The Subscription Economy Is Growing Fast. Here's How Your Business Can Adapt and Thrive.
Over the past decade, the subscription economy has grown almost five times faster than S&P 500. Here are five tips your subscription-based company can use to adapt to this rapid evolution.
The subscription economy has seen record growth and profitability recently. In fact, over the past decade, the subscription economy has grown almost five times faster than the S&P 500. Further, customers tend to feel more loyalty and spend more money with the brands they subscribe to.
It's safe to say that the subscription economy is here to stay. But what can we learn from the rapid evolution of the subscription sector? Here are five strategies and takeaways you can use from leaders in the subscription industry.
For many, consumer cancellations are the biggest threat to their subscription model. In fact, subscription-curious consumers spiked back in 2021, with only 52% of customers who signed up for a new retail subscription actually keeping it.
However, for Haroon Mokhtarzada, founder and CEO of Truebill, encouraging people may be a surefire ticket to success. Embracing cancellations can lead to far greater customer lifetime value and also increase emphasis on your organization's transparency. By surveying those who do cancel, business leaders can find a breadth and depth of data that can help shift their approach to retention and customer loyalty.
"The likelihood to re-subscribe goes up when it's easier to cancel," says Mokhtarzada. After all, it's the consumer's right to end a subscription early. Your goals should be to provide enough value to keep them buying.
Get creative with your marketing
Creative marketing strategy has driven explosive growth in the subscription space. That's because organizations must get incredibly specific about their target audience and how to reach them through a personalized user journey. "It's important to be authentic and real," says Natasha Trindall of Alo Moves.
For many organizations, this begins with communication. Email is still a major player, but many are either not using it to its full potential or, frankly, using it to their disadvantage. Stephanie Ristow, founder of Ristow Marketing, encourages businesses to leverage this marketing tool to nurture, convert and maintain customers.
To do so, take a look at your email marketing list and the messaging you're sending. Are you properly targeting the right audience with the right communication? Are you reviewing your customer journey and taking opportunities to upsell or offer enhanced experiences as part of your overall messaging tactics?
According to Ristow, one email can't accomplish everything we want. Instead, build the strategy, build the email, test and optimize. Mistakes teach us a lot, whereas waiting teaches us nothing.
Focus on retention
According to Jay Myers, co-founder of Bold Commerce, every subscription company will hit "The Subscription Death Curve." This is the flatline when you begin to churn the same number of customers as you acquire.
But there are ways to combat it, and it all starts with retention opportunities. Myers encourages brands to look at a full-stack subscription model that offers curation, replenishment and access. "I often ask brands this: 'If I take your product out of your subscription, would your customers stay subscribed?'" says Myers.
If you can't answer "yes," then you may be focusing too much on your product, rather than creating an experience that speaks for itself. Leading organizations know that consumers can get a product anywhere, but they stay loyal for the experience and community feel a brand provides.
Remember, while it's important to plan for new subscribers, it's just as important to focus on retaining the ones you have.
Create content your consumers want
Part of creating a community around your brand is understanding your audience base. Many organizations have fallen guilty of creating content for their own needs and desires, rather than listening to their audience.
The subscription industry need look no further than unboxing videos or loyalty points programs. Ultimately, these tactics are company-centric, rather than consumer-oriented. Businesses should instead focus on how to build long-term, sustainable relationships with consumers focused on what they want.
Utilize tactics that create meaningful relationships with your subscribers. Survey your customers, engage on social, and really listen to what they want, so you can optimize your offering.
Embrace sustainability and diversity efforts
Consumers are no longer looking for a product. They are looking for a company that cares. The subscription industry, in particular, has the ability to truly focus their efforts and messaging to align with consumer desire for societal impact.
"Consumers want to know, and feel better when they know, what their box can become," says Sarah Meiburg of Paper and Packaging Board.
In fact, studies show 84% of consumers are interested in sustainable solutions. Subscription-based companies can encourage their consumers to become more engaged with the recycling process, fostering an emphasis on sustainable activities.
Another key area of focus for many consumers is diversity. While these efforts cost time and resources, their payoff is far greater. After all, you could be missing a key demographic if your messaging is wrong.
Take the time to truly focus on how to incorporate diversity into your company. Make inclusion essential to your culture, empower your employees, and equip your managers. Look for ways to involve a variety of artists, crafters and makers in your pipeline. By making diversity, equity and inclusion part of your mission, you'll answer the call for social impact that's coming from so consumers.
The subscription economy continues to see substantial growth. In fact, subscription-based companies are expected to reach $275 billion in 2022, up $51 billion over the previous year. This kind of growth illustrates a lasting business model. The most forward-thinking subscription-based companies will continue to evaluate how their business can adapt to rapidly changing dynamics in order to meet consumer demand. As Paul Chambers says, "Our ability to make shifts and adaptations will allow us to discover what's next and what's possible."
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