Given the shocking number of things one can purchase on a subscription, it seems safe to say that the secret to subscriptions isn’t just the product itself. People buy fertilizer on subscription; they also buy international candies, duck blinds, animal feed, fireworks — you name it, and there is probably a subscription service offering it up to consumers.
The key to selling those subscriptions, sticky.io Chief Technology Officer Brett McLaughlin told PYMNTS in a recent conversation, is making the right offer to the right consumer at the right time. And doing that is often harder than merchants anticipate.
“What we’re seeing is it’s not necessarily hard to get a user to make a commitment,” McLaughlin said. “It’s that it’s hard if you make the wrong offer at the wrong time. So if a customer is buying toothpaste, and you offer to send them a tube every week, that’s probably not going to land, right? Who needs toothpaste every week? That’s not matched up well with the product they’re buying. And if you offer them a toothpaste of the month club, they’re going to pass, too. No one’s trying to do that — toothpaste is not a bottle of wine with a million different varieties and flavors.”
The first thing merchants need when trying to motivate consumers into subscriptions is some sense of intelligence about the product they are selling and the consumer they are trying to sell it to. A consumer who is buying toothpaste along with dental floss and a water pick is clearly thinking about dental care, McLaughlin said by way of example. They might be a candidate to hit up with a toothpaste subscription during their shopping journey — and they might not. The point, he said, is the data. Merchants need to take a long hard look at what they know about the person who is shopping and what they know about what that person is shopping for.
“If you put those things together, you can use machine learning and artificial intelligence, and sometimes just clever user interfaces, to position an offer to a user that is appealing,” he said. “So they don’t feel as much like they’re being sold to as much as you’re providing them a convenience. Users who feel like they’re being sold to are hard to get to sign up for recurring billing. Users who feel like you’re offering them convenience, that you’re actually saving them time, are actually quite likely to subscribe.”
And for merchants, he said, the incentive is to find those subscription services their shoppers want to sign onto. Acquisition costs are quite high for direct-to-consumer (D2C) brands, McLaughlin said, and subscription services have turned into an exploding business because instead of acquiring a customer over and over, the brand is acquiring them once and then netting multiple purchases out of them. Moreover, he said, it can help brands inspire consumers to buy who heretofore would not have due to sticker shock of the all-at-once pricing. He gave the example of a password utility company: he used to pay a high price annually for their services but now pays monthly.
“I haven’t talked with them, but clearly they’ve seen something in their purchasing pattern, likely the sticker shock of a big cost up front that’s helped them figure out the subscription model has created a lower cost of entry,” he said. “And when you think about digital goods that often have high prices, subscriptions can be used to effectively deflate the cost for the user who is then more likely to sign on and stay signed on over time.”
This is provided, of course, that merchants are continuing to properly apply the vast consumer data streams they have access to make sure their subscription services remain relevant to their users beyond the moment of sign-on. McLaughlin offered a simple example of a consumer signing on for a dog food subscription, specifically a product aimed at puppies. That consumer isn’t going to need that subscription after about a year because that pet is no longer a puppy — the consumer will then need adult dog food. A smart subscription service will be proactive in this case and not wait for the moment that the consumer sees that they have the wrong kind of food and decides to cancel their subscription. They get ahead of that event and reach out to the customer to see if they would like to transition their subscription to adult dog food, perhaps even offering them a small discount for making the shift.
McLaughlin said it all comes back to the data and even though the examples won’t always be quite that obvious, there is information that the merchant knows that, if applied correctly, they can use to optimize their subscription to their consumers. The result? The consumer continues to find the convenience that drew them to the service in the first place.
“And this is where we’re seeing the industry going,” he said. “The more insights that merchants have and the more their platforms can provide them to see into not only their entire user base but about how to divide and think about their user base as groups of individuals, the more successful that merchant will be because they can tailor experiences that really appeal to and create positive responses.”
Subscriptions aren’t always a sure thing but done properly, they are a smart play that can provide merchants a connection to their consumer base that will consistently and predictably generate revenue over time. But the only way to do it right, he said, is with a deep dive into the data to get the matchmaking between subscription and subscriber right from the start and consistently throughout.