Retail

How Top Merchants Are Tackling Subscription Conversions

How Merchants Tackle Subscription Conversions

To make life easier for customers, companies in many different industries, from consumer packaged goods to luxury automobiles, are adopting the subscription business model. While their product and service offerings may differ, many firms share a common challenge: They must provide shoppers with a smooth process for the payment and delivery of goods and services.

Between the third and fourth quarters of last year, however, merchants as a whole did not implement major changes to their subscription offerings. In the average PYMNTS Subscription Commerce Index, the rating for merchants slid slightly from 63.8 in Q3 2018 to 63.5 in Q4 2018. That dip was, in part, caused by a decrease in the use of features such as free trials and free shipping, among others.

Even so, merchants are shaping their offerings with conversion-boosting features to encourage customers to sign up for subscriptions. These are some of the features that merchants – from luxury automaker Mercedes-Benz to consumer goods eCommerce retailer Boxed, are using to turn potential customers into subscribers:

Nearly all – or 95 percent – of the top merchants in the Index had implemented plan options in the fourth quarter of 2018. In June, Mercedes-Benz launched a pilot service called the Mercedes-Benz Collection with three different tiers: Signature, Reserve and Premier. Through the offering, drivers could select from any vehicle body style offered within their selected tier, ranging from SUVs to sedans and coupes. Mercedes-Benz USA President and CEO Dietmar Exler said at the time of the offering, “we know there is a market opportunity for people who would like the ability to move in and out of vehicles, depending on what they need or want at a particular point in time, or who don’t want to own a vehicle right now. That’s why we are excited to test the waters with the Mercedes-Benz Collection. 

The same share – 95 percent – of the top merchants in the Index had implemented free shipping in the fourth quarter of 2018. In April, Boxed rolled out a paid membership tier to provide shoppers with discounts and rewards, such as free shipping. With the membership offering, customers were to receive free “priority shipping” for orders over $20. In the free tier, they need to spend $50 to get free shipping. Head of Communications Ashish Prashar said at the time, according to reports, “all the best services have some sort of subscription model.” He added that “people will pay for that premium service if it’s unique and brings value to their lives.”

And 95 percent of the top merchants in the Index also had implemented plan changes in the fourth quarter of 2018. Jacqueline’s Teas offers a subscription, for instance, that allows customers to update their plans based on their preferences and change between different varieties of tea. With the company’s eponymous Jacqueline’s Teas subscription offering, customers receive seasonal teas with recipes for soups and desserts. Another option, the tea sommelier subscription, includes white, green, oolong, black, rooibos and botanical teas. In addition, through customizable subscriptions, shoppers can choose between the type of tea – such as black, light or caffeine-free – and preferences like flavored and unflavored.

Seven in 10 – or 70 percent — had implemented free trials in the fourth quarter of 2018. And some eCommerce retailers are allowing customers to sign up for free trials of their subscription offerings in brick-and-mortar stores. At Amazon’s Amazon 4-star in New York City, customers can sign up for a free 30-day trial of Amazon Prime to receive the Amazon website price on items in the store. In the store, which is located in the SoHo neighborhood, every product is rated 4 stars and above, is a top seller or is new and trending on Amazon’s website. The company wrote in a blog post at the time of the store’s opening, “we created Amazon 4-star to be a place where customers can discover products they will love. Amazon 4-star’s selection is a direct reflection of our customers — what they’re buying and what they’re loving.”

Fifteen percent of the top merchants in the Index had implemented rewards in the fourth quarter of 2018. AMC Theatres’ Stubs loyalty program, for instance, has a subscription tier called AMC Stubs A-List that offers consumers up to three movies a week for a monthly fee. In a December press release, AMC said Stubs’ growth is driven, in part, by the perks that members receive through the program. Stubs A-List subscribers and members of Stubs Premiere are able to access discounts at the box office and concession stand as well as priority lines, among other perks. And the theater offers all tiers – including its free Insider tier – Ticket Tuesday savings, birthday gifts and complimentary refills on large popcorns, the kinds of perks or rewards that can positively influence the subscription experience.

From large merchants like Amazon to small eCommerce websites like Jacqueline’s Teas, retailers are turning to the subscription business model. With the right mix of features like free trials and free shipping, they can help convert potential customers into subscribers heading into the future.

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Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The September 2019 Mobile Order-Ahead Tracker, serves as a monthly framework for the space. It provides coverage of the most recent news and trends as well as a provider directory that highlights key players across the mobile order-ahead ecosystem.

 

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