Subscription eCommerce Marketing: Understanding (& Retaining) Your Customers

Subscription eCommerce has recently hit its stride. From organic diapers to men’s razors to nail polish, innovative subscription companies are popping up everywhere ‘ and they’re taking the eCommerce industry by storm.

One reason for such success? Subscription companies have customer retention built into the business model. By definition, subscription businesses rely on subscribers, and therefore must cater to repeat customers; in contrast, most eCommerce companies still focus on acquisition over retention. And since 80% of your future sales come from 20% of your existing customers, it’s easy to see why subscription companies have an edge over other eCommerce models.

And yet: 72% of subscription eCommerce customers fail to make a second purchase within 6 months of the initial transaction. Though this is a smaller percentage than retail (91.5%) and flash sale sites (a whopping 93.8%), it highlights how much is still lacking. Even with the baked-in advantage, subscription companies must address customer retention if they want to last as a brand.

By nature of the business model, subscription companies have a lot to gain through customer retention. At the same time, they have a lot to lose ‘ as mentioned, these companies depend on regular subscribers to survive. How subscription companies sustain long-term customer engagement is what determines their longevity as a business.

This 4-part series will focus on Retention Marketing tactics for subscription eCommerce. We’ll dive deep on how to maximize subscription customer retention by building a customer journey.

The key to retaining subscribers

By now, it’s clear that successful customer retention depends on a whole lot more than competitive pricing. It’s a brave new world of personalized, on-demand commerce: not only what customers want, but how and when they want it. From one-day shipping options to company standards that align with their own, consumers are looking for more than just price; they’re looking for value.

This is especially true for subscription companies, which must provide long-term value that justifies a monthly charge. To prevent fatigue and the resulting loss of interest, a tailored customer experience with multiple touchpoints throughout the customer’s lifecycle is key. These touchpoints determine how businesses keep the conversation going.

As for how to determine these multiple touchpoints ‘ well, that depends on the data.

Step 1: Data aggregation and analysis

Understanding the customers you already have is a great first step to keeping them. eCommerce companies are sitting a treasure trove of data that can provide a wealth of insights on your existing customers; when aggregated and analyzed correctly, the resulting information is crucial for building accurate customer profiles.

Behavioral data, like website browsing and email opens, can tell you what messaging or content speaks to your customers. Past transactional data provides insights on price sensitivity, whereas demographic and social data can help you figure out where your customers hang out both offline and online. Use this information, either in-house or through a third-party vendor, to figure out the best ways to keep your subscribers engaged.

Step 2: Identifying high-value customers

The next step to effective customer retention is realizing that not all customers are created equal. Some of your subscribers are more valuable than others, and being able to pinpoint who they are (and provide them with some highly engaging content or offers) will be key in maximizing your customer retention values.

Customer Lifetime Value (CLV) measures the potential net value of a customer during the time they’re engaged and spending with your company. Since we can’t predict exactly how long each relationship will last, we calculate CLV as a periodic value based on a given estimate of time.

CLV helps you strategize big picture for maximizing customer retention, but also in making your acquisition spending more efficient, too. By identifying the acquisition channels that produce higher lifetime value customers, you can figure out how to optimize your acquisition spending.

Step 3: Building Customer Journeys by Segment

Once you have all this data cleaned and organized, you will have a clear idea of who your most valuable customers are, how they react to pricing and messaging, and even which acquisition channel they come from. The worst mistake you can make at this stage is to neglect putting that information to good use.

Use the data to sort your customers into segments; understand which customers are motivated by offers or free shipping, or who is most likely to engage via social media instead of email. Build customer journeys that cater to these specific segments to deliver personalized messaging that will resonate with each customer.

Next week, we’ll take a closer look at how to effectively capture customer information, which will further help you segment your customers.