DTC Advice: How to Grow Your Subscription
Direct-to-consumer subscriptions are taking the ecommerce industry by storm. A joint report by Rodeo and Pipecandy predicts that over 75% of DTC brands will offer some type of subscription service by 2023.
But with that surge in popularity comes an increase in potential competition. So what can brands do to help make their subscription services stand out (in a good way)?
To answer this question, we’ve gathered advice and insights from some of the brightest minds in DTC and summarized them for you here. The advice covers everything from subscription cadence to affiliate marketing to consumption rate, and other things in between.
So without further ado, let’s begin:
Focus on reducing friction
“Friction” can be defined as anything that prevents the customer from having a good experience with the brand, whether that’s difficulty navigating your website or challenges in modifying their subscription.
Dean Bakes, Head of Sales at Disco, understands this well.
“The things that I see in terms of success that brands are doing well is reducing the friction as much as possible. Giving customers the ability to easily and efficiently change, skip deliveries, change delivery schedules. I think the biggest pain point I have is really with a lot of subscription billing platforms that exist out there right now. They're just completely inefficient.”
These inefficiencies carry a real risk of subscriber churn. As the friction builds up, consumers get more frustrated and eventually cancel.
Balance growth and retention
Growth isn’t bad in and of itself, but it has to be balanced with retention, according to Andrew Freedman, Partner at Hedgeye Risk Management.
Focus too much on growth, and the customers you win over won’t stick around for the long-term. This forces you to sell even more in order to stay profitable as your older customers churn out. It’s the equivalent of pouring water into a leaky bucket—all you’re doing is replacing your losses.
But if you invest in more retention-focused measures like improving the value of your subscription offerings, streamlining the ordering process, and empowering consumers to make changes to their accounts, then you’ll be able to accelerate your growth by an order of magnitude.
Solve for consumption rate
CPG subscriptions are a delicate balancing act. Send too little, and the consumer will think you’re too stingy and get frustrated. Send too much, and the consumer will feel overwhelmed by the amount of product and… also get frustrated.
In order to successfully navigate this Goldilocks problem, Ben Kochavy, Head of Growth at Cold Bru Digital, suggests trying to discover the consumption rate of each subscriber.
“It's an interesting problem to solve,” Ben says. “I was literally having a conversation about this with a client: how do we know the consumption rate? If it's not standardized the way it is for, say a supplement, it could just be as simple as asking. You could literally do this manually with CS teams where you basically have a templated question, ‘Hey, how fast do you consume XYZ?’ And then based on that, they customize the subscription.”
It’s not a perfect system, however. If the consumption rate changes, you're back to square one. The key then is to reach out to each account on a regular basis. Not only are you getting up-to-date usage data, but you’re also showing the consumer that you’re paying attention and haven’t forgotten them.
Measure, improve, then measure again
“You can't improve something that you can't measure.” said Dan Freed, co-founder of nootropics brand Thesis, on an episode of the Subscription Radio podcast.
Measurement and testing is something that all brands should be doing, and yet many don’t—for various reasons. They might not have the tech stack or the budget. Maybe they don’t have the manpower or expertise.
But if you’re to grow your DTC subscription service (and, honestly, your entire DTC business), measurement and testing is something you have to invest in. Dan learned this the hard way.
Dan says, “We could measure the basics of retention, but we couldn't actually run some of the complex tests that we wanted.We really want to test how much does a free gift move the needle for retention? You know, should it be month two, should it be month three? We weren't able to run those types of tests until now.”
Fortunately, Dan was able to bring in the tech required to run these kinds of tests, and it’s changed the way he’s done business.
“We can tell how our CAC to LTV is trending, and we can get the basic insights that we needed. But you really have to dive a level deeper to see like how these different cohorts of customers are behaving. So being able to test different funnel structures, different product pages, different offers, and not only correlate that with the direct acquisition metrics, so things around CAC and conversion rate, but with retention.”
Give consumers more immediate control over their subscriptions
Brands have a bad habit of waiting until the consumer is threatening to cancel before giving them what they want. That has a strong potential to backfire. After all, if you as the brand could let the consumer have their way now, why didn’t you do it before?
