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3 REASONS CONSUMERS LOVE SUBSCRIPTION SERVICES

Consumers love subscription services. This is clear from the increasing number of subscription businesses popping up in the market. Subscriptions services are being popularized with consumer needs for products on a recurring basis.

This subscription economy has grown on us over the past 10-15 years. Software-as-a-service grew to become the dominant software business model in B2B (and even among retail consumers). Emerging trends include subscription box offers, auto repair offers from dealerships, the rise of meal kits, and of course video streaming services. These services were all developed to provide personalized experiences and establish long-term relationships with purchasers.

Serious Subscriptions Growth

In a report from the Subscription Trade Association (SUBTA) from 2019, the ecommerce subscription market has grown steadily at a rate of 17.3% annually over the past five years. By 2023, club and subscription services will be offered by 75% of firms selling directly to consumers online. What's more, UnivDatos Market Insights expects the global ecommerce subscription market to reach $478.2 billion USD by 2025.

In the United States, over two-thirds of users (69%) have more than one subscription service running. In fact, 28% have at least four. This is far from being a uniquely American phenomenon. Canadians are the most likely to have several memberships. Germany, the UK, and Austria are next with the most subscriptions per user.

Beyond Netflix

Subscriptions are no longer limited to video entertainment, a favorite magazine, or a gym membership. Many brands are taking notice of the amount of market adoption attained thus far. Target, Birchbox, Naty AB, JRCigars, Lush, Domaine Chandon, Ruby Love, and Newton Vineyards are just a few of the companies making their mark with a wide array of subscription services. Club memberships have often been relegated to word-of-mouth marketing. Customer engagement is key to building the membership. To drive membership growth, there are three primary reasons that customers love subscription services.

1. Convenience

One of the most popular benefits of a subscription is that it provides convenience. When you subscribe to something, you're making a small commitment that will come through for you in the long run. That means not forgetting to buy shampoo every time your current bottle runs out. Subscriptions serve the purpose of providing consumers with the ease of having their replenishment needs met regularly.

Aside from toiletries, CPG supplies such as canned soups, pasta, rice, sauces, pet accessories (such as dog and cat food and kitty litter), and cleaning products are all perfectly suited for subscription services. From a convenience standpoint, ‘Dollar Shave Club’ like offers perform well in this situation.

Convenience subscriptions are all about having what you need on hand without the hassle of running to the store each time.

2. Value

When it comes to internet customers, only 22 percent of their shopping decisions are influenced by the brand of a product. Much of their focus these days lies squarely on the value proposition. If a club or service provides customers with a high sense of value, this attracts a large portion of value-sensitive consumers. Branding is still a significant factor, but it is only one of several factors to be considered. This is particularly true in light of the increasing level of competition in retail sales across all channels (physical, online, and marketplaces). As a result, brands have taken notice of the amount of value they can offer customers. They do so by providing exclusive content, member-only pricing, special discounts, and other perks.

Brands that allow customers to subscribe to their service are more likely to have happy shoppers, who in turn become loyal long-term customers.

Furthermore, when customers know that they're only going to be charged regularly for what they want or need, it can be easier for them to budget and plan accordingly. It becomes routine and part of the norm.

Believe it or not, offering subscriptions can help your customers save money in the long run. For example, you offer a monthly subscription service of juice boxes for office breaks for $20/month. Instead of buying single-use packages at $2.50 each, per day, the customer saves $180 in just six months!

3. Curation

Curation is important component in the subscription model's success or failure. Birchbox was successful because their customers placed their trust in their curating tastes, which were designed to create a specific look and feel for the consumer's fashion requirements. Curation (and a sense of exclusivity) for wine subscription services has also proven to be extremely successful. According to a WineDirect survey conducted in 2019, clubs that provide increasingly expensive bottles of wine have the highest average number of wine club members. For example, clubs that offered wine bottles worth more than $100 USD regularly, had an average of 2,646 members. Those whose wines were sold for less than $20 USD a bottle, on the other hand, had an average club membership of 1,407.

This leads to the surprising discovery that doing a good job at curating can actually raise your customer share of wallet—while also increasing your club membership base. Don't make the mistake of believing that clubs will just reduce your profit margins. It's possible that your subscription members are your most loyal consumer base, and that they are prepared to spend more money on your products than other customers.

Where to Start

The ecommerce subscription market is growing fast, with no slowdown in sight. In short, consumers love subscription services. They provide value to consumers, brands, and merchants. For consumers, subscriptions provide convenience, value, and curated goods that appeal to their tastes. For brands, organizations, and merchants, setting up subscription services evens out cash flow, provides greater predictability of business, grows brand loyalty and sales volume, and the consumer's share of wallet. Subscriptions are here, and growing fast. If you are not already in it, find out how to add this dimension to your organization's sales approach.

One quick and easy way to tap into the subscription services market is to add a cartridge to your existing ecommerce system. If you are already using a robust system such as Salesforce Commerce Cloud, then consider the Smart Order Refill cartridge. It will get you started on a path to growing consistent sales.

Simion Petrov

Author: Simion Petrov, SVP of Innovation and Industries

Simion began his career at OSF in 2007 when he entered the internship program as a software developer and quickly ascended within the company holding roles as a team leader and project manager. From 2013 to 2018, Simion established and optimized the company's commerce division, growing the group to over 400 people who delivered over 200 projects, making OSF Digital one of Salesforce’s top ecommerce partners. He has created new local structures designed to support the company's rapid growth in APAC and LATAM while at the same time, worked on innovation of the company's processes, best practices, and products including the creation of the OSF Product Labs program.

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