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The Power of Personalization:  How to Keep Your Subscription Customers Coming Back

Posted By: OceanX    |    Wed, 07/10/2019 - 12:09    |    0

The market for subscription boxes is booming, and McKinsey & Co. research illustrates an increase in sales of more than 100% each year from 2011 to 2016. Customers have lots of motivations for subscribing, from the convenience and value of a regular delivery to the excitement of curated products that might not be available in stores.

Despite the diverse appeal of physical subscription boxes, one thing remains consistent across customers: They expect a personalized experience.

At a basic level, a personalized experience is one designed with an individual in mind instead of a group. To an individual, it’s personalized because she is getting exactly what she wants. But personalization can be a tricky thing to get right. For one, it’s possible to cross a line into territory that customers might find downright creepy. If you’ve ever browsed Amazon on your mobile device and then checked your Instagram only to see the same product, you’ll know what I mean.

Getting too personal is at one end of the spectrum, but the other extreme is a problem, too. Consumers might be frustrated if they see ads that are meant for people with different political views or that promote products they already own. Either way, personalization gone bad can lead as many as 25% of customers to cease doing business with a company. In the subscription box industry, the stakes are even higher.

 

Subscription Setbacks

Despite massive growth in the industry, not every subscription box is a slam dunk. Lots of new players entering the market want a piece of that growth, and competition is increasingly fierce. Between 2017 and 2018, the number of subscription boxes increased by 40% to 3,500. Meanwhile, about 13% of the offerings listed on MySubscriptionAddiction have failed. Even major entrants such as Blue Apron have had their difficulties — stock in that company lost 70% of its value during its IPO.

Besides the heated competition in the space, the subscription business model has a high cost of acquisition. Many companies rely heavily on free trials and substantial discounts to sign up initial subscribers, but these tactics are risky. For some of the more expensive boxes such as meal kits, it can take months for the investment to pay off. Unfortunately, research from McKinsey found that three-fifths of new meal kit subscribers cancel before reaching the six-month mark.

To keep customers from canceling, subscription box businesses must give the people what they want. When subscribers are after curation or access, 28% report that a personalized experience is what keeps them coming back. In the case of replenishment, personalization is narrowly edged out by convenience and value, although all three are within a 2 percentage-point margin. No matter what type of experience customers hope to get out of a subscription box, it should be a personalized one.

 

Making Personalization Work

Beauty subscription box FabFitFun is one brand that’s taking personalization to the next level. According to CEO Daniel Broukhim, the company is relying on machine learning to recommend products based on customer preferences. Stitch Fix also uses a powerful recommendation engine in conjunction with human stylists to deliver clothing that customers will love. In both cases, the brands must build a complete picture of customers and their past preferences to deliver on their promises.

Personalization is everywhere. Recommendation engines suggest what we should buy on Amazon, watch on Netflix, or listen to on Spotify. More often than not, these suggestions are spot-on, and they help build trust between brand and consumer.

Subscription boxes are an area where personalization has great potential. As opposed to a one-off purchase, subscription businesses interact with customers repeatedly, sometimes even for years. These interactions yield a wealth of data and give a subscription box business the opportunity to get to know its customers better with each iteration. If your company can continue to deliver personalized experiences, then you can continue to deliver products to customers’ doorsteps.

 

Category: Retention direct-to-consumer DTC