Subscription: The New Eldorado for Customer Loyalty

A subscription program is a business model where customers commit to paying regularly to access a product or service. This model, which gained momentum in media and digital services, is diversifying today across a multitude of sectors, including those dealing with physical products. Subscription stands out for its ability to establish a continuous and dynamic relationship between the business and the customer, thereby fostering deep and lasting loyalty.

In this context, according to a Papernest/Ipsos study, the French accumulate on average ten subscriptions per month, thus illustrating the massive adoption of this economic model. This number, constantly increasing, testifies to the growing popularity of subscriptions in areas as varied as entertainment, everyday consumer products, or value-added services.

At the heart of this model lies the idea of convenience and personalisation. Customers appreciate the ease of access and the regularity of the services or products provided. For businesses, this translates into recurring revenue and better financial predictability. Moreover, subscription programs allow the collection of valuable data on customer preferences and behaviours, thus offering businesses the opportunity to optimise their offerings and personalise their communication.

Subscription manifests in various forms, tailored to the specific needs of consumers and markets. For example, in the media sector, this might mean unlimited access to digital content, while in retail, it could involve regular delivery of everyday consumer goods. This flexibility makes the subscription model particularly attractive and adaptable, capable of meeting a wide range of needs and expectations.

Subscription programs also create a sense of belonging and community among customers. By subscribing, customers are not just making a purchase; they often join a group of people with shared interests, which reinforces their commitment and loyalty to the brand. This community dimension is a major asset for businesses looking to build a lasting relationship with their customers.

In summary, a subscription program is much more than a simple commercial transaction. It's a relational strategy that benefits both businesses and consumers by offering an enriched, personalised, and engaging experience.

Acquisition vs. Retention

It can never be overstated that today acquiring a new customer costs between 5 and 7 times more than retaining one. According to a study by Profitwell, acquisition costs have indeed increased by 35 to 60% over the past 5 years. Therefore, subscription emerges as a way to better manage marketing expenses since, according to Zuora, an undisputed authority in the subscription economy, 70% of subscription revenue comes from existing users. This underscores an undeniable truth: loyal customers are the pillar on which sustainable growth rests.

Furthermore, mindsets and consumer behaviours are evolving. We are entering an era that Zuora defines as "the end of ownership". This growing trend reflects a fundamental shift in how consumers perceive possession and value, favoring access and experience over the physical ownership of a product.

Today, thanks to services like Decathlon Location, we can rent our bike instead of buying it. This subscription even includes very useful services such as a lock, a "theft and breakage" insurance, and regular maintenance.

Facing this new paradigm, not integrating subscription into one's marketing strategy is akin to refusing to ride the wave of the future, preferring to cling to a raft in the ocean of market indifference.

Beyond marketing costs, the subscription model offers a multitude of other advantages for both businesses and consumers, transforming the way products and services are marketed and consumed. Here's a deep dive into these benefits:

• Recurring and Predictable Revenue: Subscription ensures a stable and regular revenue stream, crucial for financial planning and long-term growth. This predictability allows businesses to better manage their budgets and invest more strategically in R&D and marketing.

• Deep Customer Insights: Subscription programs provide valuable data on customer preferences and behaviours, enabling businesses to tailor their offerings and target their marketing campaigns more effectively.

• Increased Customer Loyalty: By providing a consistent and quality customer experience, businesses strengthen customer loyalty. Subscribers are more likely to become brand ambassadors, sharing their positive experiences and attracting new customers.

• Optimised Inventory and Resource Management: With better predictability of demand, businesses can optimise their inventory management and reduce costs related to surplus or shortage of products.

• Development of Long-term Relationships: Subscriptions create ongoing interaction with customers, fostering the development of deeper and more meaningful relationships.

• Convenience and Simplicity: Subscriptions offer a hassle-free shopping experience, where products or services are delivered or made accessible regularly without any additional effort from the consumer. This convenience is especially appreciated in daily routines, such as the automatic replenishment of everyday consumer goods.

• Personalisation: Many subscription programs offer customisable options, allowing customers to choose the products or services that best meet their needs and preferences. This personalisation enhances the customer experience and increases satisfaction.

• Flexibility: Modern subscriptions often provide the flexibility to smooth payments, modify, suspend, or even cancel membership at any time. This flexibility meets the changing needs of consumers and reduces anxiety related to long-term commitments.

• Access to Exclusive Offers: Subscribers often benefit from exclusive perks such as discounts, special offers, or early access to new products or services. These benefits reinforce the sense of value (getting one's money's worth) and belonging to a privileged community.

• Discovery and Exploration: Subscriptions, particularly those offering a variety of products or content, encourage discovery and exploration. For example, tasting boxes or streaming platforms allow consumers to discover new products or content they might not have chosen on their own.

The world of subscriptions is vast and varied, adapting to the diverse needs of consumers and businesses. Here's a deeper exploration of the different types of subscriptions, along with concrete examples:

Content Subscription

This type of subscription allows users to access a library of digital content, often streaming. For example, Netflix, which needs no introduction, offers a wide array of movies and TV shows, with customisation options based on the user's viewing preferences.

Deezer, on the other hand, provides unlimited access to millions of music tracks and podcasts, with the ability to create personalised playlists and discover new artists.

