I am sure you have heard this countless times, “The e-commerce market is exploding or the e-commerce market has grown dramatically within the past five years!” The disruption in the way we shop and choose our products due to the large adaptation of digital channels has shifted customer expectations to buy from brands that offer convenience, speed, and positive experience while doing so. The subscription based model is fantastic for CPG brands to offer convenience to their customers while remaining competitive and growing their brands. Here are 5 ways we think CPG brands can use this model to increase revenue with a subscription based model.
What is a CPG brand?
A CPG brand is a brand selling Consumer packaged goods (CPG), which are “items used daily by the everyday consumers that require routine replacement or replenishment, such as food, beverages, clothes, makeup, and household products.” Doesn't this sound perfect for a subscription based model?
What is the subscription based model?
In its most basic form, a subscription business model is one that charges customers a recurring fee usually charged monthly or yearly for the access to a product or service. Think Netflix, Dollar Shave Club, or Serenity Kids.
This definitely sounds like the perfect match; a product that requires routine replacement, replenishment, or access matching with a service model that offers the product at the rate of consumption that is right for you. I think we have hit the jackpot!
The Future Outlook of Subscription Based models for CPGs
Conglomerate CPG companies that are competing in the various categories like personal care/beauty, home cleaning, food and beverage are finding it difficult to meet high standards of regulations while still delivering substantial growth and maintaining profit margins. This is why many companies have started to turn to direct-to-consumer and subscription service models to keep increasing revenue and ultimately their bottom line.
You’ve heard that the e-commerce market has exploded but the subscription economy has also boomed right along with it, if not more in recent years. In the past seven years subscription based companies have seen agrowth rate of a whopping 300%! Furthermore the global subscription economy is now projected to grow 70% year over year andhit half a Trillion dollars by 2025, growing 9x faster than the S&P 500 average. Another great forecast to look forward to is that by 2023, 75% of businesses that sell direct to consumers are expected to start offering subscriptions according to thisShopify article.
Advantages of subscription-based businesses.
The Three Types of Subscription Models
Now let's talk about the different types of subscription based models so you can pick the one that best suits your business and tailor your offerings to your specific market.
5 Ways on How to Increase Subscriptions and Decrease Churn
Now that you know the basics of the subscription model let's get down to the ways you can improve your subscription rates and reduce your churn rate if you are already using this model. The following five tactics will make your subscription service more effective and build customer loyalty.
There are thousands of CPG subscription services online. You shouldn’t be exactly like any of them. Instead, you should be creative to help your brand stand out and find its competitive advantage. Look for patterns in the ways your competitors sell their products in your market and find ways to be different. What sets you apart from your competitors? Is it price? Is it convenience? Is it exclusivity? If you do focus on exclusivity can you offer even more exclusive items?
Personalizing the subscription experience helps companies retain more of its customers. Don't we all want options that fit our needs? Offering customers the ability to build their own plan is key to retaining your customers and customer satisfaction.
If you offer curated subscriptions, you should put a lot of emphasis on personalization. People sign up for curated boxes because they want something special that is put together with their preferences in mind. The more you can make them feel special by giving them exactly what they want based on their preferences, the more your customers will love what they receive. This is why it is imperative to collect as much user data as you can. The more you know about your customer the more you can personalize your curated box which will lead to increased customer satisfaction.
Convenience is key in the subscription economy. If you’re offering CPG goods, it is crucial to make it easier for your customers to subscribe than to have them manually reorder every subscription period. It should be even easier to sign up for recurring deliveries than it is to buy something once. There has to be a benefit to subscribing.
These are a couple of ways you can accomplish this:
Most customers subscribe to products because of convenience. If you are able to find more ways to make your customers’ lives more simple, you will start increasing your subscriptions. Here few ways you might be to simplify your service:
Data is king! It’s easy to get lost in the sauce of the day-to-day task of running an e-commerce business. But if you want to increase your e-commerce subscriptions you must set aside time for analyzing your customers data points and KPIs. Check your subscription data at least once every subscription period. Pay attention to key KPIs like new subscription sign-ups, upgrades, cancellations. This helps you successfully market to your customers, for example, you can sway them into re-subscribing by offering them a discount if they just canceled their subscription.
How to get started increasing your e-commerce subscriptions now
It is easier than you think, whether you are just starting out or if you want to improve your current model,ReCharge is a great platform for CPG brand owners to easily integrate and manage their brand’s subscriptions services. Quickly enable subscriptions, increase lifetime value, reduce customer churn, and measure your performance using ReCharge. With varying prices andplans, a help center, and a resource library on their website, you are being set up for success from the start. Schedule a free discovery call with us today and chat with us about integrating this exceptional application onto your Shopify store.
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