WHITEPAPER - APRIL 2021 - Commerce Futures

WHITEPAPER - APRIL 2021

SUBSCRIPTION ADDICTION
Retail subscription services have been around for a long time. However, the
combination of continued growth in online retail plus the COVID-19 pandemic, which
saw many of us seeking new ways to shop, has furthered heightened their popularity.

Subscription services for physical goods were an attractive proposition even before the COVID-19
pandemic. A 2019 Royal Mail survey found that over a quarter (27.4%) of UK consumers were signed up to
a subscription box service, with over half of those aged 25-34 (52.1%) signed up to at least one1. In many
sectors the pandemic then accelerated take-up. In April 2020, the first full month of lockdown in the UK,
spending on digital content and subscription services jumped by 50%2. In Britain every household is signed
up to an average of seven regular subscription services.3

This particular ecommerce niche holds great promise for those who get it right. Even before the pandemic,
the UK market for subscription boxes was forecast to reach £1 billion by 2022.4 It now seems likely that this
figure will be even higher. But as buyers in the UK start to have more choice again over where and when
they can shop, how can you retain subscribers and grow your subscription service? If you haven’t launched
one, how do you get it right? We sought insights from vendors who are making subscription services work
for them across a range of products. And no, it isn’t all about KPIs, metrics and churn.

WHAT’S YOUR STORY?
When you are trying to persuade people to part with their money
on a regular basis, you need to have a captivating story to tell and a
compelling reason for them to sign up. Are you solving a problem for
them? Are you keeping them entertained? Are you letting them try
something new? Or are you simply making their lives easier? If it’s a
combination of two or more of these, so much the better.

Whatever product or service you are trying to sell as a subscription,
your proposition needs to be clear. At craft beer subscription
service BeerBods.

  WE’VE ALWAYS HAD ONE SIMPLE MISSION
  THAT HAS REMAINED THE SAME FROM
  WHEN I WAS HOLDING BEER TASTINGS IN
  MY SHED TO TODAY, AND THAT’S TO GET
  MORE PEOPLE DRINKING BETTER BEER,
  Matt Lane
  Founder - BeerBods

The sales pitch on the website to potential customers is strikingly
clear: ‘One beer and the story behind it every week’. Similarly, at Pact
Coffee you’re invited to ‘Wave goodbye to bad coffee days’.

Meanwhile, at the Bike Club, the aim is to get children cycling by
helping parents navigate the daunting task of choosing bikes,
given that in a physical retail environment it’s easy to be baffled by
enthusiastic expert staff.

A common theme here is curation – making people’s lives easier in a world where we’re often
overwhelmed with choice. “The amount of choice is making it harder for people to choose, so the job
of curator becomes really important,” says BeerBods’ Lane. “Even though they don’t know what they will
receive, our subscribers tell us the number one reason they subscribe is because they trust us to find beers
they would never find otherwise.”

For some companies, the ecological aspect is key as buyers increasingly care about the source of the
things they consume. This is a core proposition for fruit and vegetable service Oddbox, where you are
invited to ‘Eat good. Do good. Stay odd.’ And the first button you see says ‘Start rescuing’. Given that being
eco-friendly is something more and more people are looking for, ensure it’s easy for people to see this if it’s
one of your sales messages.

Having determined your offer, it’s important to be aware that you are unlikely to get it 100% right from the
start. “We can presume what people want and what the product should be,” says Alexandra Rico-Lloyd,
Chief Operating Officer of the Bike Club. “But no matter how much work you put into it, you’re never going
to get it perfect when you finally do that hard launch because there’s always going to be something you
haven’t thought of. So it’s about having a minimum viable product and being adaptable to change and
develop your proposition over time.”

ACQUISITION
The next step is to acquire some paying customers. There is no single guaranteed route to do this, not
least because some subscription services grow out of ideas that were first set up for friends and relations,
some are pure play subscription services and others are extensions of successful online and/or retail
store businesses.

  DON’T UNDERESTIMATE HOW MUCH IT COSTS TO ACQUIRE
  CUSTOMERS AND MAKE SURE THEIR LIFETIME VALUE IS GOING TO
  SUPPORT THAT POSITION
  Joseph Munns
  Managing Director - Bakedin

Whatever you do, “Don’t underestimate how much it costs to acquire customers and make sure their
lifetime value is going to support that position,” warns Joseph Munns, Managing Director of Bakedin.

