Core tools and tactics are similar among retail subscriptions, but guiding consumers to keep a beloved but nonessential subscription is a nuanced set of interactions that vary widely.
In an On the Agenda panel discussion featuring Brian Bogosian, president and CEO of sticky.io, Juan Palacio, founder and CEO at BloomsyBox.com and Matthew Berk, CEO of Bean Box, PYMNTS’ Karen Webster delved into the factors now deciding the keep or cut question.
In a fascinating exchange, Berk and Palacio compared how retention strategies in a vertical like floral subscriptions differ from those involving coffee, illuminating how consumers are valuing everything from pricing to features and loyalty to make choices in a down economy.
Personalization emerged as a key commonality, as Berk explained that “we’ve seen a shift away from more of our sampling experiences and towards more of our sort of personal coffee consumption experiences over the last 12 months. And that has required us to kind of shift the set of SKUs that we promote.”
This was done in response to consumers who want less surprise and more control over subscription selection and spend. Palacio said BloomsyBox’s business had reinvented its approach based on 2022 consumption patterns that are in line with inflationary decisioning.
Saying he’s seen a shift wherein “the base of users that are using the flowers for themselves is [now] smaller than [those] giving the description as a gift. We knew that customers were going to give the subscription as a gift — 3, 6, 12 months of flowers, right? But actually, we were not expecting this change of behavior on our customer base.”
That’s a big change from the pandemic pattern of subscribing for personal use and a clear indication that consumers are emphasizing needs over wants in this climate.
Bogosian boiled it down to this: “Those that have been successful have provided variability of products and found niches that exploit consumer convenience and wants in a way that they’re willing to make commitments and extend the customer lifetime value.”
See also: The Subscription Commerce Conversion Index
Experiments in Value
Changes to subscription commerce feature sets featuring prominently in the panel discussion, with Berk noting that Bean Box is now asking subscribers to review the curated selections they’ve been receiving, looking for data points to higher personalization to reduce churn.
“That level of engagement has also been kind of against the churn grain for us and has really kept people involved, not just getting a product delivered on their doorstep, but being part of the curation process. We find every week more and more people are engaging,” he said.
Palacio’s experience with BloomsyBox has been quite different. He said, “we tried to do what Matthew is doing with his customer base, and we actually opened the door for customers to have a say on the bouquets that we’re sending on a monthly basis.” That effort didn’t bloom.
“That opened Pandora’s Box for us. It was really difficult,” Palacio said. “People started asking for stuff that was really hard to get, etc., so we decided to close that door. It hasn’t worked and I don’t think it’s going to work given the nature of our product.”
From his vantage as a subscription platform, Bogosian said “Merchants need to be able to step up with offers and really understand their consumers and make pivots and make adjustments to their offers. The hooks are hard to identify sometimes, and they’ve got to continue to look.”
It led BloomsyBox to refocus on back-office operations and watch the data, saying “retention levels have improved tremendously with just minor adjustments to [cancellation]. We had more friction before when customers wanted to cancel or pause. We decided to remove the friction for pausing completely.”
That’s the “three-legs of the stool” at work, as Bogosian sees it, making product quality, program flexibility and the “perceived value are they getting from the bundle or the product or service” as the factors that steady any retail subscription offering.
See also: The Data Point — 40% of Subscribers Would Switch for Better Billing Experience
Conquering Churn, Lowering CAC
Other interesting dynamics that inflation has revealed in subscription commerce involve consumer perceptions around recurring versus as-needed purchasing behavior.
In coffee, Berk said “people will churn out of a subscription, but then they will come in and buy both gifts and coffee a la carte more frequently at a higher dollar value than they ever paid with the subscription. With multiple modes — you can buy it as a gift, you can buy it a la cart, you can subscribe — then supporting the customer’s choice, a cancellation can be a healthy pivot point for the customer in getting them to up their repeat spending and their LTV.”
Moving to other payment trends in the sector like discounting versus paying up front for subscriptions, Palacio noted that Bloomsby tried the prepaid route but watched margins erode as FedEx and UPS raised shipping rates again and again, making that model unsustainable.
With customer acquisition costs high and climbing, Palacio pivoted to a focus on demand, saying “Acquiring users is out of control. We are working hard on an organic strategy, we’re releasing a lot of content, working on acquiring customers organically, relying more on affiliates, and we’re trying to stop the dependency on paid channels like Google, for example.”
On the topic of prepaids Berk said, “We have stopped doing that entirely,” instead trying things like defined duration subscriptions which he said “work really well for gifts, and again, no more prepaid for us. It was just too complicated to manage, too many declines.”
While Bean Box does rewards by issuing credits and granting early product access to subscribers and free shipping, at Bloomsby, a straight rewards program didn’t fly.
Palacio’s team used a segmentation strategy, “communicating differently to the cohorts. We got from the top to the bottom in terms of length of subscription and our recency, frequency, monetary value approach. It worked amazingly,” he said. That was mixed with exclusive offers like a free set of floral shears with its pricier New York Botanical Gardens bouquets.
It’s trending and will continue to. Bogosian noted that “We’re seeing more and more membership rewards. We’re seeing soft rebates, credits towards other products or discounts to other offers. We’re seeing this whole idea of bundling and upselling, discounting, pricing and the flexibility of subscription being a big tool for merchants to utilize in extending customer lifetime value and providing value to consumers to keep them in.”
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