Consumers love their retail subscriptions, but inflation has forced a wave of cancellations, and merchants need to use every tool at their disposal — including making an emotional connection — to appeal to the far more judicious calculus of today’s subscribers.
Those ideas grounded the talk track for a conversation in PYMNTS’ series “Tough Questions: Retaining the Selective Subscriber of 2023,” where guests Brian Bogosian, CEO of sticky.io; Seth Goldman, CEO of floral and gifting subscription firm UrbanStems; and Alex Brown, CEO of sustainable cleaning supplies subscription firm Truly Free joined PYMNTS’ Karen Webster.
With retention the dominant theme of the conversation, there was universal agreement that recurring revenue models are beautiful in business. But as PYMNTS and sticky.io research has found, consumers trimmed their subscriptions from an average of 4.1 in 2022 to roughly 2.9 as of Q1 2023, so lifetime value strategies are the critical pivot for merchants now.
To achieve that, the merchant panelists concurred that creating and sustaining emotional links with consumers is key. That can arise in several ways.
“We sell kind of a healthier alternative to cleaning products that are out there,” Brown of Truly Free said. “So oftentimes when people find us, they’re on a kind of health journey.”
He added that “what helps retain people versus them going somewhere else and staying on our subscription is that they buy into the way of life.”
That resonated with UrbanStems’ Goldman, who sells a discretionary product, which is unlike the consumable replenishment positioning of Truly Free.
“What you’re using us for is kind of gratitude on repeat,” he said. That centers on “not thinking of it as a less expensive way to buy flowers from UrbanStems, but more as a way to celebrate the people in their lives. The emotional part of our product is what makes a customer stay.”
Emotional connection with the brand goes a long way, but when subscribers want to make a change or take a break, it’s a matter of policies and technologies, and merchants need to nail it.
Brown — who uses the sticky.io platform to manage his business — said among his first moves was giving subscribers the ability to cancel themselves right from the membership portal.
“We had less cancellation requests, more saves and less customer service time,” he said. “That’s given us the latitude to take a little bit of the pressure off of them, and I think it’s caused more of them to come back in the future too.”
Bogosian said these two merchants have grasped a subscription fundamental.
“Flexibility is key,” he said. “Flexibility to not only be able to cancel, but to pause, replace products, move to a different tier, as much flexibility as can be provided … extends that customer’s lifetime value.”
The discussion turned to why consumers are trimming subscriptions, and cost is number one, as borne out by PYMNTS data. Not just the cost of subscriptions themselves, but time costs dealing with merchants that are cutting back — on things like free shipping and easy returns. In that climate, the core value prop must be constantly reinforced.
“It’s less about bringing the price down and more about ensuring that what we’re delivering has a strong value-to-cost ratio for that consumer,” UrbanStems’ Goldman said. “For us, that’s continuing to lean into the features that make it more accessible and easier to work with. It’s improving customer service and also pushing on that emotional side of what we do.”
UrbanStems has kept free shipping, for example, and it sees retention value in absorbing that.
And just as these features are powerful retention tools, Bogosian noted that there are creative ways to recoup associated costs for merchants via “more engagement with the consumer to provide a lower threshold of pain that’s fixed on a monthly basis and make up for that with one time offers or ones that provide a lot of value, convenience, or otherwise, appeal.”
Truly Free “had this idea for a long time to be able to give people bigger rewards, bigger discounts and free products for adding more into a box,” Brown said. “Average order value is what saves us. We have customers that are spending more money than they used to, but they see more value because they’re getting more.”
With failed payments now a factor in subscriber churn, Bogosian noted that sticky.io has partnered to introduce a new service that takes “milliseconds” to analyze card declines on recurring billings and approve more failed payments. It’s led to a 30% increase in approvals.
Retaining today’s selective subscribers takes creativity and a relentless focus on hitting the moving target of consumer cost-value math. That includes recasting policies that worked in the pandemic years but are misaligned with 2023 realities.
For Truly Free, that meant upending its returns policy. Before, subscribers shipped orders back and got hit with a restocking fee.
“It was kind of clunky,” Brown said, and anathema to the brand’s “green” market positioning.
“We started saying, ‘Keep it. Give it to a friend, give it to a loved one, use it yourself, donate it somewhere. Whatever you want to do with it, just keep the product.’”
Ironically, it’s saving costs. Moreover, he said it gives consumers “ammunition to say good things about us. We want to build advocacy. I think that’s a better way to do it” than returns.
These best practices “avoid unhappy customers and chargebacks and things like that Alex was referring to and ensure you have customer satisfaction,” Bogosian said. “It’s an incredible gesture. As he was saying it, I was thinking that I, as a customer, how I would feel about that is tremendous loyalty and appreciation” toward a brand that’s easy to buy from.
Commenting that top-performing subscription merchants do all these things as seen in study after study, Webster wondered why more merchants don’t follow these best practices.
“A lot of it is technology,” Bogosian said. “Payments companies that provide mere rebilling miss the point around consumers having more control over the outcome of their subscriptions. In subscription, you want to [put] some of that power back into the hands of the consumer.”
UrbanStems covers its bases with features like pause and more advanced abilities like making changes to orders.
“We’re about to add features that allow you to add to gifts if you wanted to add chocolates or a candle to something,” Goldman said.
“On top of that, the next feature is that you can pick within a small subset of bouquets, so you feel like you have that control Brian was talking about,” he added. “That makes people feel like they’re owning the subscription at a more concrete level. We expect all of these to help reduce churn.”
But the emotional connection — trust by another name — is perhaps the ultimate best practice. For a long time, Truly Free didn’t feel truly comfortable messing with its platform tech. But as changes came to the space, Brown said surrendering more control paid off.
“Allowing people to see that they can pause or cancel or have this full control over their subscription is what delivered more trust,” he said. “At the end of the day, it’s about trust.”