All our experts agree that having an attractive financial offer is vital, although there’s evidence to show that
in some cases buyers are willing to pay a premium for subscription services. One major decision surrounds
introductory offers and how best to pitch these to avoid bargain hunters who buy a cheap first ‘box’ or two
and then leave. Monitoring your churn at different stages and designing (and continually assessing) an
appropriate retention strategy is important.

Another key decision is how much choice you give buyers in what they will receive. At one extreme are
businesses such as BeerBods where there is no choice, in this case because the aim is for everyone to try
the same new beer every week, usually at the same time. “Curation is at the heart of what we do, so if we
start letting our customers pick what we send them, it takes away that central tenet,” says BeerBods’
Lane. Similarly, at Bakedin there is just one choice: between sweet, non-dough based bakes and bread-
based bakes.

But this approach doesn’t work for all schemes because of the product on offer. At Pact Coffee, for example,
there are choices that allow for, among other things, the different ways subscribers brew their coffee, the
strength of coffee they typically drink and their budget. And at Oddbox they cater for how much subscribers
eat each week, whether they want fruit or vegetables or both and have any dislikes, and when they’ll be on
holiday – after all, you can’t address food waste if you deliver food that people won’t or can’t eat.

There are numerous options of how to promote your service – too many to go into here. But just because
your offer runs online, don’t forget to consider offline promotions as well, such as printed flyers. If you have
bricks-and-mortar retail outlets, consider promoting your subscription service in your stores. “We’re trialling
this at the moment, but the subscriptions we promote this way are ones with products that are not currently
available in store,” says Joanne Gray, Loyalty and Retention Manager at Hotel Chocolat. At Bakedin, they
also make their subscription products unique so as not to cannibalise retail sales.

Another suggestion is marketing partnerships with like-minded brands whose customer profiles fall in line
with your target audience. “The return on spend can be far greater when you work with synergy partners
and this can perform really well compared with paid social,” notes Ted Charalambides, Digital and Marketing
Director at Pact Coffee. Influencer marketing is another avenue that some brands are exploring.

Whatever you opt for, the advice is to keep                 “IF YOU AVOID LOOKING AT
your campaigns consistent in terms of brand                 ATTRIBUTION AS A MEASURE
and to focus on where your target customer
segments tend to hang out. “We don’t want                   OF PERFORMANCE, YOU’RE
our ads to appear too different, so that if                 MISSING A BIG CHUNK OF WHAT
someone sees us in different places they                    YOU COULD ACHIEVE”
instinctively know it’s the Bike Club,” says
Rico-Lloyd from the Bike Club.                              says Charalambides from Pact Coffee, who
                                                            suggests looking at the “triggers you can pull on
Finally, make sure you constantly analyse                   different social media channels to broaden your
your numbers over time to understand the                    horizon”. Understanding any seasonality that will
customer journey before the last click.                     affect both acquisition and retention is
                                                            also important.

RETENTION AND GROWTH
Once you have your subscribers, how do you keep them? As mentioned above, the optimum price
differential between any initial offer and the ongoing subscription cost is something you will need to
determine over time. But one of the other main elements that affects retention is customer experience.

“Retention is a big play for any subscription B2C brand,” says Pact Coffee’s Charalambides. “If we can
improve on customer experience, in theory we should retain more customers and reduce churn.” Oddbox’s
Co-Founder and CEO Emilie Vanpoperinghe goes so far as to say that “churn is not a marketing issue, it’s a
whole company issue.”

That customer experience obviously includes the product itself, but also covers everything from the
ordering process, content on your website, any interface with customer services, the way a
product is packaged and delivered and, if you have one, any community you have built around your
subscription service.

As far as the product is concerned, “the first box experience really impacts retention,” notes Oddbox’s
Vanpoperinghe. “Just like when you meet someone new, if you have a good first experience, you’re more
likely to forgive them if the second time isn’t quite as good! So we’re putting together a start-up pack for
new customers which will be slightly different, to boost that initial experience.”

In terms of online, make sure you keep it fresh so that people want to keep coming back.

