Transcript: eCommerce MasterPlan Virtual Summit 2019 on subscription ecommerce

 

Chloë:

Hello, welcome to the eCommerce Masterplan Subscription eCommerce Virtual Summit 2019. This edition of the summit is completely focused on the world of subscription ecommerce: how to start a subscription business, how to grow one and how to add subscription products to your existing ecommerce operation.

Our guest for this session is Fiona Stevens from LoyaltyLion. She’s going to be taking us through loyalty plus subscriptions, another piece of the retention puzzle.

Hello Fiona.

Fiona:

Hi. Thank you so much for having me.

Chloë:

It’s very cool to have you here. I am looking forward to learning lots about loyalty and retention in your session. So, before I ask you anything else, let’s just dive straight in. Shall we?

Fiona:

Yes. Sounds good. So, as Chloe said today we’re going to be talking about loyalty and subscriptions. For those of you who don’t know LoyaltyLion already, we are a data-driven customer loyalty and engagement platform. We work with over four thousand retailers worldwide and our mission as a business really is to help merchants such as yourselves succeed in a world that’s becoming more and more competitive.

Today, we’re just going to do a bit of an overview to the challenges around loyalty and retention today and then look at how subscriptions really fit into meeting those challenges head-on.

We’ll jump straight into challenge number one, the fact that actually today ecommerce is very impersonal by nature. So, the days of walking into a store, having a shop assistant with a little black book, who remembered your name, your colour and what size jeans you bought last time around, are unfortunately gone.

Those days actually never existed for me, but I think that might be more the types of stores that I shop in the rather than anything else. Unfortunately, online today it’s far harder to have the equivalent of the shop assistant asking questions. It’s far harder to have a store window that actually makes people want to come in and shop with you. It’s far harder to personalise experiences.

The second challenge that we hear a lot about of merchants talking about is the fact that it’s harder than it’s ever been before to reach your customers. So, I’m sure the vast majority of you are doing some kind of online advertising, whether that’s Instagram, Facebook, AdWords, retargeting; could be anything. But, as more of us start to invest in these channels, the cost per click becomes more expensive and the effectiveness goes down.

Unfortunately, MarketingWeek says that only 9% of digital ads are viewed for more than one second. So, it’s getting harder and harder to actually reach your audiences.

Challenge number three is that we’re operating in the most competitive market in the world as ecommerce competition grows 13% each year.

On top of that, Amazon now accounts for 49% of all online sales. So, I’d like you to imagine that you own a store on Oxford Street. One morning you open up your shutters and you have a look across the road and Topshop has taken over the entire left-hand side of the street. That’s pretty much what’s happening online with Amazon. It’s quite scary both for consumers and retailers alike.

And the fourth and final challenge, which is making retention really difficult in today’s market, is that, more and more customers are demanding really excellent experience. If one retailer offers something innovative, like same day delivery or next day delivery, everybody else is expected to rise to the same challenge, which isn’t always something they can do.

And to be honest, at this point in time, we’re not really hitting that excellent customer experience as well as we could be. 81% of customers still want brands to understand them better and 78% aren’t satisfied with the level of personalisation they currently receive. Dissatisfied customers, unfortunately, aren’t the ones that you’re going to retain.

Chloë:

It sounds like ecommerce is a tough industry. Those challenges do not seem easy to tackle.

So where do subscriptions fit into all of this?

Loyalty Across Customer Lifecycle

Fiona:

Have a look at the slide in front of you.

What we’re looking at is our customer lifecycle, and I’m sure most of you have seen this diagram in various guises before. We start with our prospect: he’s just visiting your site. They haven’t necessarily made a purchase yet, but over time hopefully you’ve nurtured them into a one time customer who makes their first buy.

Again, over time, they will turn into a repeat customer when they come back and shop with you. Eventually they become loyal and, with any luck, they will become an advocate who will talk about your brand and recommend it at some point.

Unfortunately, there are points where they can drop out of that journey to at-risk and lapsed customers. At LoyaltyLion, we define somebody who’s at-risk as a customer that hasn’t returned to your store to make a purchase or a second purchase within a given timeframe. That timeframe will vary. So, if you are a company selling razor blades for example, you’d expect that replenishment to happen quite regularly. Whereas, if you are selling trainers, you’d expect a slightly longer lead time in between.

What’s interesting about this lifecycle is that the lifetime value of each customer goes up as they progress through that journey.

