Learn why subscriptions are the key to boosting LTV and stability — even in a volatile economy
eCommerce brands have few reliable safeguards against economic volatility. High inflation often means customers drop favorite brands in favor of better deals elsewhere — leading to higher customer acquisition costs (CAC) as brands work harder to win customers.
CommerceNext learned in a 2022 survey that 57% of business leaders called “rising customer acquisition costs” the top risk to achieving their sales objectives. In such a climate, brands must focus on increasing retention.
Subscriptions are the best way to boost retention because they meet changing consumer demand. Most subscriptions incentivize enrollments with a steep discount of up to 15%, making them attractive to cost-conscious customers. Subscriptions are also highly convenient because they arrive at subscribers’ doorsteps.
What’s more, subscriptions drive business success. They increase recurring revenue and customer lifetime value (LTV) — even in uncertain market conditions.
Getting started with subscriptions
If you haven’t launched a subscription experience, now’s the time to start. Subscriptions stabilize business revenue in good times and bad, and brands who prioritize them will have an advantage over the competition. After the pandemic boom, Shopify estimates that eCommerce revenue dropped by 2% in 2022, down from 18% growth in 2021.
Subscriptions drive predictable, recurring revenue, enabling brands to develop more accurate financial and inventory forecasts. Subscriptions also drive higher LTV compared to one-time transactions.
Take CBDistillery and OLLY as examples. Not long after launching subscriptions on Ordergroove, CBDistillery’s recurring revenue was twice their revenue from one-off purchases. As for OLLY, their subscribers' LTV is three-and-a-half times higher than non-subscribers.
Vetting a subscription platform provider
If you want to launch subscriptions, you’ll need a subscription platform. But before you invest in a tool, do your homework. There has been a proliferation of subscription apps in the last several years, and not all of them offer the capabilities you’ll need to scale your experience. When evaluating a subscription solution, focus on battle-tested and established platforms with a history of success with retail and eCommerce brands.
As you vet subscription providers, pay close attention to their enrollment experience. You want to work with a solution that enables multiple subscription-enrollment locations — like on product pages, in quick views, and at checkout. A shopper can decide to become a subscriber in a split second, so you must have enrollment options at key touchpoints.
You also need to evaluate the platform’s subscription promotion capabilities. It should be easy to offer unique incentives like “subscribe more, save more,” free shipping, loyalty rewards, and more.
Our final advice for selecting a subscription platform is to scrutinize the provider's billing policy. Don’t work with a partner that takes a cut from every transaction.
Sheets CEO Chris Videau turned to Ordergroove when he realized that billing by transaction would cost his company three to four times more than Ordergroove’s billing model.
“We ultimately found it cheaper to go with Ordergroove that’s tested and proven by Gillette and KIND Snacks, and that doesn’t take money out of every transaction,” he said.
Improving your subscription experience
With consumer expectations high and brand loyalty low, “set it and forget it” is not an option with subscriptions. Once your subscription experience is up and running, always look for ways to improve it — including the enrollment process, subscriber order management, and retention campaigns.
Speed up enrollment and buying
Friction is the enemy of customer acquisition, subscriptions or not. Comscore found that 8% of online shoppers will abandon checkout simply because it takes “too long.”
Thankfully, there are several ways to reduce friction. Start by shortening your checkout experience. Some subscription technologies don’t fully integrate with popular eCommerce platforms. As a result, customers are sent to a different site and interface to complete their checkout.
This experience, known as a hijacked checkout, leads to a disjointed buying experience and inconsistent branding – both of which can send hopeful subscribers packing. Ordergroove found that a hijacked checkout can reduce enrollment by as much as 40%.
Platforms like Ordergroove let customers enroll in a subscription without leaving a brand’s eCommerce platform. Suppose Salesforce is your eCommerce provider. With Ordergroove, there’s no need to disrupt the Salesforce-provided experience to enroll in a subscription.
Another way to speed up the eCommerce checkout process is to install a digital wallet like Shop Pay. Digital wallets save consumers the trouble of entering their payment information on each eCommerce site they visit. With consumers willing to switch brands over the slightest inconvenience, digital wallets can make all the difference in winning a sale.
Give subscribers more control
Subscribers want to be in charge of their orders. Give them the ability to skip a month, pause their order, and swap out a product for a similar item. This flexibility builds customer trust, which helps reduce churn. Ordergroove’s research shows that subscribers last 135% longer when they can skip an order and 71% longer when they can swap an order for a similar product.
Wellness brand OLLY gives their subscribers control by offering a dashboard where customers can take charge of their shipments.
Notice how OLLY doesn’t complicate subscription cancellations. They place a cancellation link right next to a pause link. Jermain Gil, COO of Good Ranchers, agrees with this strategy.
“Customers, whether they are looking to cancel or not, just want to know they can do it,” he said in a recent webinar.
Focus on retention strategies
Boost the chance of your subscribers staying with you longer by focusing on retention from day one.
For example, Good Ranchers recommends three tactics to keep subscribers in the fold.
Deliver a superb first-time buying experience. Good Ranchers offers a steep discount for first-time buyers and other incentives. Their customer service also sends follow-up emails and will call new subscribers to confirm they liked their order.
Offer locked-in pricing. As long as the customer subscribes, the cost of their subscription won’t increase.
Say thank you. Every Thursday, the Good Ranchers team calls subscribers to thank them for being a customer and ask if they need help.
Adding a prepaid subscription option
To drive even greater LTV, launch prepaid subscriptions.
A popular shopping experience, prepaid subscriptions let subscribers pay upfront for several orders in exchange for a better discount. The term could be three months, six months, annually, or something in between.
For instance, Wrist Mafia lets customers choose a three- or six-month prepaid commitment with an easy dropdown menu.
We predict prepaid subscriptions will be the most significant trend in the subscription space over the next year. Brands without subscriptions will launch their experience with prepaid subscriptions, and brands that already have subscriptions will add prepaid subscriptions.
Why? Because they benefit both consumers and businesses. Customers save more money than when they buy a pay-as-you-go subscription. And when the economy is poor, consumers look for better value.
For brands, prepaid subscriptions, on average, generate four times the LTV of monthly pay-as-you-go subscriptions.
Boost your eCommerce revenue with subscriptions
It’s never been easier to add a subscription experience to your eCommerce customer experience. While you’ll still need to vet subscription platforms, it’s worth the effort. You’ll soon find that subscriptions stabilize your business during difficult times and boost your bottom line when the economy is healthy.
Contact Ordergroove today for a free demo of their subscription platform. And if you’re looking to launch an eCommerce business on Salesforce, we are here to make the setup process as smooth as possible.
