subscription services, retail

Shoppers are learning their way around a deal. In general, international and U.S. consumers have made the most out of aggressive Black Friday and Cyber Monday sales. In the subscription service corner, sales are up. Recurly, a subscription management platform, released its findings from an analysis of subscription business activity so far during the holiday shopping period.

As recurring box delivery services become more widespread, consumers are eager to give the gift of subscriptions this holiday season. Recurly’s research unveiled that same-store sales increased dramatically for top performing subscription services with total payment volume up 126 percent on Black Friday and 131 percent on Cyber Monday.

In total, top subscription services fared well during the four-day Black Friday crunch. Recurly’s research found that top subscription services benefited from a 115 percent year-on-year rise in sales volume. This could be in part due to the influx of coupon redemption during the period – up 43 percent compared to last year.

Here, Dan Burkhart, chief executive officer and co-founder of Recurly, discusses how brands can broaden their business to offer subscriptions, how mobile spending effects subscription service opt-ins, and how to sustain momentum built off of Black Friday sales.

WWD: How has the increase in purchasing via mobile devices affected the buying of subscription services?

Dan Burkhart: More and more we see mobile playing an increasing role in commerce. While we didn’t look at this factor specifically in our study, we are firm believers in eliminating friction – particularly when it comes to mobile checkouts. Offering to store customer payment credentials for future purchases allows for offers to be presented and easily accepted by consumers without forcing them to fumble for payment card details. This is quickly becoming a standard. This attention to detail and customer empathy will result in decreased friction and cart abandonment while increasing transaction velocity.

WWD: In this current landscape, what are key factors for brands to consider when branching out into subscription services?

D.B.: First and foremost your product or service must lend itself to being extended via a subscription or membership program. In essence, we are talking about an ongoing value exchange. In the realm of physical products, categories that meet that requirement include consumables such as beauty products, basics such as socks or lingerie or even some type of first look, special deal or rental of higher-value goods.

In terms of an ongoing value exchange, it’s crucial to establish a reason for a continued business relationship. The quality of the product or service is key to establishing delight for the customer and elements such as variety, surprise, anticipation or a feeling of uniqueness can be powerful motivators to continue the relationship.

As always, good storytelling goes a long way towards creating a sense of anticipation and the feeling that something special is about to arrive. Great marketing companies often precede the shipment of their offering with an email tailored to accomplish this critical component.

WWD: How can subscription services maintain the momentum built off of the Black Friday and Cyber Monday sales?

D.B.: It’s important to consider the brand promise. For example, a brand that promises value such as an economical shaving club needs to combine a quality product with convenient delivery in order to create a positive experience for the customer. In that example, the ongoing exchange with the customer is predicated on delivering value and a positive experience, not just price.

In general, subscription commerce provides an opportunity to understand customer preferences and provide a personalized experience. In the case of physical goods, we hear a lot about a curated experience, which lends itself to forming a deeper customer bond. Many successful brands create a feeling of anticipation by sending an email describing the contents of the latest shipment in advance, whetting the customer’s appetite.

Never underestimate the power of good packaging and design in that equation. The unboxing experience can be a real ritual for many customers, something to which they look forward, even posting videos and photos across social channels as they open their latest shipment. Fostering community around your brand, which encourages that kind of viral component in the experience, provides a great way to reach Millennial customers.

WWD: What were the most impactful forms of coupons? Why did this resonate most with shoppers?

D.B.: In the study the most popular coupons that we saw were for one month free or for discounts, sometimes as high as 50 percent. However to gauge the true impact of a coupon depends upon the cost structure of a business. In businesses with low COGS, such as a cosmetics sampler, a free trial such as is seen with one-month free coupons is a great way to encourage trial and adoption. Combine that with a high virality co-efficient – photos and videos on YouTube and Instagram, for example – and you have a great way to build momentum for your business. We also see steep discounts in businesses based on digital services, where the COGS can be low.

With higher COGS products such as shoes or jewelry, free trials can be highly unprofitable and risky. Unless the trial samples provided are viewed as an acceptable promotional expense, offering a free sample in exchange for a commitment to a subscription in advance can result in unacceptably high chargeback rates. Merchants are better off promoting a one-time purchase at a steep discount as a means of initial trial than offering a free item of intrinsic value to be shipped in exchange for a longer-term subscription purchase commitment.

One successful model seen frequently is to offer an increasingly graduated discount for each gift code shared and redeemed by friends of your most loyal customers. This discount can be offered in the form of a credit or additional product up-sells.