Can subscribers truly be loyal?

They buy from you each month, but do they really love you or do they just like an easy deal?

One of the fascinating trends over the last several years has been the rise of subscription services. Long a mainstay of the media business (newspapers, magazines, etc.), the previous subscription boom was dominated by mail-order services like the “DVD-of-the-Month Club.” But today’s subscription services are starkly different and much less mundane. They’re disrupting traditional industries like cable television, grocery and fashion retail. Driven almost exclusively by e-commerce businesses, the modern subscription boom kicked off with the advent of online streaming services like Spotify and Netflix and has come into prominence in areas as disparate as grocery shopping, personal styling, wines, whiskeys and women’s underwear. Seriously. According to Forbes, the subscription e-commerce market has grown by more than 100 percent a year over the past five years; it seems today if you have an interest or need, there is a subscription service available for it.

While there have never been more options available for consumers to sign up, set up autopay and receive a product or service on a recurring basis, the reality is that consumers basically have two types of subscriptions available to them: “necessities” and “indulgences.” Think of necessities as things consumers perceive to need to live a “modern” life like cable, pet food, a smartphone and cell service, or their Netflix subscription. Think of indulgences as just that, from the kind of fun, superfluous goodies that brighten your day (think Birchbox) to true luxuries like fine wines or premium food items.

And while every subscription service has its unique nuances—in both the case of necessities and the case of indulgences—it is an interesting question whether or not consumers can truly be loyal. They’re certainly doing frequent business and, in some cases, even making incremental purchases, but there is much less clarity around how much of this behavior is habitual and how much is driven by a meaningful connection with the brand.

What is clear is that brands in both categories face unique challenges to inspiring and activating customer loyalty. Read on for my thoughts on each subscription category and how brands in each can further incite and ignite customer loyalty:

Necessities:

What they are: Subscriptions in this category include things like “subscribe and save” items from Amazon, recurring pet food orders from a brand like Chewy.com, monthly car insurance payments, even satellite radio and cable subscriptions.

How they keep their customers: There’s a reason we’ve coined this the “necessities” category: For the most part, these products are fact-of-modern-life requirements. Customers enjoy the simplicity of not having to think about renewing their order and then having it just show up on the front step when they need it. Many of these brands have a price advantage by not having a physical footprint and offer free shipping and returns. An article in AdWeek also notes that subscriptions often offer the products at a flat rate, allowing customers to stay within their budget by predicting their spending. And in general, a key element of these types of subscriptions is that they require customers who opt in to keep these services on autopay. Some of these brands, particularly media/telecom providers have practical monopolies on their category.

Where they fail: Because these brands are often selling staple items, and the competition often also offers auto-ship or auto-renew options, one of the biggest drivers of switching providers is price. Switching takes effort, of course, but the savings can be worth it. For brands that control the market, like cable and satellite radio providers, consumers can “cut the cord” and go without. This process can be arduous, however. Even when a customer chooses to keep their service, promotional pricing often leads to the annual Kabuki dance of renegotiating your rates: the promotional period ends and the ritual theater of renegotiating your rates for the coming year begins. It’s frustrating, a waste of valuable time and it leaves that distinctive gross feeling of knowing that even when you get a good deal as a new customer or one who has negotiated well, other loyal customers are getting fleeced.

How they can inspire greater subscriber loyalty: Ultimately, subscription brands selling “necessity” items are generally successful in providing their customers with convenience and value. These are the table-stakes traits of their subscription category type. In short, they are reliable, one of the key drivers of loyalty uncovered by our loyalty research report, Humanizing Loyalty. However, there are other drivers these subscriptions can capitalize on to drive deeper loyalty with their customers:

