Dose #83: (Future) State of Subscriptions.

Matt here with your weekly Subscription Prescription 💊

This week’s dose is about the state of subscriptions - current and future. We will dive into what’s working and what’s changing for subscription brands. The goal? Giving you the insights you need to position your brand for growth now and in the future.

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Companies like Natural Intelligence, 365Scores, and Mayple use Entail to increase organic traffic by an average of more than 40% MoM, convert organic traffic into sales, and generate positive ROI.

Find more subscribers with content that speaks directly to what they need the most with Entail AI. I’m excited to have them as a sponsor on this particular dose, where we talk so much about better ways to engage subscribers, so take a moment and check out their platform!

Want to hear more about the (Future) State of Subscriptions? Check out this week’s podcast dose on your favorite platforms:

This dose took months of writing and research. Unlike my typical weekly updates, I wanted to tackle how I see the space with its opportunities and challenges. To make this dose as practical and insightful as possible, I asked for contributions from nearly everyone I know in the subscription industry.

This is a much longer read than usual, but it’s mandatory reading for any brand operator. There are nuggets of information here that you can’t afford to miss. The reach of ecommerce is only growing. Technology continues to innovate, and customer expectations change.

There is a lot to balance.

You can’t afford to miss out on these opportunities.

But don’t misunderstand me; the goal of any excellent subscription program is to deliver amazing value for their best customers. Technology is just a tool to make that happen.

So, read this article with a grain of salt. You can’t do everything I’m going to dive into, but there will be things you can steal from to improve how you sell to subscribers. The goal should be to configure the best subscription offering possible for your customers.

The Good in Subscriptions

A subscription transaction is one of the most beautiful in ecommerce. You trade a small (hopefully small) discount for a promise from a customer to keep buying on repeat into the future.

As a brand, you get predictable revenue that boosts your brand. Customers get a discount and a product that they love (or need) in a predictable manner. Customers on subscriptions have historically had higher lifetime value, meaning you could not only afford to pay more to acquire those customers, but in general, they are much more profitable, too.

How it started.

In the past, this transaction was pretty static. You’d get locked into a preset option. Early improvements to the experience only affected how you could pay (gift, up-front, different schedules). Most flexibility came for digital goods, while the customer experience for physical subscriptions lagged.

That is changing very quickly.

Thanks to innovation from incredible subscription tech platforms, the subscriber experience is evolving. Customers are becoming increasingly comfortable with home delivery across a wide range of products, providing an opportunity for subscriptions and repeat purchases to drive greater profitability.

With technology advancing so quickly, it is more important than ever to focus on value, what you’re giving customers, and how you can utilize that tech to make that experience a lasting one.

Better ways to sell subscriptions.

The most important part of the subscription transaction still happens on the product page. This is where marketers are driving traffic and working hard on conversions. Testing offers, positioning the subscription favorably, and making frequency selection simple are common.

The bottom line is creating an experience that puts the subscription customer under the spotlight. They’re your best customer and should be treated accordingly. When done well, those customers are more profitable and valuable over time.

Other ways brands are innovating the subscription purchase experience and seeing success include:

1. Upsells. Either on a flyout after someone clicks add-to-cart, or on the confirmation page, subscriptions are finding simple and effective ways to increase AOV with upsells. This can be done with one-time options, add-ons, or recurring orders.

2. Custom frequencies. Instead of relying on 1-month, 2-month, or 3-month, brands are tailoring subscription frequencies to the needs of their customers. This can be an annual subscription for new sheets, or ordering dog food on a 3-month cadence to save on shipping.

3. Opt-in to Subscriptions. One of the first things Andriy Rudnyk and the Good Subscription Agency test with their customers is automatically opting customers in to the subscription. This can change conversions from 10% normally to 40-50% when customers are opted-in right away. Some brands don’t keep it when customer complaints of “I didn’t know I had a subscription” get too high, so keep that in mind.

4. Quizzes. This is a growing trend across ecommerce, but subscriptions are seeing success with them as well. The reason? Many brands are offering a solution to a painful problem (think weight loss, sleep aids, skincare) and customers are willing to engage with a brand in the hopes of finding the right solution for them. Quizzes can build trust, assist with product selection, and allow brands to collect first-party data.

