the bigger question is how to keep consumers in a long-term relationship to avoid their churning out. That, he said, must reflect a shift in how subscription commerce merchants think about loyalty.

“We get up every single morning and we remind ourselves that our brand needs to be loyal to the consumer. The days of the 1960s, ’70s, ’80s and ’90s — that idea of the consumer being loyal to the brand is long gone until you are also loyal to the consumer,” Fosina said.

It’s why Amora’s 2021, he said, will be the year of operations. A year wholly dedicated to building out its entire corporate ecosystem — from tech stack to warehousing, to shipping, to fulfillment and to customer service to make sure there are no glitches.

Value And Convenience

As the conversation came to an end, Bogosian said subscription customers, no matter the type of subscription, ask themselves two main questions: “am I getting a good value” and “is this making my life more convenient?” For the players who are winning in this segment, that comes down to value and convenience. And that comes down to data.

Consumer packaged goods (CPGs), he said, are each looking for ways to have a direct relationship with that consumer. The more data they have about that consumer, the more insight they have into what will ultimately deliver an offer that will resonate — and convert to a sale.

“We’re going to see [the subscription commerce] landscape continue to evolve and provide consumers with so many more options than what they have previously experienced,” Bogosian explained.

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