  • Investment – Amazon does an incredible job building significant value for members of its Prime program. While members may join for access to free shipping, they receive a variety of other valuable services including Prime Video and streaming music. Brands should learn from how Amazon creates additional value for its subscribers.
  • Trust – Customers expect a brand to deliver their subscription on time. They trust the brand to be there when they need it. Brands should take great pains to ensure that auto-ship items are sent on time and arrive quickly.
  • Appreciation – One area in which many subscriptions fail is in rewarding their customers for their longevity, especially after the trial period has ended. They spend money with your brand each month and their longevity and consistency should be acknowledged and appreciated, not penalized.
  • Empathy – Your customers are busy; it’s why they subscribe. Don’t waste their time with frequent changes to the program, unnecessary communications or wild price fluctuation. Make it easy for them to update or enhance their order. Understand, respect and acknowledge that they are choosing you to make their lives easier, and add features and services to continue to do so.

Indulgences:

What they are: Subscriptions that fall into this category are highly discretionary purchases. In fact, Forbes highlights that food and beauty products represent the two largest subscription spending categories. Examples of popular “indulgence” subscription services include brands like Blue Apron, an online meal prep brand; Birchbox, which delivers premium cosmetics and other beauty products; StitchFix, a personal styling service; and Bespoke Post, which delivers premium goods for “the modern man.” Generally, these boxes are stocked with premium products, new, high-end brands and unique items selected for discerning consumers.

How they keep their customers: Subscription services in this category keep their customers engaged by continually offering new and interesting products. This ability to help their customers continually discover products or foods they like is how they provide value. They also provide value by removing friction and pain-points in their subscribers’ lives. Personal styling services help shoppers who don’t like shopping or don’t know what to buy. Meal planning and recipe services pick out great and interesting recipes, handle the grocery shopping, and even provide some the ingredients already prepped to cook. However, these benefits generally come at a premium price.

Where they fail: Indulgence subscription services generally lose their customers when they fail to continue to deliver on the promises of value mentioned above. When the products become repetitive or the recipes become stale, consumers are often no longer willing to pay a premium for the service. Going hand in hand with this issue, these subscriptions are generally priced at a premium and the perceived cost can drive subscribers away. Finally, many of these services promise a highly personalized experience, something quite difficult to deliver at scale. When the experience no longer feels personal or starts to feel repetitive, consumers tend to opt out.

How they can inspire greater subscriber loyalty: For indulgence subscriptions, customer attrition is a real risk. Blue Apron, still a thriving service that offers an excellent product, is an example of how customer churn can be a real risk to these businesses. In order to reduce churn, these premium subscriptions should focus on the following drivers of emotional loyalty.

  • Reliability – These brands need to focus on consistency. One slip can be all it takes to lose a subscriber. They need to continually deliver a fresh and interesting product of exceptional quality. These services must deliver the quality and reliability that customers expect. In turn, these customers will be reliable subscribers, and likely will advocate for the brand within their social network.
  • Appreciation – Just like for “necessity” subscriptions, indulgence subscriptions need to reward customers for longevity. They spend their money with your brand each month and their longevity and consistency should be acknowledged and appreciated. Don’t put a formal rewards program in play; instead consider the delivery of unexpected and unadvertised rewards, as this will fit well with what drives these customers.
  • Shared Values – Premium subscriptions are generally niche brands offering niche products to a specific set of customers. These segments of customers often share similar interests and similar economic status. It is fair to assume that they also share many values. Brands should aim to capitalize on these shared values and make an impact in areas that matter most to their customers.
  • Investment – While premium subscription brands may be reluctant to offer discounts on their products, they should work with partner brands to offer discounts or sampling opportunities on other products or services their customers may like. While they need to be careful not to spam their customers, making an investment in them and providing additional outside benefits can further extend their relationship with other facets of their customers’ lives, while deepening the relationship in the process.

Time will tell whether subscription services have the staying power to continue the disruption currently underway, but what is clear is that for these brands to continue their success and retain their customers, they will have to capitalize on the drivers of emotional loyalty identified in our research. By doing so, they will develop deeper and longer-lasting customer relationships, and will have a better chance of retaining their customers in the long run.