5. Gamification. While some customers may want minimal brand interaction, most subscription customers are open to more engagement. After quizzes, gamifying subscriptions through rewards, purchase milestones, and education about how the subscription works can increase CLV and reduce churn.

6. Bundles. Similar to upsells, bundles can increase AOV for subscription orders. They work because you can deliver more value for the customer. Some brands offer bigger discounts on a bundle, but what makes this strategy effective is selling a more complete solution. Consider someone searching for protein powder - selling a bundle of pre-workout, amino acids, and glutamine can greatly benefit subscribers.

7. Build-a-Box. The most exciting change in recent history for subscriptions is the build-a-box experience! Popularized by food delivery companies like Hello Fresh, build-a-box allows subscribers to customize their box. Dr. Squatch is another leader here, letting subscribers build a box with the soaps and scents they want (while offering upsells as part of the building experience).

8. Memberships. If you haven’t seen what brands like Wandering Bear, Lashify, XEndurance, and Carnivore Snax do with memberships, you’re leaving money on the table. Customers buy an annual membership with options like cash back, store credit, free shipping, exclusive products or content, and more! With memberships, you can increase the perceived value or create another tier of subscribers beyond the typical subscribe and save.

9. Starter Kits. These are making a big impact and are a different approach than your typical discount and save subscription offer. The goal is to pack a first box with so much value that it’s a no-brainer to subscribe. You can see a great example of that here. You include things like guides, gifts, and other enhancements for the goal behind the subscription. Think ‘weight loss guide’ to go along with diet pills or ‘Make Smoky Eyes guide’ with mascara.

Improved Subscriber Experience

As ecommerce brands continue to innovate the purchase experience, creating better engagement and higher average order values, they are also improving how customers can manage their subscriptions.

With passwordless logins, subscriber portals, and interactive emails, it has never been easier for customers to stay on top of orders. Brands that minimize order management friction are rewarded with higher retention and average order values.

Less Log-in Work for Returning Customers

One of the top reasons people don’t subscribe is the fear of forgetting about it. Or even worse, the fear that they won’t be able to cancel the subscription without a hassle.

In the past, customers would have to wrangle with account logins to find their subscription orders. Managing passwords, questions around if they even have a subscription, and more created headaches for customer service teams.

Platforms like Shopify and WooCommerce have changed this approach, enabling passwordless logins for subscription customers. This means less time in support helping people access orders and powering end users to make changes themselves.

Subscriber Portals: More Seamless and More Flexible

In the past, customers rarely touched the portal, and most of those interactions resulted in cancelations. The customer portal is now becoming as important as the shopping cart - a place with upsells, expected delivery dates, and integrations with other software like loyalty programs.

Old subscription portals did not have a lot to offer. You could change the billing date typically, and that’s it. Now, customers expect to be able to switch products, frequency, skip/pause, and have total control in one location.

Each subscription platform does the portal differently, but all are leaning more toward improving the customer experience. ReCharge has multiple themes and portal views for their customers, but the new Affinity portal provides more control over what the portal looks like - and what is available - for the end user.

One subscription platform putting a lot of work into improving the customer portal is Stay AI. They’ve turned the portal into a quasi-product page, with a product carousel for upsells, banner ads with promotions, discounts, and special offers, and an ‘Add Extras to next order’ option.

The goal here is to service those customers who need to make changes. Static subscriptions are no longer the norm, and a great portal experience can improve retention dramatically. Whenever someone logs in to make a change, that can be done quickly and efficiently while providing the brand an opportunity for upsells and offers, too.

Branded Apps for Improved Control

While the portal is the control center for most customers, there is a rising shift in how brands are engaging with subscribers. Branded apps are rising in popularity, and with good reason. They allow you to create a more personalized experience for customers.

You don’t need to worry so much about emails landing in the “Promotions” tab. Push notifications are right on their phone and hard to ignore.

Shop2App is creating specialized experiences for brands with a subscription or loyalty component. Customizing the home screen - or even limiting the app itself to just members - means that customers see a uniquely personalized screen when they open the app.

This makes it easier for customers to redeem points, control their subscriptions (no need even for passwordless login - it’s a single click!), and try out new products.

