Survival of the Fittest: 3 Reasons Your Subscription Business Didn't Work

Active subscriber levels are up, but with so much success, there has also been a great deal of failure.

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By Chris George

Opinions expressed by Entrepreneur contributors are their own.

The e-commerce and retail landscape has changed drastically in a short period of time — and it will only continue. In fact, it is projected that 91 percent of U.S. consumers will be online shoppers by 2023. The reality is digital connection and ease of e-commerce sales are the future. Organizations need to get on board or get left behind.

Companies seeking to adopt a digital presence, and build a connection to their modern brand DNA, need to look no further than a subscription-based business model. Subscriptions are the future of commerce. The brands that focus on building these out strategically and place a focus on experience will win in the end.

In fact, nearly 48 percent of people say it's easier to sign up for a subscription plan than to shop in a store. And more than 80 percent of U.S. consumers are active subscribers, accounting for more than 20 percent of e-commerce total sales. These are just some of the several key findings from the State of Subscription Commerce Economy Annual Report, put out by the Subscription Trade Association (SUBTA).

Related: 5 Tips for Growing Your Subscription Business

With this rising trend comes a unique opportunity for organizations to embrace the subscription-based model. But with so much success, there has also been a great deal of failure. Here are three reasons why your subscription business didn't work — and how to fix it.

1. Lack of focus on the customer experience

Customer preference has moved to a focus on meaningful relationships with brands. After all, customers want to feel like they are a part of something and connect to a story. Businesses should leverage this desire for belonging by creating access to unique products through subscriptions.

Subscription-based businesses have an upper hand when it comes to customer experience with multiple touch points along the customer lifecycle. But many often fall short, neglecting the importance of understanding customer needs and ensuring results.

Here are a few ways to put focus back on the customer experience:

  • Understand what your customers are asking. Rather than utilizing scripted responses, work to understand the questions and concerns of your audience and use that data to better fuel your experience model.

  • Respond everywhere. In the age of increased connectivity, it's important to monitor all communication channels where your audience may ask questions (social media, email, web forms and so on).

  • Utilize the first-party data you have to better understand your consumer's behaviors and personalize their offering. The more personal you get, the more memorable the experience will be.

  • Prioritize training. A significant portion of your focus should be on customer service training and tips to ensure a smooth customer experience every time.

2. Neglecting your retention strategy

Focusing on customer experience can also help you build out your customer retention strategy. This is crucial for subscription-based models since they thrive on repeat customers.

Customer retention must be one of your key goals as an organization. After all, it costs five to 25 times more to acquire a new customer than retain an existing one — thus keeping your churn rate low is critical.

But what happens when you inevitably lose a customer?

The subscription businesses that fail do not prioritize lost customers. Rather, they simply let the customer cancel without digging deeper, or putting an effective and proven win-back strategy in place.

When subscribers cancel, use it as a learning experience. Why would your customers want to leave? Asking them one or two simple questions during the process can give you insights into how to improve going forward.

Here are a few other things to consider in your retention process:

  • Consider another offer. When a customer is prepared to cancel, understanding the reason why can help you present another offer to entice them to stay. For instance, if a customer cancels due to product fatigue (receiving too many products at a time), give them the chance to change their shipping cadence to bi-monthly or quarterly. Or, if affordability is the issue, offer a quarterly billing option or a discount to stay on for another month.

  • Concentrate on proactive retention. Catch your clients before they're prepared to cancel by regularly surveying them about their experience with both products and service. If results come back with an average or a bad rating, set up a process to notify customer service immediately. This gives you the opportunity to set things right and rebuild the connection.

  • Know your churn and always review your data. Your data provides valuable insight into your clients. For example, if data shows you the average subscriber cancels around six months, prepare an offer or incentive to keep them on for another six months. That could be anything from adding an extra item to the box, an additional service/product for free and so forth.

Related: 5 Ways to Get Your Sales Strategy Back on Track

3. Failure to find the right product offering

Subscription-based models only work when you have a product worth connecting to. Those organizations that succeed in this model will identify offerings that people actually need.

Memberships are the most successful when you find what your consumers are passionate about. By understanding the problem your product solves or the solution someone needs, you're able to find ideal customers easily and speak to them more effectively.

When you look at your organization, what do you create or do that gets people fired up? Find that niche and then grow it through a subscription.

In an age where more and more brands are adding a membership model to their business, it's important to hone in on the right product and create a one-of-a-kind experience that will separate it from the rest.

Related: Taco Bell is Rolling Out a Subscription Service that Will Give Fans a Taco a Day

The business case for subscription-based models is real

There is no indication that e-commerce growth will slow down. In fact, the subscription industry as a whole is expected to hit $1.5 trillion by 2025, according to the State of the Subscription Commerce Economy Annual Report. The organizations that choose to embrace the subscription model stand poised to make significant strides over their competition and meet a willing and ready consumer base.

The most successful of these brands will prioritize listening to and building relationships with their customers. Through the use of technology such as AI, digital connectivity and communication and the art of personalization, subscription-based organizations can empower their customers to feel less like a subscriber and more like a valued partner.

Chris George

Entrepreneur Leadership Network Contributor

Leading voice of the subscription industry

Chris George is the co-founder and chairman of SUBTA, the first and only trade association serving the subscription space, and SubSummit, world's largest conference dedicated to DTC subscriptions.

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