Likelihood Of Repeat Purchases
Take a look at this next slide.

We can see that once a customer has bought once, there’s a 22% chance that they’re going to return to make a second purchase. From that second purchase, to the third, that jumps to 43%. Between the third and fourth purchase, there’s a 52% chance of them coming back and so on and so forth. So, you can see, the lifetime value of a customer grows as you keep going through that journey.

Research from RJMetrics at the end of 2017 actually showed that for top performing companies, over 50% of revenue is from repeat customers by the end of your third year in business. We were quite intrigued by that and we wanted to see how that really mapped into LoyaltyLion’s customers.

We found, very similarly, that for stores of all sizes, the top 20% of customers are generating over half of their revenue. Whether you’ve been operating for two years or ten years, you’re actually equally reliant on a few loyal customers coming back time and again.

If we go back to the customer lifecycle, we can see that retention is important. What’s interesting now though is that there’s another stage that comes into play, which is why we’re here today. It’s the subscriber stage. Subscribers are already repeat customers. They’re coming back and buying from you again and again; but they’re not necessarily committed enough to be loyal customers.

The great news is that the subscription ecommerce market has grown over 100% in the past five years. That’s enormous. And, 15% of online shoppers have signed up for at least one subscription.

My personal favourite is my gin subscription. I get a bottle every month. It’s fantastic! But, people can subscribe for everything, from basic things like cosmetics or you can get your workout gear delivered once a month. It really is opening up loads of new opportunities.

Unfortunately, according to Econsultancy, the average length of time a customer keeps a subscription is just a hundred and twenty-five days. So, a subscriber may appear to be a very loyal, retained customer, but that could be a honeymoon period that doesn’t last that long.

Chloë:

Wow, that is all so interesting. Especially the point about how long an average subscriber usually lasts.

So, knowing this, can you tell us any tactics that can drive loyalty with subscribed customers?

Fiona:

Absolutely. So, tactic number one is based around the fact that according to Forbes, actually only 55% of shoppers who look at subscriptions go on to subscribe. Again, you might have a lovely looking product. It might be a lovely idea to subscribe to it. But, how do you get people over the line from someone who comes back and buys a few times to someone who signs up month to month?

A very nice way of doing that is using a subscriber tier to incentivise subscription.

Dr. Axe, one of our American clients, are a health and wellness brand. They have a subscriber tier which has its own unique set of rewards. You can see on the bottom left here, if you are part of this subscribe and save tier, you receive free shipping on all of your orders. You also get double the reward points and even early access to new products. So, this tier gives a whole set of rewards for subscribing that other people who just come back and shop repeatedly won’t get if they don’t subscribe.

They also make that really obvious on the site. It’s very clearly on their rewards and loyalty program page, but they also use a pop up across the site, to target people at different stages of the customer journey and incentivise them to sign up to a subscription perhaps. I think the takeaway there is to make sure that your subscription has something different that makes it worth signing up, and also make sure you’re communicating it at all points of the purchasing journey.

The second tactic is keeping in touch with people in between subscriptions. According to Forbes, 20% of subscribers say that personalised experiences are the key to ongoing subscriptions. I’m sure you, just like me, have probably seen many different introductory offers on different subscription products. It’s very easy to encourage people to switch away from a subscription even when they have already signed up. So, keeping in touch in between boxes or orders is really important to encourage them to stay.

Annamrie Emails

Loyalty emails are a great way of giving a really personalised experience. A loyalty email actually has fourteen times better open rates than a normal marketing email. We believe this is down to the fact that you can personalise them so well. There’s an example on the screen here from annmarie. They reach out and tell you how many points you’ve earned with your purchases. They’ll reach out and tell you when you have a reward. You can see here, with five hundred points, you have a $5 reward to claim.

Every email that they send based on their loyalty program is extremely targeted and tailored to each individual customer. By sending them in between the orders, or monthly boxes, or subscriptions, they’re really making sure that they’re checking in and giving people another reason to come back and get the next box.

Finally, the third tactic I wanted to talk about is about customer advocacy, which we saw at the very top right-hand side of that customer lifecycle. Customers who are recommended by friends and family are four times more likely to purchase than the customers who are brought in by Facebook advertising or by any other means. Really encouraging your subscribers to act as advocates is a sure-fire way to acquire new customers more cost-effectively. And, the customer lifetime value of those people who are referred is also far higher than just a standard customer.