Engaging Customers on Email + SMS

Building on seamless subscription order management, email and SMS messages are making it easier for customers to control what happens next. Instead of email or SMS messages with links to access the portal, customers can now enact subscription changes right in the message itself.

Tech platforms like ARPU and Zaymo are enabling customers to make one-click changes to their orders without having to access your website.

Need to delay a shipment? Do it from the email. Want that new upsell item? Buy it from the email. Interactive emails make it even easier for brands to engage with customers via email. Keep that process simple to reduce friction and frustration for customers!

Klaviyo’s quick actions support certain behaviors like this as well. You can enable one-click actions in Klaviyo with your favorite subscription platform.

OneText is innovating in a similar way, but within SMS. Once a customer has a card on file with OneText, all you need is to have them reply ‘Yes’ to make a purchase. Simplify reorders, upsells, and repurchases without the shopping cart.

It will be interesting to watch as platforms develop more features, but also integrate into other systems as well, to create a more complete subscription experience across product pages, email/SMS, portals, loyalty programs, and more!

Fighting Churn

Great retention starts at the point of acquisition.

What customers choose to buy - and why - influences how they stick around. That being said, there are some amazing tools and practices that make retention easier than it’s ever been.

Understanding more about what subscribers want - and don’t want - while giving them more control over the life of the subscription is the key to fighting churn.

Customer Control Over Subscriptions

Static subscriptions are long gone. Much of this article mentions the different ways brands find to enable customers to make changes. The reason is that allowing changes reduces churn.

During my days leading marketing at QPilot, we found ridiculous numbers when customers could make changes. Just making 3 changes to frequency/scheduling resulted in 200% higher LTV. If you let customers change products a few times, brands see 600% higher LTV than those customers that don’t!

The bottom line is that the more customers have control, the less likely you’ll see churn because something didn’t fit their schedule. This isn’t the only strategy to employ for retention, but it is a big part of the experience.

Post-purchase surveys

While typically viewed as an attribution tool, the use of post-purchase surveys to better understand customers is on the rise. Tools like Bestie and KnoCommerce even allow you to segment by subscribed or not, and how many purchases customers have made, so you can ask questions like:

“What’s keeping you from trying a subscription?”

“What is the biggest reason you chose to subscribe today?”

Knowing more about why customers subscribe, what they expect, and what’s keeping them from trying a subscription in the first place is powerful information. When you implement a post-purchase survey tool, you’re collecting information on customer expectations, allowing you to craft better offers and align with customer interests.

Doing those two things well results in stronger retention.

Cancelation surveys

While there are many things great brands do to prevent cancelations, it does happen. Many subscription platforms have built-in functionality to collect the reasons and make offers based on the chosen reason.

For example, if a customer selects “Price” as the reason for canceling, you can offer them an extra 20% to stick around.

Platforms like Upzelo and Prosperstack, however, are taking these offers one step further. By segmenting subscribers, you can make the right offer to the right customer at the right time. You don’t give 20% to anyone who cancels for the price, but anyone after the 3rd month because it works better (as an example).

Passive churn

As subscriber bases grow, passive churn becomes a big issue. Passive churn occurs when customers are canceled without trying, thanks to credit card declines or expirations. This is a big problem because most subscribers don’t realize it is happening.

Declines happen at a higher rate for many subscription brands because payment processors often view subscriptions as ‘higher risk’ or see repeat purchases as suspect.

Some great tech partners are combating this type of churn effectively. Churnbuster pays attention to upcoming expiration dates on cards and reaches out to customers to make updates. They can combine this with different offers to ensure customers take action.

Butter Payments is leveraging the power of AI and machine learning to make better dunning attempts. Instead of retrying a card over and over again, Butter optimizes how cards should be tried for higher success rates.

The Future of Subscriptions

There is a bright future indeed. While much of the technology and processes mentioned above make subscriptions easier to offer and manage, in the future, subscriptions will be more than just repeat purchases.

Making shopping easier, more automated, and virtual wherever possible puts more control in the customer’s hands, but opens up more opportunities for subscription brands.

