Retention: Subscription Edition 🧑‍🏫

Hi Team!

Last week, we hosted the second-ever Retention Roundtable™️ in the office, moderated by the incredible Michal from The Sak, with guests from brands like Cartier, DVF, Cometeer, etc.

If you are on the brand side and would like to join a future one in NYC (or moderate one), just shoot us a note here.

Creating spaces that I wish I had as a Retention/CX operator has been a blessing. Look out for a bunch more like this over the coming months. 👀

This week, I’d like to talk about a topic I had somewhat of a front seat watching over the last few years: Retention at subscription-first brands.

We’ve seen a wild evolution on subscriptions in general, going from only a few folks in ecommerce using it… to a massive slew of great brands offering (and even defaulting to) subscriptions… to what looks like a more tempered approach. 

Let’s talk some history, but also let’s chat about some basics on retaining subscription customers. 

Buckle up, we’ve got lots to chat about. 

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Part 1: The Evolution of Subscription Models in DTC Brands

Quick history before we kick off. Shh, class is in session.

Initially, subscriptions were a rare offering in DTC, reserved for specific categories like razors or meal kits that were inherently “subscribable.” 

Brands like Dollar Shave Club and Birchbox led the charge, demonstrating that consumers were willing to commit to regular deliveries for convenience and consistency.

In the early 2010s, subscription models were a fairly novel concept. Brands that adopted this model early on focused on products with a natural replenishment cycle, such as grooming supplies and beauty samples. 

These early adopters capitalized on the convenience factor, making it easy for customers to receive essential items without the hassle of reordering. This model provided predictable revenue streams for brands and offered slightly discounted consumer pricing—a win-win. 

As success stories like Dollar Shave Club, Birchbox, and Blue Apron gained traction, more brands began to explore the subscription model. 

By the mid-2010s, the subscription boom was in full swing. It seemed like every new DTC brand was offering a subscription option. FabFitFun, for example, made a splash with its quarterly boxes of curated wellness and beauty products. 

This trend extended beyond replenishable goods, including everything from fashion to fitness products. The allure of recurring revenue and increased customer lifetime value (LTV) made subscriptions an attractive proposition for many brands.

Why pay to acquire a customer a few times if you can just hook them into a subscription??

As the trend gained momentum, brands began to default to subscription models. They lured customers with attractive discounts and perks to lock in long-term commitments. 

MeUndies was an OG in the “make something a subscription even if it’s generally not subscribable” and introduced monthly subscription packs, creating a whole new world of recurring purchases. 

However, this approach often led to challenges across the ecosystem. Only some products were suitable for a subscription model, and only some customers wanted to commit to recurring purchases.

This misalignment usually resulted in high churn rates, with customers canceling after the initial discount period.

We saw companies like Repeat create a movement around the “not everyone should be a subscriber vs. a repeat purchaser.” 

Fast forward to today, and we’re witnessing a more tempered approach. Brands recognize that not all products are fit for subscription and that aggressive discounting can erode margins and attract the wrong type of customer—those only interested in the initial deal. 

Our friend Bryan had a solid post about this on Linkedin this past weekend.

Part 2: Retention Strategies for Subscription Customers

Retention is where the magic happens in subscription models. Unless you are the NYT, it’s shockingly easy to unsubscribe, even on the same day as you subscribed.

Yeah, you probably have a higher LTV on subscribers, but too many of you are not doing the math on how much money you gave away on the subscription order vs. a one-off purchase to make sure it’s making sense long-term.

Let's dive into some effective retention strategies with real-world examples, including what worked for us at OLIPOP back in 2021.

Understanding Customer Behavior:

First things first—know your customers. Analyze purchase frequency, product usage, and feedback. Segment them based on buying patterns and tailor your strategies accordingly. Very few brands actually study this data well.

OLIPOP's Approach:

At OLIPOP, we didn't default first-time customers into subscriptions. Why? We didn't want to lose 15% of our margin to one-time buyers who’d cancel.