These subscriptions regularly provide physical products. Les Petits Culottés, for example, offers a subscription service for eco-friendly diapers and baby care products, delivered directly to your home.

HelloFresh delivers weekly meal boxes with fresh ingredients and recipes, making it easier to prepare healthy meals at home. The subscription is flexible since you can pause it when you go on vacation, for example.

La Fourche, an online organic market, allows consumers to regularly receive organic food products, up to 50% cheaper than in specialised stores, against an annual membership.

Among our clients, we can mention Razwar, which offers a subscription box so you no longer have to worry about restocking razor blades and other shaving products.

These subscriptions offer additional services that enhance the shopping or product usage experience. Darty Max, for example, provides an unlimited repair service for household appliances, while Boulanger Infinity offers similar benefits, including delivery and installation services.

Zalando, an online fashion giant, offers a subscription for premium services like simplified returns and faster delivery.

This model offers discounts and benefits on products and services throughout the year. In recent years, the retail sector has introduced loyalty programs by subscription as a way to combat inflation and declining purchasing power.

Casino (Casino Max), Monoprix (Monopflix), and Carrefour (Carrefour Plus), for example, allow customers to benefit from exclusive discounts in their supermarkets. Carrefour states that the average basket of its Carrefour Plus subscribers is 30% higher than that of non-subscribers.

Among our clients, we can mention Naturalia, which offers a monthly, quarterly, or annual subscription in exchange for discounts all year round on all their products.

To learn more about the subject, we recommend reading this enlightening white paper by Zuora.

These subscriptions combine different types of services, products, and content. Amazon Prime is the perfect example, offering both fast delivery, access to a wide range of movies and series via Prime Video, as well as exclusive benefits on purchases.

La Redoute, on the other hand, combines the benefits of delivery, special discounts, and access to private sales.

Each of these subscription models meets specific consumer needs while offering businesses unique opportunities for loyalty and growth. In the following section, we will examine best practices for effectively managing and retaining subscribers.

Effective management and retention of subscribers are crucial for the long-term success of any subscription program. Here are proven strategies to optimise these aspects:

#1 Regular and Personalised Communication

Establishing ongoing dialogue with subscribers is essential. This can take the form of personalised newsletters, updates on new products or services, regular feedback, or incentives to use the services more. The more you establish quality relationships with your customers, the longer they will remain customers, extending the duration of your Customer Lifetime Value (CLV).

#2 Incentives for Subscription Renewal

Offering rewards, discounts, or exclusive benefits can encourage subscribers to renew their commitment. For example, offering a free month for each year of subscription or discounts on renewals can increase retention rates.

#3 Segmentation, Personalisation, and Flexibility

Consumers want control! Offering multiple options within a subscription model is essential to cater to the diversity of customer needs and preferences while leveraging psychological effects beneficial for value perception. This strategy allows for effective customer segmentation and offer personalisation, giving customers the flexibility to choose or move between different service levels. Similarly, offering options such as changing delivery frequency, choosing products in a box, or the ability to pause the subscription can greatly improve customer satisfaction and reduce churn rate.

#4 Quality Customer Service

A responsive and efficient customer service is fundamental. This includes not only quick problem-solving but also a proactive approach to anticipate and meet customer needs. For example, live chat on the website, a dedicated hotline, or a responsive after-sales service can greatly enhance the customer experience.

#5 Monitoring Key Performance Indicators (KPIs)

Tracking KPIs such as the churn rate, customer satisfaction, and renewal rate allows identifying areas for improvement. Analysing this data can reveal trends, preferences, and potential issues, thus enabling adjustments to the subscription strategy to better meet customer expectations.

#6 Access to Exclusive Experiences

Creating events or offers only available to subscribers can strengthen the sense of belonging and value. For example, access to private sales, exclusive webinars, or meetings with experts can increase subscriber engagement.

#7 Using Customer Feedback for Continuous Improvement

Encouraging feedback and using it to improve the service is a crucial practice. This can include satisfaction surveys, focus groups, or online forums where subscribers can share their opinions and suggestions.

By adopting these best practices, businesses can not only maintain a solid subscriber base but also grow it sustainably. The key lies in creating a subscription experience that is both rewarding, personalised, and flexible, thus meeting the changing expectations of consumers while fostering a long-term relationship.

Subscription is not just a method for selling a product or service; it's a philosophy (with its own codes) that places relationships at the heart of every transaction. It's the recognition that every interaction counts, that every customer is an opportunity to build a lasting story. Businesses that understand this don't just survive; they thrive, forging unbreakable bonds with their customers in a world where loyalty has become a rare commodity.

Thus, the question is no longer whether subscription should be part of your marketing strategy, but rather how to integrate it in a way that maximises its impact.

However, in a context of inflation where consumers are more attentive to their expenses, sorting through their subscriptions to save a few euros, it is crucial for businesses to innovate and reinvent themselves to maintain the attractiveness of their subscription programs.

Some avenues could be to offer subscription programs in which several brands sharing the same values partner up, or to aggregate different subscription offers on a single platform that can be activated only when needed.

Thanks to Michaël Mansard, Principal Director of Subscription Strategy at Zuora for his contribution to the writing of this article.