A subscription model is a win–win for businesses and customers alike. We take a look at two very different businesses – Dollar Shave Club and Wine Selectors – who are getting the subscription model right.
A loyal base of repeat customers, predictable monthly sales and plenty of up-selling opportunities. These are just some of the benefits of a subscription-based business model. There are different models to suit different businesses, but each combines the convenience of online shopping with the genuine delight of receiving a parcel in the mail.
A subscription model can offer great value to customers, too. “It’s a one-time purchase for something like a 12-month subscription, so it’s a headache removed,” says Grant Arnott, founder of eCommerce Expo and publisher of Power Retail, a news and information resource for the online retail industry.
Budget subscriptions: Dollar Shave Club
For subscription-based businesses such as Dollar Shave Club, which charges a monthly fee for razors and cartridge refills, the value comes from its low entry point. Subscribers can pay $4 a month for its “Humble Twin” razor or jump to the top of the range, “The Executive”, for $10 a month.
A variety of price points makes the offer attractive to a wide range of consumers and also means that loyal customers can choose to progress from a basic model to a more sophisticated product.
“They’ve built their model around cheap entry points as a hook,” says Arnott. “It makes it a low risk to sign up at that level and it helps to entice customers to make higher-value purchases down the track.”
Expertise with subscription convenience: Wine Selectors
Wine Selectors, which has been delivering a handpicked selection of wine to its subscribers up to five times a year since 1975, brings a different kind of value. “It’s the value of curation,” says Arnott. “This is particularly the case with wine subscriptions, where someone has taken care of the expertise of selection. You’re entrusting them to provide variety, and there is also the novelty of surprise.”
Wine Selectors offers eight member series to choose from and also has special member benefits, such as free copies of Selector magazine, access to a premium partner program and invitations to exclusive member events. Arnott adds that member incentives work to build brand engagement. “Value-add is important; samples can work as incentives, too,” he says. “You should also invest in good packaging, so your customers feel that they’re getting something special.”
Measuring satisfaction with subscriptions
Subscription models also offer a number of methods to measure customer satisfaction. The most obvious indication of a happy customer is an increase in subscription value. Ratings, reviews and testimonials are also good ways of gauging satisfaction. Both Dollar Shave Club and Wine Selectors display customer reviews on their website, which helps to reinforce faith in their brands.
As you’re in regular contact with customers already, online surveys are another way to measure customer satisfaction. “You can send post-purchase emails three to six months after the beginning of a subscription to check in with your customer to see if they’re happy,” says Arnott. “People who are disenchanted tend to voice their opinions. People who are satisfied don’t tend to voice this unless they’re prompted.”
Delivering the goods
The frequency of delivery with a subscription model depends on the category of your business; however, consistency is essential. “If you deliver every two weeks and your first delivery is on a Wednesday, try to ensure the next delivery arrives on a Wednesday too, because you’ve set an expectation,” advises Arnott. “If people haven’t received their subscription order by Thursday, they’ll start asking questions.”
Depending on the business model, subscribers may be billed a monthly fee or an up-front fee for 12 months. “Monthly debit is becoming more common, as there are more sophisticated payment gateways out there and people are more confident in having their credit cards debited,” says Arnott.
Subscription renewals and opt-outs
Terms and conditions for online subscription purchases must comply with the Competition and Consumer Act, and Arnott adds that opt-out clauses should not be so onerous that they deter customers from signing up. “It should be a two-way exchange,” he says, “where it’s not too painful for either party if someone opts out.”
In the case of Dollar Shave Club, the subscription is automatically renewed and members can opt out at no cost. For Wine Selectors, members can cancel their subscription at any time; however, their annual $22 membership fee is non-refundable.
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The views expressed in this article are those of the author and the interviewees, and not of Australia Post.
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