Right now, you would call them subscribers. But daily taco fixes, possible through Taco Bell’s Taco Lover’s Pass program, do not represent brand commitment. They represent value commitment. (The $10 monthly program entitles members to redeem one of seven taco options daily for 30 days.)
And herein lies both the opportunity, and the challenge, of subscription services. Now in use by movie houses, ugly produce suppliers, beauty companies and fast-food chains, the “re-up” model can be a hard-to-resist sales device – subscription sales accelerated by 40% in 2020 and are a predictable revenue stream. Yet at the same time, this model can generate disloyalty.
Think about it: If interactions between the customer and the company never evolve beyond product replenishment, then the subscription is nothing more than a price promotion. And once the customer grows tired of the product, finds a better option or becomes disappointed, the subscription will be cancelled. Research by McKinsey reveals 40% of all product subscribers cancel – more than a third do so in less than 90 days, and more than half within six months.
Other than one-time sales, what does the merchant have to show for the investment?
Return to Sender – 5 Unfulfilling Practices
Here are five mistakes subscription services make that, if resolved, can deliver lucrative returns.
Mistake 1: The subscription service is not making the most of the data. Heck, sometimes companies aren’t even collecting the right data to faithfully serve their customers, let alone using their analytics to make sense of the information. Just one-third of companies said they trust their data enough to derive value from it, according to a Forbes.com story. The result is a lot of insightful interactions are lost in a vacuum when they could be parlayed into new products and offers customers would love. Opportunity: Assess the goal of the subscription (ex: improve retention) and then collect only the data that serves that goal. Use the analytics and algorithms to detect where engagement breaks down and picks up, and engage members using those insights. If a bi-weekly grocery subscriber never buys meat, why suggest a meat special that proves the company isn’t paying attention? It’s so simple; I hate that I have to write it.
Mistake 2: It’s too damn predictable. Where is the sub-prize and delight? Sure, subscribers may understand the agreement – that the company gives them a price break in return for their repeat business. But we are all by nature reward seekers. If I buy a taco or a movie ticket every day for a month, it’s normal for me to want to be recognized for the effort – because it is an effort. Opportunity: An occasional coffee upgrade or free side of Taco Bell cinnamon twists doesn’t cost much, yet research has shown that one-third of consumers will give a company more business upon receiving surprise and delight rewards. Timing matters: A merchant can program its subscriptions to send alerts when members hit milestone visits within set periods.
Mistake 3: Failure to connect, digitally and in the flesh. If frontline workers and their digital counterparts are not able to recognize repeat subscription customers, then their employers are not recognizing a valuable asset. Opportunity: Employees (and apps) can be enrolled as “engagers” and provided a loose script when encountering subscription customers. “Which was your favorite taco (or movie or coffee) this week? Why?” or “What can we do to make these trips more fun for you?” Machine learning and artificial intelligence tools can be a big help in developing more personalized, relevant questions – and it’s not that daunting. Ten to 12 pieces of telling data should be enough to start a banging personalization effort.
Mistake 4: Making membership too “exclusive.” Yes, anyone can join most subscription services, but what if a regular customer (and potential member) doesn’t eat tacos, or lives alone and doesn’t need $30 worth of produce every week? Opportunity: Promote tiered subscription options based on market segments. Young apartment dwellers may be more receptive to single-serve prepared meal kits, retired folks to matinee movie subscriptions. The beauty of tiers is their “add-on” potential, via service upgrades – some experts advise these should meet 30% of subscriber needs. Pro tip: The offerings of each tier should be evident enough to easily quantify, not cause confusion. (See next tip.)
Mistake 5: It’s too complicated. Subscription services that offer options can become rule heavy, and this will turn customers off. The appeal of subscriptions, remember, is ease. The member pays once; the company is supposed to do the rest. Opportunity: Don’t overthink it. Let the customer data do the work for you and use what you learn to make the total experience happier for all from start to finish. To that end, don’t ignore areas with high friction, such as payments. It’s estimated 15% to 20% of recurring payments fail, and that equals a complication that may cause customers to walk. A system’s algorithms should detect payment failures. From there, a company can identify and resolve the cause.
What You Deliver All Comes Down to the Back-End
Creative product replenishment, like a daily taco fix, can launch 10,000 subscriptions. However, to be long-serving, it requires the infrastructure to gather and use member data that accurately anticipates individual preferences. That is what encourages engagement beyond automatic replenishment.
If 30 days of tacos have a shot at doing that, then chances are your awesome product or service can do it as well.
Jenn McMillen, nationally renowned as the architect of GameStop’s PowerUp Rewards, is Founder and Chief Accelerant of Incendio, a firm that builds and fixes marketing, consumer engagement, loyalty and CRM programs. Incendio provides a nimble, flexible and technology-agnostic approach without the big-agency cost structure and is a trusted partner of some of the biggest brands in the U.S.