Birchbox
 

A very nice example on screen is from Birchbox. They have a system whereby if a subscriber shares a picture of them, their box, a recommendation or anything on Instagram, they actually receive a full-size product of one of the things that was in the box.

Other things you could look at doing is incentivising positive reviews. You could say, “Okay, if a subscriber leaves a positive review, they get extra double points or we send them an additional product in your box.” Or, you could have a look at referrals, which can work both ways. So, if you incentivise a subscriber to make you a referral and they do, and then, the person they referred comes and buys, you can make sure that both the referrer and referee are rewarded for that action.

Make sure that customer advocacy is a big part of your loyalty program and make your subscriber tier in particular really important.

Those really are the top three tactics and I could talk for hours on this but I’m sure you’ve got other things to listen to and I’ll come back to Chloë.

Chloë:

That was awesome. Thank you so much. Proper stats to talk about as well. I do like my stats. I’ve written that a lot of them down during the course of that session. There are lots that will be appearing in the things I write in the near future, I suspect. I’ve got a whole host of questions to run through with you shortly because there are lots I want to know based on what you’ve just been telling us.

But before I do that, everyone who’s out there watching, you can get all those lovely stats and all the other tips and advice that Fiona just gave us in the PDF, which you can download directly below this video. Now, Fiona, please do tell us a bit more about LoyaltyLion and where people can hear a bit more about you.

Fiona:

Absolutely. As I touched on briefly, we are a data-driven engagement solution. We work across ecommerce platforms, say Shopify, Shopify Plus, Magento, BigCommerce, and we’re available on all of these different app stores and marketplaces. We also have integrations with a lot of other Shopify and Shopify Plus technology, like ReCharge, for example, who is one of the leading subscription partners. If you’re already using some of those tools, then you can see how we connect on the app store as well.

Chloë:

Excellent. Presumably, LoyaltyLion can pretty much do everything you were just talking about?

Fiona:

Yes, absolutely. We provide the point-based programs, based on rewarding positive activities such as reviews, social referrals, purchases, site visits and that sort of thing.

Chloë:

Excellent. I believe you’ve got a free ebook for everybody too.

Fiona:

We do, yes. Below the slides, you’ll find our Quick Guide to Customer Retention, which you can download at our site.

Chloë:

There you go guys. Even more information than just what’s on the slides, what we’ve just gone through. But, now I have a couple of questions for you. You mentioned in the session there about subscription tiers and obviously, we also have subscription products. So, just in case anyone else out there is a little bit thinking, “What’s the subscription tier? What’s a product?” Could you outline the difference between the two of those for us, please?

Fiona:

Yeah, I guess the subscription product in itself is signing up to receive something regularly so you’re not just coming back to buy again, but actually signing up to it so that it just appears on your doorstep. So, for example, Hello Fresh, the health food company, you decide which products you want and then it just regularly arrives unless you stop or change that subscription. Whereas, a subscriber tier would be something that sits specifically in a loyalty program. By becoming a subscriber you would most likely automatically enrol in that subscriber tier. But, by then being part of it, there are additional rewards, rewards you can unlock that you wouldn’t be able to access as just a regular loyalty program member.

Chloë:

Oh, okay. So is it a paid piece? Or is it like free Amazon Prime or paid for Amazon Prime?

Fiona:

You’d be paying for your subscription product. Just by virtue of the fact that you have subscribed to it, you would automatically enrol in your subscriber tier.

Chloë:

Got You. Okay. So, Dr. Axe was an example you gave us by committing to the business mentally and all that via their email address or by joining up to the program, they were unlocking those extra benefits just by being a part of it. And, then they earn points and all the rest of it goes on from there.

Fiona:

Exactly, yes. You’d be part of a subscriber tier by virtue of the fact that you’ve made that commitment and you’re investing in a longer term relationship with the brand.

Chloë:

So if I’m a subscription business, like a Birchbox or something, is it then worth also having that subscriber tier in my mix of my customers?

Fiona:

That’s a really good question because obviously if you are just a subscriber business, then everybody would fit in your subscriber tier. So, what I would say is, it’s probably worth looking at something like a VIP tier. You could have an additional VIP status that you have to either subscribe for a set number of months in a row or break a certain spend threshold perhaps to reach. Then, you can include in that tier some more really lovely experiential rewards, like early access to sales or be part of a Facebook community.