Lorenzo Carreri, co-host of the podcast Understanding How Shoppers Think, suggests that a big part of subscriber dissatisfaction stems from the inability to choose their product quantities at the onset of a relationship.
This makes sense, both from a logistical and a customer experience angle. By setting the right quantity at the front end, the consumer gets exactly the right amount and doesn’t have to waste the extra product. They’re satisfied and you save on costs. It’s a win-win situation.
Invest in word of mouth
No matter how many marketing dollars you spend trying to connect with a customer, they will always believe their friend’s word over yours. That’s why you should make sure that what the friend has to say about you is positive.
As Tero Isokauppila, founder of functional foods company Four Sigmatic, shares, “Very rarely do people subscribe before they know they love a product. So make sure it’s easy for them to refer their friends. Consider implementing a program where customers earn money off their future orders when their friends place an order through your referral program.”
“Having strong referral relationships is very important. Especially now when the DTC brand struggles paying up for the high customer acquisition costs with Facebook and Google. So I’ve found that having really happy customers who tell their friends is really one of the only winning strategies long-term.”
Don’t dismiss affiliate marketing
Affiliate marketing, where brands hook up with third parties and reward them for bringing in new customers, are just as valuable for gaining subscribers as they are for direct purchases. Especially when you consider that affiliate marketing generates between 5% to 25% of online sales for some of the biggest brands in the world.
Diana Lozano, Affiliate Strategist for Tinuiti, has some strong opinions on the matter.
“It’s important to incentivize publishers to promote subscriptions to their audiences,” Diana Lozano said during the 2022 DTC Summit. This can be done in a few different ways:
“One: Increase commission rates for subscription transactions. This can be an evergreen change or a limited-time only arrangement.”
“Two: Give partners a bonus flat fee amount per subscription. This would be above and beyond regular commission-rate payments.”
“Three: Secure paid and unpaid placements for additional visibility. Optimize publishers to the best of your ability and book placements to get in front of their audiences.|
“And finally, create exclusives for first-time sign-ups. For example, you can give an additional 20% off for first-time subscribers.”
Use subscriptions where they make sense
It may be tempting to throw every product you have in your catalog into the subscription box, but you should resist the temptation. Not everything is appropriate for the subscription model.
Just ask Matthew Barnes, founder of Proteus Digital Lab.
“For products where subscription is actually convenient and actually makes sense, that will just remain durable, like dog food. Do I want to go buy dog food? No, I don't want to buy dog food. My dog’s just going to keep eating the same food. So subscription is a terrific idea for dog food.”
“What about T-shirts? I don't need a t-shirt subscription. I will just have t-shirts and I will wear them. And when they wear out or I get tired of them I will give them to the charity shop, I will buy a new t-shirt. I don't need a subscription for t-shirts to remind me to buy t-shirts. That is incredibly stupid.”
If you have items that are cute or interesting or unique, you may be able to get away with things like shirts. But for novelty items like that to work, you have to have access to enough variety that you won’t send the same item to to the same customer twice.
How to implement best practices
As you digest all of these best practices we shared, just remember that you shouldn’t apply advice blindly. Every business is different, and a best practice that might work for another company might not work with your own (except for testing and measuring—that’s pretty much universal).
So how do you apply all of these best practices to your DTC subscription? Will you have to overhaul your entire process and hire staff to implement your great ideas?
DTC subscription solutions like Rodeo can help you meet many of these best practices conveniently and at scale. For example, Just in Time subscriptions allow customers to adjust the timing of their subscriptions to meet their needs. They don’t have to cancel when they have too much product—they can just pause the deliveries and remain subscribers. The system will provide smart reminders to help them purchase when they’re ready.
Services like Shopify offer one-click checkouts that reduce friction by allowing subscribers to checkout without filling in any extra information. Just one click (literally) and they’re done!
Of course, data is very important to implementing any of these measures, and that’s where services like Rodeo shine. Rodeo is able to collect consumer-specific first-party data that allows brands to create an amazing customer experience. We show the consumer behavior around the entire subscription process. We can show you who subscribes, how often, what products they purchase as a subscription, and can even see their purchase data after they cancel the subscription.
If you want to learn more about how Rodeo can increase the ROI of your DTC subscription service, shoot us an email at [email protected]