Functionality, Flexibility and Features: The Three F’s That Give Subscription Commerce an A

For eCommerce merchants, if you aren’t first, you might as well be last.

While not a golden rule, in today’s fast-evolving environment, the quote rings truer than it otherwise would.

The pace of digital innovation has rapidly transformed the behavioral expectations of consumers, putting the onus on businesses to seek innovative ways to stay ahead of the competition by meeting their dynamic needs.

“Consumers expect more,” Thomas Marks, senior vice president of growth at application programming interface (API)-first subscription management and recurring billing optimization platform, told PYMNTS. “Subscriptions really exploded during the pandemic, and now, people want more than subscribe and save. They want ultimate flexibility. They want to be in complete control of their subscription.”

“It’s not just about getting a product delivered every 30 days,” he added. “It’s about getting what they want delivered when they want it. … Consumers want to have an on-demand relationship with merchants now.”

Fortunately, the technical capabilities of today’s digital-first ecosystem have evolved to the point where merchants can increasingly provide their subscribers and customers with what they ask for.

Seamless Customer Experience Is Crucial

The lines are blurring between one-time purchases and subscriptions, as merchants recognize the importance of offering options that cater to different consumer preferences and give customers the freedom to choose what works best for them.

“All eCommerce merchants are looking for a way to create a recurring revenue stream,” Marks said.

“When you look at younger consumers today, they want to have affinity with the brands they’re purchasing from,” he added. “Many merchants are taking advantage of that desire and creating VIP memberships or special relationships with customers, regardless of whether they sell replenishable products or not.”

Marks said one of the most important things when it comes to subscription management and recurring billing is the ability to manage churn — from both a technical and customer management standpoint.

Around 30% of churn is unintentional or passive, meaning that a consumer forgot to update their credit card number, or the billing payment failed at that particular time. To help combat this significant percentage, merchants need to have the technical flexibility to retry a payment or update credit card numbers in advance of a card expiring.

“It’s really important to think beyond just the basic subscription management and recurring billing to consider the holistic ecosystem that revolves around [the payment experience],” Marks said, emphasizing that having the “technological capabilities to ensure success” is crucial.

Establishing Customer Lifetime Value

With the rise of predictive analytics and artificial intelligence (AI), companies are now able to anticipate consumer behavior and desire like never before.

This has led to a growing emphasis on personalization and data analytics, with AI and machine learning playing crucial roles in understanding and catering to individual customer needs.

“Customer acquisition costs have risen dramatically for all eCommerce merchants,” Marks said. “What we find with subscription merchants or people who are using that as a part of their merchandising mix is that they’re looking to increase customer lifetime value, and they’re looking for capabilities around that.”

“One of the things that really plays into that is using data and AI to analyze consumer behavior and make smart recommendations,” he added. “Consumer-friendly capabilities are going to be the name of the game for successful merchants going forward.”

Those capabilities, Marks said, are underpinned by three F’s: flexibility, features and functionality.

And they couldn’t be more important to merchants than they are right now as the eCommerce ecosystem matures.

“eCommerce used to be mostly driven by digitally native vertical brands,” he said. “Now, everyone is playing in the mix, especially in the subscription space. The competition is stiff, acquisition cost has risen, and merchants need to make the most of every consumer that they acquire.”

“As more consumers opt for subscription-based services, it is essential for businesses to provide a seamless experience across devices,” he added. “Whether it’s on mobile, social media or a laptop, customers expect a consistent and user-friendly interface that allows them to easily manage their subscriptions.”

Within an eCommerce future driven by data and personalization, those sophisticated subscription merchants who find themselves winning share and spend will be those who embrace a consumer-first functionality for their tech stack.