Subscriptions are the fastest growing segment in ecommerce and represent a new concept of buying where a customer can save time and money by receiving products/services delivered periodically as a subscription similar to magazines and newspapers business models with a single order. A popular example of an ecommerce subscription is the Dollar Shave Club monthly subscription that went viral with millions of customers. Their razor-blade promoting video on YouTube encouraged customers to buy razor blades on a subscription basis for $2 a month. Here is that great promotional video on YouTube:
Example of Dollar Shave Club Our Blades Are F***ing Great Ad
Subscriptions based ecommerce companies have higher expertise and efficiency since a $39 dollar product can lead to a $400+ dollar annual subscription purchase. In fact, subscription ecommerce models allow ecommerce website owners to earn higher revenues and margins, get higher retention, quick customer feedback and order predictability. It is growing at the fastest pace ever. Established and startup ecommerce companies are adopting subscriptions to boost their online revenues. You can incorporate this model in your ecommerce website when your products and services have gained a significant and loyal customer base.
Some Reasons for Why Subscription Ecommerce is Hot?
1. Convenience to Customers:
With a subscription model, customers can save their money and time and they don’t need to worry about out of stock items. Once they have subscribed it, they will surely get it on expected time. One of the best examples of subscription ecommerce is from The Honest Co. partly founded by a celebrity influencer, Jessica Alba. Once parents will subscribe for daily diapers for their kids, they don’t need to schedule regular purchasing days for it. By subscribing to diaper and wipes option, The Honest Co. is providing a consistent delivery of necessary items that are frequently delivered together to parents in a fast and convenient manner.
Jessica Alba promoting diapers and wipes
2. Customer Lifetime Value (CLTV) Calculations:
Customer Lifetime Value (CLTV) is used to analyze acquisition strategy and estimate online marketing costs. It is also defined as expected revenue that a customer will generate during his/her lifetime. One of the most successful ways to boost CLTV is to improve customer satisfaction. According to a research, 5% increase in customer retention can increase profits by 25% to 95%. Also it costs 6-7 times more to acquire a new customer than to retain an existing one.
3. Consistent Revenue Forecasting:
It is important to get an approximate estimate of the revenue that you can expect from one month to other. Subscription models help ecommerce businesses to get an idea about profit that they can expect in future. Though it is not always accurate because nobody knows when your loyal customer will unsubscribe from your services or when more customers will be added to your subscription list. Online stores should be ready for these possibilities, but as a whole, subscription models are better ways that make your forecasting easier.
To learn more about subscription ecommerce website solutions for your company/brand, please contact PROS – San Diego Internet Marketing & Technology Company now.
4. Capitalizing on Expectancy (Buyer’s Intent):
In order to retain your customers, deliver their orders on time. Keep them updated about the whole process of delivery. If there is any problem while delivering, inform your customers immediately. Explain them about the problem and how you’re going to deal with it. Follow up again and again to ensure positive results. This will help to gain trust among customers and increase customer satisfaction.
5. Simple Shipping Plans:
Subscription models help ecommerce businesses to forecast easy shipping plans if same product is being shipped every month. The size, weight, shipping costs and number of packages can also be pre-determined. This makes subscription model one of the best ecommerce business models for maintaining revenue and shipping records.
6. Higher Customer Retention:
It is important to keep minimum and relevant choices for a customer while subscribing to your services. Many choices can annoy them and they may unsubscribe from your list. With a subscription service, consumers simply get what they order. Easy choices like different prices and levels don’t bother them though difficult choices like size, sex, verification, pop-ups may irritate them.
BirchBox’s Subscription for Men’s & Women’s Beauty Boxes
Subscription services are a great opportunity when it comes to retention and boosting your ecommerce revenues. Subscriptions models help ecommerce businesses understand the customer needs and improve marketing campaigns leading to higher sales. Subscription based ecommerce business models are a win-win both for consumers and ecommerce brands.
To learn more about subscription ecommerce website solutions for your company/brand, please contact PROS or call us at 619.567.9322.
Deepak Wadhwani has over 20 years experience in software/wireless technologies. He has worked with Fortune 500 companies including Intuit, ESRI, Qualcomm, Sprint, Verizon, Vodafone, Nortel, Microsoft and Oracle in over 60 countries. Deepak has worked on Internet marketing projects in San Diego, Los Angeles, Orange Country, Denver, Nashville, Kansas City, New York, San Francisco and Huntsville. Deepak has been a founder of technology Startups for one of the first Cityguides, yellow pages online and web based enterprise solutions. He is an internet marketing and technology expert & co-founder for a San Diego Internet marketing company.