  AT THE END OF                             The content on your website and in emails also supports retention.
  THE DAY AN                                Recipes, tips and videos are valuable on food subscription sites, for
                                            example, with Oddbox providing seasonal eating and meal planning
  ECOMMERCE STORE                           guides, among other things. To support its eco credentials, Oddbox’s
  IS LIKE A RETAIL                          Vanpoperinghe explains, “We’ve also developed an impact calculator
  STORE – IT NEEDS                          where, on a monthly basis, we send customers details of the impact
                                            they have made in terms of how much fruit and veg they have rescued
  ITS WINDOWS                               and the volume of CO2 emissions and litres of water they’ve saved.”
  CLEANED AND
  THE STOREFRONT                            Your website also offers the opportunity to gain more from your
  CHANGED, WITH                             subscribers by adding products that complement the ones they
                                            receive as part of their subscription. For primarily retail brands where
  NEW THEMES AND                            the subscription products are produced in relatively small volumes, this
  NEW ITEMS FOR                             provides an opportunity to get subscribers purchasing large volume
  THEM TO BROWSE                            production items too.
  Alexandra Rico-Lloyd
  Chief Operating Officer - the Bike Club

COMMUNITY FEELING
For some brands, community has been a central part of the
subscription offer from day one. Others have gradually moved in this
direction over time. However, the pandemic brought the concept
into sharp focus as people turned to online communities when stuck
indoors during various lockdowns. The key is making it work for your
brand and products.

At BeerBods, the whole subscription concept is built around everyone
trying the same beer at the same time on the same day and sharing
their experiences online across various social media channels. In
addition, at these live tastings they get to hear the stories behind the
beers they are drinking. “Our Thursday night tastings are the beating
heart of what we do and the number one reason people subscribe,”
says BeerBods’ Lane. “They love the ritual and the social aspect.
Building that magic over the long term is hard, but it’s all about creating
something they love and want to be a part of long term. What I would
advise, though, is to engage with them in the way they find easiest and
to go where they are, as when we tried to create our own community
platform, it didn’t work.”

The concept of sharing an experience on the same day is now a core part of the Bakedin subscription
service too, although this wasn’t how it was originally planned. Because customers are sharing pictures
of something they’ve baked themselves, Bakedin freezes its social media channels between the boxes
arriving and the monthly ‘reveal’ to create a buzz around that time. “Organic reach on Facebook can often
be insignificant unless you’ve got an insanely big audience, so we set up the group because we knew it
would get loads of interaction,” admits Munns from Bakedin. “But then we realised it didn’t belong in the
background. Now, even though it sometimes gets used by subscribers as a customer service channel, the
community generated a huge amount of positivity.”

ULTIMATELY, IT’S ALL ABOUT THE CUSTOMER
Online communities provide a
valuable way of finding out what
                                                           we remain relevant for our
                                                           customer base.”
                                                                                                                     FOCUS ON
customers think, as do surveys.                                                                                      MAKING YOUR
“Customers won’t necessarily
tell you exactly what they want,
                                                           It might seem that a subscription
                                                           service is a potential goldmine,                          PRODUCT
because they don’t necessarily                             but it needs careful consideration                        GREAT, BUT
know, but they can still help you                          and planning, and then plenty
understand your key parameters                             of nurturing and continuous                               BEAR IN MIND
in terms of box contents,
packaging, size, cost and that
                                                           updating along the way. At the
                                                           same time as retaining your
                                                                                                                     THAT PEOPLE
kind of thing.” Says Gray from                             focus, you need to ensure you                             DON’T BUY
Hotel Chocolat.                                            are communicating clearly and
                                                           making people’s lives easier –                            JUST YOUR
Rico-Lloyd from the Bike Club
has another take on the value of
                                                           and often more fun.
                                                                                                                     PRODUCTS
surveys. “As entrepreneurs you                             “Of course you should make sure                           – THEY BUY
always have a new fun thing that                           your product is functional and
you think would be amazing for                             is amazing, but make sure you                             THE WHOLE
your business but we always talk
to our subscribers first and that
                                                           then build everything else around
                                                           that. Emotional engagement
                                                                                                                     PROPOSITION
helps us to drive the direction of                         is important too.” Advises                                Emilie Vanpoperinghe
the business and make sure                                 Vanpoperinghe from Oddbox.                                Co-Founder and CEO - Oddbox

      LISTEN TO YOUR CUSTOMERS AND GATHER INSIGHTS
      Joanne Gray
      Loyalty and Retention Manager - Hotel Chocolat

1
    Royal Mail; The UK Subscription Box Boom Report; February 2019 https://www.royalmailgroup.com/media/10626/royal-mail-subscription-box-boom-report.pdf
2
    Barclaycard Payments; June 2020
3
    Barclaycard Payments; June 2020; includes digital entertainment and premium delivery services
4
    Royal Mail; The UK Subscription Box Boom Report; February 2019