Daily Insights

Genius Subscription Strategies

By: Mia Silverio | Oct 23, 2019

The consumer ecosystem is undergoing a metamorphosis, and the rise in subscription services across previously untouched categories (think commoditized or perishable goods) is early proof. Seamless, scheduled conversions will replace effortful and erratic ones, and points of sale will become increasingly enmeshed in users’ daily routines. To weather this shift, brands must adapt their business models to reduce friction and dial up differentiated value and convenience. 

Mckinsey estimates that the subscription market has grown 100% in the past five years and that 15% of online shoppers have signed up for one or more subscription services. Thirty-seven percent of brands with DTC have a  subscription option, up from 33% in 2018 according to Gartner L2’s Digital IQ Index: Personal Care. In the Home Care Index, where brands have historically eschewed DTC for retailer partnerships, adoption is lower, at 26% in 2019. 

In order to determine the table stakes for subscriptions, Gartner L2 benchmarked the performance of the top ten most successful services by current subscribers. Brands in this “Genius Class” of subscription offerings prioritize personalization and convenience, the two qualities that are most important to subscription service customers. 

Seventy percent of the top ten brands offered a quiz (average length: almost nine questions) and 60% allowed customers to take the quiz before making an account. This “diagnostic” serves a dual purpose: it makes the brands’ products appear personalized and thus more valuable, when, in reality, only their selection over other SKUs is tailored. Second, it provides invaluable data like contact information and product preferences that can be leveraged to shape future R&D and target new customers. 

Convenience is the main selling point for brands in the replenishment space. Those with the highest number of users, Amazon’s Subscribe and Save and Dollar Shave Club, make it easy by offering free delivery at customizable frequencies.  

Best in class customer service is becoming table stakes for subscription brands looking to make long-term contracts with users. Fifty percent of the top ten and 50% of brands in the Personal Care Index with subscription services have live chat functionality, while Home Care brands, at 25% adoption, have yet to catch up. Laggards should look to Beauty brands for best in class examples, where leaders like NARS place live chat in a persistent box starting on the homepage and collect user data prior to starting for a more personalized experience. 

Subscriptions, along with voice and IoT technologies, are poised to transform the shopping experience. They are the tools that will move the digital marketplace forward towards a future of seamless product integration and frictionless conversion. Personalization, convenience, and customer service will be differentiating factors. Brands should take note.