You really just want to make it something aspirational that makes people want to stick with you rather than switching off that subscription or moving to someone else. So, in that situation, a VIP tier is probably the right thing to go with.

Chloë:

So, the tiers are quite nice, aren’t they? It’s not just simply about collecting the points, it’s about reaching a threshold. Be that signing up, being there for a certain period of time or spending a certain amount, which then just unlocks the rewards without you having to count up the points.

Fiona:

Yeah, exactly. I think it’s in a business’ best interest to make those rewards and these experiences as attractive as possible. So, think outside the box of just, “Okay, I spent X amount of money,” or “I visited the site X number of times.” It’s actually about, what nice things can you do? Like, tailored content or Facebook communities, things that people can aspire to.

Chloë:

Because community and that connection tend to be a big part of what customers want from their subscription businesses. Especially with the discovery box as well. They want to feel part of something, don’t they?

Fiona:

I think with a lot of these things, you’re either making it very convenient for someone or actually you’re delivering a really nice experience and they’re finding out new things and new products. For example, I mentioned my gin subscription, but, a lot of these gins have really interesting stories behind them and actually I learned about a new brand every single month and that’s exciting. Then, I pick the ones that I want a long-term relationship with.

I think if you use your subscription and your tiers to really show someone that you align on some of these brand values or that you’ve got the same interests in things, then that’s how you can build a long-term relationship.

Chloë:

Which I guess goes back to that stat, which I’m probably going to get the number wrong here. Is it something like 83% of customers want to have a better relationship with the companies they’re buying from?

Fiona:

Yes, or to feel that brands understand them.

Chloë:

So yeah, so there’s a lot to be gained from creating that community feeling and adding the content then.

Fiona:

Absolutely. Yeah.

Chloë:

Okay, cool. Here’s the big tricky question that I know a lot of people struggle with when they’re trying to work out loyalty programs and points and all the rest of it. If someone cancels or stops buying, how long do you keep their points for them in case they come back?

Fiona:

That’s a very big question because, unfortunately, to a degree churn is going to be slightly inevitable in that situation, just by virtue of the fact that there is competition in the market. Somebody else will be offering an introductory discount that you just can’t match on a month to month basis. Somebody will drop off your list and go with someone else for a little while. But then that’ll run out and they’ll start looking for the next person.

It’s going to be an individual decision business to business. But, if you can say, “If you come back to us, then your points are waiting for you.” That’s going to give people a good reason when they are looking again, to come back to you versus someone else.

So, I think as a general rule with a loyalty program, the more generous you can be, the more it will pay off. And, keeping those points for that customer as it isn’t going to cost you anything as a business and actually allowing them to come back and access them and unlock a reward will probably cost you less than trying to acquire a new customer. In a lot of ways it makes sense just to keep them from sort of ticking over and say, “Yep, that’s fine. When you come back you can reactivate it.” Actually, I think GLOSSYBOX does that. Given that they’re one of the most successful subscription businesses in 2018, we could probably all learn something from them. I think it goes to asking, “Okay, what’s the net cost of letting someone reassess their points versus spending money on acquiring a new customer?” If you have to—I mean preferably not, but if you have to—discount to acquire that new customer, how did the two costs compare?

Chloë:

I think that’s one of the good things about running a loyalty program with points is you’ve got something else to talk to the customer about. Like you said in the presentation, you’ve got this, “Here’s midway between your boxes. Here’s a reminder of your points status.” It’s a really great reason to get engaged with the customer, to remind them that they love you, they love your products, they want to stay engaged and then you’ve got it for reactivation as well. Not just have a fiver off. No, you’ve still got these points and if you subscribe for another three months, you get a free something else.

It’s a great extra string to the marketers bow, I think over and above the straight forward or not so straight forward, but the loyalty package itself. It gives you all these extra communication methods and messages.

Fiona:

To be honest, we need that because as I said, Amazon is dominating 50% of this market. We can’t beat Amazon on price and we probably can’t beat them on logistics. So, what is that other thing that you’re going to differentiate your brand with? I think that’s where loyalty and subscriptions can both play a really big part.

