How Brands Can Overcome The Data Deficit And Unlock Subscription Potential

The pandemic period has acted as a powerful tailwind for consumer interest in subscriptions. Consumers are signing onto new subscription services by the day, and firms are working overtime to figure out how they can leverage the rising tide of consumer interest to expand their offerings.

And as sticky.io Chief Product Officer Lyn Tran noted, that interest has pushed merchants to not only embrace the subscription model, but to also start experimenting and innovating upon it. They are finding ways to enhance the subscription bundle to persuade the consumer to upgrade their purchase by adding a la carte options and new products and services, which also helps keep those consumers engaged, she said.

Because as Tran noted, subscriptions done right offer merchants a unique opportunity to establish a lifetime relationship with a consumer — and that opens up a trove of valuable data.

“By delivering a curated experience and keeping it relevant and fresh, brands have the opportunity to continuously extend that customer lifetime value, therefore extending that relationship,” Tran said. “When you’re selling a one-off product or one product at a time, or selling through a reseller, there isn’t a lot of insight. Using a direct-to-consumer subscription model, brands have data insights to experiment and analyze what offering retains that customer the best and for the longest time period.”

But doing it right isn’t as easy as rolling out a subscription, setting it and forgetting it. It’s just as easy for a consumer to churn out as it is to sign on in many cases, Tran pointed out – and the data demonstrates that consumers will churn out if the offering is no longer relevant to them. Doing subscription services correctly isn’t merely about getting the customer hooked in – it’s about leveraging the continuous data stream from a subscription service to make the necessary adjustments. The goal, said Tran, is to bring more and better products to market that resonate with the subscriber base.

And that can present a series of challenges that newly D2C-minded brands need to overcome. First, said Tran, they are at a data deficit that must be overcome in terms of knowing precisely what goods or services to offer via subscription. Second, they have to be aware of channel cannibalization concerns and ensure that what they offer in their D2C subscription channel is different and distinct from what consumers can get elsewhere, lest they simply start competing with themselves across channels.

“Differentiation might be in the form of a specially curated product or bundles, or differentiated by price and business model or a combination. And a curated offering isn’t just for combating channel conflicts. Curation and personalization of product offerings is also a really strong way to drive higher retention and higher conversion,” Tran explained.

The third major obstacle brands must overcome is logistics, and making sure their eCommerce platform’s backend is ready to deliver on the offer appearing to consumers on the front end. For many brands, noted Tran, these channels are optimized to deliver bulk to certain hub spots — not to the door of the individual consumer. It’s a complicated effort for the entire team to figure out the shortest, safest road for moving their new logistical system. That leads to the fourth challenge, said Tran: finding a Software-as-a-Service (SaaS) provider that can help them do it quickly, as opposed to having to spend weeks and months building out full subscription solutions that may or may not be the optimized choice for a merchant’s situation.

“There are lots of questions that brands need to set hypotheses to test, get the beta and then roll out. Once brands gain traction with their subscriber base, they’ll begin to add focus on revenue optimization,” said Tran. Next, they need to identify the tools and levers to help increase conversion rates. “These are the tools that the brands would be looking to leverage … to increase payments approval rates to reduce fraud and chargebacks, [and the] right tools to increase retention rates and reduce churn.”

Subscriptions are here to stay even beyond the pandemic, because they deliver so much value for both sides of the transaction. The consumer gets a streamlined commerce journey that puts what they want in their hands, while minimizing the work they have to do to get it. The merchants, meanwhile, get an entry point to a consumer relationship that, if managed properly, can last a lifetime — and can provide the ongoing data stream to make it possible to build that relationship with an ever-growing number of subscribers.

“Subscriptions are more than just building a recurring billing system,” Tran said. “We believe that subscriptions amplify the brand’s opportunity to foster long-lasting relationships with customers. It shifts the business’ paradigm from thinking transactionally to being relational. Today, we are transitioning from measuring the number of units sold for each product to measuring the number of customers we’ve acquired and the number of customers we retain. And that looks like the future of retail.”