Retail

Nearly Half Of Merchants Offer Free Trials As Subscription Benefit

These days, eCommerce merchants are offering subscriptions for all sorts of products – from music to movies and even cars – but they face a challenge: How can they convert users into subscribers?

Merchants are using all sorts of features to drive conversions – and their efforts are working. The average rating on the Subscription Commerce Conversion Index (SCCI) is 64 in the second quarter, an increase of approximately one point from 62.9 in the first quarter.

In terms of features, free trials and plan options are popular implementations. Here is how leading merchants, from Boxed to Pandora, are tackling conversions.

About one in 10 – or 11.7 percent – of merchants offered rewards as a subscription feature. Boxed, for example, has launched its first paid membership tier that will offer rewards and discounts to customers. “All the best services have some sort of subscription model,” Ashish Prashar, Boxed head of communications, had told Business Insider. “People will pay for that premium service if it’s unique and brings value to their lives.” The membership — called Boxed Up — will not replace the standard free membership, but it does offer perks, such as free priority shipping for orders over $20, as well as 2 percent cash rewards based on what customers spend, price-matching for competitors and “VIP customer service.”

Just under half – or 45.9 percent – of merchants offered free trials as subscription features. In 2017, for example, Pandora announced its plans to offer an on-demand music service similar to that of its competitors in the space. Existing Pandora listeners were to have access to a free trial this month. After that, there will be a $9.99 per month fee, where Pandora users will have the ability to listen to music on-demand and – perhaps one of the more enticing aspects – access to offline playback. Overall, using a free trial period as a customer acquisition tool has had a strong track record for converting consumers, according to Recurly Senior Product Manager Emma Clark— with a few caveats, of course. They are most effective in segments where the cost of providing the service is low, such as media streaming. And physical goods, because they involve physical products, obviously have a higher cost associated with extending those free trials, which tends to make them a more expensive acquisition tool.

Approximately three quarters – or 74.8 percent – of merchants offered plan options as a subscription feature. Netflix, for example, offers three monthly subscription plans, with the Basic plan going for $7.99, the Standard at $10.99 a month and the Premium tier at $13.99. With the standard package, customers can view Netflix on two screens, while with the Premium subscription it’s four screens. The Netflix spokeswoman told CNET that not all subscribers will be able to take part in the test and it may not be available after the trial is complete. More recently, Netflix could be gearing up to roll out a new, higher-end service that will cost more for users. CNET, citing Italian blog Tutto Android, reported that the new tier, called Ultra, would let four devices receive Ultra HD video and audio streaming simultaneously on each device.

Thirty-six percent of merchants offered reviews or ratings as a subscription feature. Beyond plan options, Netflix also has a recommendation engine to help viewers decide if they are likely to enjoy a given movie. The platform has refined the service: Last year, for example, it migrated from a star system to one requiring a thumbs-up or thumbs-down. Beyond movies, streaming music services uses rating and reviews as well: Pandora, for example, allows users to give a thumbs-up or thumbs-down to help determine their tastes.

And 73 percent of merchants offered cancellation as a subscription feature. As of January 2018, the top 20 subscription services tracked in the PYMNTS Subscription Commerce Conversion Index (SCCI) give consumers the ability to cancel their subscriptions at any time, compared to just 20 percent of the bottom 20. Even so, some services, such as Truebill, a service that — similar to the startup Trim — helps consumers track down and cancel their unwanted subscriptions. Truebill works by having its users link their credit cards and bank accounts to the service; it subsequently monitors those accounts for recurring monthly charges, which it reports to the user. For any subscriptions that a person wishes to cancel, he or she lets Truebill know that with a single click, and the service takes care of the rest.

Will merchants continue to improve their subscription conversion efforts in the next quarter? Stay tuned for the next edition of the Index.

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