Instead, we pushed subscriptions after the first (or second) purchase. We even created a standalone subscription landing page (LP) to highlight the benefits. Check it out here.

We offered steeper first-time subscription discounts to customers who had purchased a few times but hadn't yet subscribed. These folks were already hooked, so the risk of them canceling was low. This approach cut our subscription churn nearly in half.

Consistent Value Communication:

Keep reminding customers why they subscribed. Use personalized nurture email flows, SMS updates, etc., to reinforce the value they get.

Example: Athletic Greens focuses on long-term health benefits, which can take time to manifest (if you ever do actually feel it 🙃). 

They regularly send educational content, success stories, and tips to integrate their products into daily routines. This helps keep subscribers engaged and committed.

Example: Ritual sells vitamins reasonably similar to others on the market. While they lean heavily on brand and messaging, their post-purchase journey is magical. 

They take the time to show you what you should be feeling after days/weeks/months on the vitamins, so you think twice about churning.

Flexibility and Control:

Give customers control over their subscriptions. Let them pause, skip, or modify their orders quickly. When customers feel in control, they’re more likely to stay.

Allow subscribers to adjust delivery frequency, skip a month, or change product types. This flexibility ensures customers feel their subscription fits their needs, reducing cancellations.

Handling Excess Product:

Especially within the world of consumables, one of the biggest reasons folks cancel their subscriptions is because they have too much product.

When the new order is about to be processed, they just cancel the order so they won’t have a warehouse full of product. 

Here are two ways to handle it:

1. Create More Consumption Occasions: At OLIPOP, we learned that folks would drink it for special occasions and not often enough. So, we created new occasions for them: Mocktail recipes, cocktail recipes, a ton of content around food, and OLIPOP pairings (vintage cola with a burger, strawberry vanilla with pizza, etc.). We even shared stories about parents who would wind down after a long day with an OLIPOP as their moment of calm.
   

2. Preemptive Communication: We preempted cancellations with a text offering folks the option to skip or swap. This was in 2020 before it was common. Most brands would ghost and go radio silent after you subscribe, hoping you'd forget and keep paying. We learned that folks who skipped or swapped tended to have dramatically higher LTV.

Part 3: Key Learnings and Takeaways

We've covered the history and effective retention strategies for subscription customers. Now, let's wrap it up with some key learnings and takeaways that can help you optimize your subscription model and keep those churn rates low.

Finding the Balance:

The key to a successful subscription model lies in striking the right balance. It’s not just about acquiring subscribers; it's about ensuring they see continuous value in staying subscribed. Here are some important points to remember:

1. Evaluate Your Product Fit Not all products are suited for a subscription model. Evaluate if your product naturally fits into a replenishment cycle. If it does, great! If not, you might need to get creative with how you present your subscription offer.
   

2. Know Your Customer Identify which customers will genuinely benefit from a subscription and target them specifically. Use data to understand their buying patterns and preferences. Segment your audience and tailor your messaging to different customer groups.
   

3. Offer Value Beyond Discounts Sure, discounts are enticing, but they shouldn't be the only reason customers subscribe. Offer additional value like exclusive content, personalized recommendations, and VIP perks. This makes your subscription offering more attractive and reduces the likelihood of churn.
   

4. Communicate Consistently Keep your customers in the loop. Regular communication about the benefits they're getting, new product launches, and helpful tips can reinforce the value of their subscription. Personalized emails, SMS updates, and in-app notifications can all play a role in this.

It’s no secret that retention is uber-important if you are a subscription-heavy brand. 

By understanding your customers, consistently communicating value, personalizing experiences, providing flexibility, and proactively managing excess products, you can build a loyal subscriber base for the long haul.

That’s it for this week!

Any topics you'd like to see me cover in the future?

Just shoot me a DM or an email!

Cheers, 

Eli 💛

P.S. Looking for inspo on your next email/SMS campaign? 

I know you will love this.