What D2C brands need to do to make a subscription model work in 2022

Subscription ****** are on the rise. I never expected to have a subscription for food, meal shakes, heck, even cleaning products. But I’m starting to get a subscription for everything. And it’s not surprising when the expectation is that in 2023, 75% of DTC brands will offer some form of subscription. 75%!

In 2023, 75% of DTC brands will offer some form of subscription.

But are we getting tired of subscriptions? I’m not the only one who struggles to keep track of it: 34% of consumers find it hard to keep track of their subscriptions. The long-term financial commitment puts off an additional 46% of buyers. Will subscription ****** continue to work?

Let me ask that differently: do we need subscriptions to work as a business model? We secretly need them as a company for all our claims of saying subscriptions are for the customer’s convenience. We battle rising acquisition costs with iOS changes making targeting harder and ever-increasing competition. We need that higher Lifetime Value (LTV) to cover those rising acquisition costs, which is where subscriptions come in:

The LTV of a subscriber is 2.7x higher than a non-subscriber

So we need subscriptions, but we also face a customer overwhelmed with subscriptions and desiring flexibility. Can we balance the two?

I think we can, but it requires a more intelligent approach to our subscription offering. So in this article, I’ll show you in three steps how you can get your customers on a subscription and increase that LTV, but be respectful of their timing and needs.

The first step is building a relationship with your customer. Some customers will be ready to subscribe immediately, while others prefer to try it out first. You should give customers both options, not just forcing subscriptions on them but allowing them to try it out.

You can experiment with this by running an A/B test offering subscription-only vs. one-off purchases. It could be that your conversion rate goes up with providing both options, but in terms of LTV, it isn’t worth it. However, in general, for higher-order value and/or less common subscription products, having the option can give them the comfort of choice. I’ve also seen great success with a one-time trial bundle that allows a customer to try the product the first time at a discounted price.

Note there are exceptions to this. I don’t expect my food subscription company, Bella & Duke, to offer a one-off purchase. If I run out of food, I will have a very hangry . Also, owners will understand the issues of switching a from one food to another; that is not something you want to do every month, so if your product is one of high-need / long-term usage, it may make sense only to offer only a subscription.

The key to this step is to ensure that they get to see the value of your product with that first purchase, and you show you clearly understand their challenge. You do this through the customer experience, robust post-purchase flow to activate them as a customer and then upsell later at the right time.

From there, you need to see when is the right time for them to reorder or subscribe. When you start, you’ll probably be doing this based on data on purchase frequency:

• What is the average repeat order time for customers like that?
• When will they have seen the value of the product?

But this buckets customers into one big group and means that you don’t always get the timing right, especially if you have multiple products or customer segments.

The next step is using a predictive model to determine exactly when someone is likely to order again. Historically, this has been very difficult to do as email service providers aren’t set up to integrate predictive data and build out personalised flows. What tends to happen instead is a one-size-fits-all approach with clunky flows and poor conversion.

Ecommerce tools like Relo make targeting the right customers at the right time easier. Relo analyzes all customer orders to give the best possible predictions, and integrates with Klaviyo so brands can push the data into their existing SMS/email flows. It also has a 1-click Magic Cart that allows them to repurchase in just seconds or switch to subscription. Always highlight the cancellation policy and flexibility on the product page.

You also need to make the subscription offer worthwhile.

Conversion = Desire — Friction

There is the Desire: what is in it for them? This is, of course, convenient but often also a better price. I would advise experimenting with different discounts for subscriptions where possible, e.g., 10% vs. 15% vs. 20%. Make it a no-brainer to want to subscribe. Personally, at 10%, I choose flexibility over another subscription, but I’m just a sample size of one (and already have way too many subscriptions).

So what about reducing friction? That is where Step 3 comes in.

From there, it’s about putting your customer in control; this allows the customer to still feel the flexibility without the locked-in feeling of a subscription.

A bad example was a beer subscription (not going to name and shame). I ordered for my boyfriend to see if he enjoyed having different types of beers to try every month. When I went to pause it while we tried out the first month’s box, no one answered the several emails I sent, and I found out that the only way to pause/cancel was to call during the week. Then when I called there was a long wait. I had to do my best not to get annoyed at them when I finally got through. So instead of pausing, I cancelled it altogether because it would be an absolute hassle if we were on holiday for a few weeks, and we didn’t want the subscription in that month.

Compare this to Allplants (the complete opposite of a beer subscription, I know). I’ve been using Allplants, a vegan freezer meal subscription, for over a year now. Sometimes I’m super busy and want to receive an Allplants box every two weeks. Other times, I have time to cook, or the freezer is already overflowing (with all the food). Allplants makes it super easy for me to adjust and feel in control, so I’ve never cancelled:

• I receive an email, and SMS heads up.
• I can directly adjust the timing and what I want in my box via the website.

Step 3 is about making it easy to change, reorder, and adjust your subscription. For example, my LTV for AllPlants is way higher than it would be if they forced me to order a specific period or made the process challenging to adjust my order.

Here you can see how a brand uses Relo and Klaviyo in combination. The customer never needs to log-in to manage their subscription as this is authenticated via email or SMS credentials (a lifesaver for me as I’m constantly forgetting my password).

The rise in subscriptions makes sense, but we need to get more innovative in how we:

• Bring customers onboard with the right offering and setup
• Time the upsell to reorder/subscribe right
• Allow them to be in control of their subscription

This doesn’t require a super fancy website or customer portal, but tools and the right offering make the experience easier and smoother. This helps boost LTV and afford the higher CACs in turn. Subscriptions are here to stay, but in 2022, we can’t get away with an inflexible customer portal and definitely not requiring customers to call to cancel!

Note: I am not an affiliate of any of the brands I have mentioned. These are all brands I have worked with / purchased before.