Chloë:

We know a lot of the people watching this video right now are just beginning a subscription business or a couple of months in or thinking of adding it to an existing business. What’s the right point at which to add the loyalty side of it? Is it something you should be thinking about having on the day you launch so they start getting those points? Or, is it a great story to drop in? What was it? The average length is a hundred and twenty-five days. So, at the end of month three, maybe you put it in to try and push yourself past that a hundred and twenty-five? What do you think?

Fiona:

A great question. Again, I think it depends on the business, but essentially the minute you’ve got somebody who’s coming in and buying from you and buying again and knowing and trusting your brand, you’ve got somebody who’ll talk about you. Again, they can be the difference between success or failure because they can be the people that actually bring you new customers more cost-effectively than going out and spending lots of money on slightly less effective advertising. In theory, you could say from day one, a rewards program would work because you’re immediately engaging with those customers and focusing on retaining them, which will, in the long run, probably add up to more revenue than trying to get new customers.

However, you’re absolutely right. Engagement on day one – what store who’s launched is going to have this as a priority in their minds. But, there are some really smart ways that you can move it to at a later date.

Tying in with seasonal events, for example, is a great way of doing it. So, you can say, “Hey! It’s coming up to Black Friday. We’ve got some really exciting new products. For this special occasion, we’ll do X, Y, Z, and you should all join our program.”

The other one is new product launches. You can use a loyalty program as a vehicle for launching new products. They could be the extra rewards that you give away to people to get that at new product range out there. Or, it could just be something as simple as, “Hey, it’s Earth Day. We’ve got a new, natural, organic, Earth-friendly product. We’re launching a loyalty program as a celebration of that.” Having a hook that fits into your wider marketing strategy is a good way of doing it. If you don’t have the resources to do it straight away.

Chloë:

So, if it is thought that the team needs to focus on launching the business on day one and then the loyalty comes later, then that will be the right thing to do.

Fiona:

I think again, it’s making sure that it’s part of your strategy. Your loyalty program shouldn’t be a standalone marketing activity; it should feed into everything else that you do. I mentioned the app store earlier for Shopify, I think it wouldn’t necessarily hurt to wait a month until you’ve got all your ducks in a row so you know which email provider you’re going to be using, which payment provider you’re going to be using, which help desk you’re going to be using and then look at how you can integrate your loyalty program with all of those things.

If you’re sending emails, your post-purchasing emails, for example, should include a link to your program and how many points they’ve acquired. Your email that prompts to review should be linked to the loyalty program, so it incentivises someone to leave that review with points. Your help desk is connected, so if somebody has a bad experience, your customer service representative is empowered to say, “Great. Have ten points.” Probably not ten points. “Have a hundred points because you had a slightly below par experience and we want to make it up to you.”

A couple of months in, you’re probably in a better situation to say, “Right. I can make this effective across all of those channels,” which powers everything else a little bit as well.

Chloë:

So, we’re saying be ready to do it well. But, don’t it straight away, and there’s no reason to wait until you’ve got X subscribers. This is something you can do well with any volume of customers. It’s just making sure you do it properly so brings the benefits you want for the business.

Fiona:

Absolutely, much more succinctly put.

Chloë:

Yeah, but with none of the details. Your here for the details, I’m here for the quick bits. Speaking of which, that is all my questions. So, Fiona, before we say goodbye, could you just remind people where they can find you? LoyaltyLion and that marvellous ebook, please?

Fiona:

Absolutely. So we are at loyaltylion.com. But, you can also find us on all of the app stores and marketplaces, Shopify, Shopify Plus, Magento, BigCommerce. You can speak with someone from the team on our website or if you’re not sure where to get started and you want A Quick Guide on Customer Retention, you can find that in the link below the slides as well.

Chloë:

Thank you. You’ve been an absolute star. So much useful information and so much clarity on understanding where that loyalty program fits in the whole strategy of a business is definitely not something that’s going to sit on the side. So thank you very, very much.

Fiona: 

Thank you for having me.

Chloë:

Who knew there was so much to loyalty programs; so much you can do, not just award points, but build a stronger relationship with the customer. They give you some really good things that the customer wants to know about, that you could communicate with them to keep that engagement, to keep them interested between boxes arriving, between product deliveries. So many angles there. I thought that was a really fascinating session that’s really got me thinking about marketing strategies and retention strategies when it comes to the world of subscription ecommerce.

That’s it for this session. Please do feel free to share the URL with your team and your ecommerce brands because the more people who watch this, the more people I can help. And that is the whole point. So for now, keep optimising.

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