The Rise of AI

In a year when AI seems to have taken over everything, how it will improve subscriptions is important to understand. Even Shopify is rolling out AI features, with Sidekick coming soon to all plans.

The most straightforward way that AI (or rather machine learning in this instance) will improve subscriptions is through product recommendations. Customers can have product recommendations made from quiz inputs, purchase history, and enriched data.

The next is to reduce churn. AI can dive into data to better understand what is happening within your program and what should be done to make customers happy and keep them around longer.

Text, SMS, FB, and on-site chatbots can help shoppers with product information and FAQs. Customers will be engaged even earlier in their purchase decision. This same type of engagement can be used for customers wanting to manage or change their existing subscriptions.

Predictive analytics will let brands communicate more clearly with customers about when they need to reorder, so the age-old cancelation reason “I have too much product” will be diminished.

AI assistants will make it easier than ever for consumers to control subscriptions. Through Siri or Apple voice commands to an AI assistant knowing that you’ll be out of town, AI will help you ensure an order shows up where and when it needs to be. Imagine a world where you saying, “Hey Siri, I’m running low on protein powder,” results in a replenishment order automatically.

Or even better, an AI assistant who knows you’ll be in Tampa for the next two weeks and knows to reroute orders or pause them until you’re back. How will you craft a better subscription experience with AI?

Data analytics is already leveraging AI too - Peel Insights just released their Magic Dash tool. You can ask it questions like “Which products have the highest retention?” and get a response in seconds.

Internet of Things and Auto-Replenishment (Autoship)

We live in a world with auto-replenishment. It’s been around for a long time. Historically, it’s been a B2B automation, but D2C Brands are now testing it. For example, Amazon offers a service where you simply place your bag of coffee on a scale, and it determines when you need to reorder one.

I have supplies for our hot tub on autoship, based on the schedule for how often I use and replace them. As consumers, we’ve subscribed to have our printer replenish low ink cartridges and even monitor our home goods with smart refrigerators.

As the Internet of Things (IoT) continues to proliferate through connected homes, services like Bottomless are bringing the idea of replenishing low stock to the kitchen as a way for customers to subscribe to usage-based replenishment.

Without the issue of ending up with too much product, brands using this method are seeing retention as high as 70% after one year!

This kind of innovation within the IoT is quickly advancing. Brands like Pura are integrating sensors into their scent diffusers and communicating to an app so their customers can automatically refill as things get low, or customers can track how much is left themselves.

Knowing the precise moment to reorder is something special that will drastically change how consumers interact with brands.

New Ways to Reward Elite Subscribers

The goal of any great subscription program is to unlock profitability from a dedicated segment of repeat buyers. Finding ways to turn subscribers into superfans is part of the future I see for subscriptions.

There are new ways to do this, from innovative membership offers to ways for customers to earn equity in your brand.

Imagine that! The ultimate reward for super fans and your best customers is to be actual owners of your brand. It's better than loyalty points, but giving actual ownership will drive the best kind of engagement and follow-on purchases.

The goal behind any program you’re building is to find ways to create incentives. Incentivize the subscription, incentivize brand loyalty, and above all, create superfans that not only spend more than anyone else–they brag about it too.

Conclusion (What’s Next in 2024)

Making it easy for customers to reorder and keep them from shopping somewhere else is at the heart of subscriptions. As technology continues to improve customer experience and marketers find more and more creative ways to sell to consumers, subscriptions will continue to grow and penetrate the retail market.

2024 will see further improvements in personalization. More brands are implementing ‘build a box’ and offering unique upsell tools. Greater control over subscription management. As brands spend more time listening to what customers want, they will change their offerings and not only retain customers longer but boost AOV as well.

The future is bright, and as the current state of subscriptions attests, it has never been easier to start, manage, and scale a subscription program. But it has also never been easier to cancel them. With the rise of apps like Trim and RocketMoney, customers can also cancel multiple subscriptions with the touch of a button.

That’s a clear warning that you need to stand out. Customer experience and delivering value every time have never been more critical. Even with so many innovations, keep focusing on what customers want from a subscription, and look for better ways to deliver that to them.

That’s it for this week’s dose - stay tuned for Dose #84 next Tuesday!

- Matt Holman 🩺

The Subscription Doc