The rise of the subscription economy
2020 saw huge growth for the subscription economy. In light of this stellar growth Braze, a leading customer engagement platform, hosted a panel session as part of The Drum’s Digital Transformation Festival to debate the rise of direct to consumer brands and the subscription economy. The session embraced issues as varied as dealing with subscriber churn, the vital importance of financial and data transparency, and the need to deliver an almost obsessive level of customer focus combined with both short and long-term brand building.
The session explored the rise of direct to consumer brands and the subscription economy
Moderated by Lynn Lester, managing director of events at The Drum, the panel session featured Matthew McRoberts, SVP, global alliances at Braze, Sally Higgin, senior director, brand marketing, at shaving brand Harry’s, and Ryan Dillon-Curran, senior director of global marketing, bike + portfolio, at Peloton.
Braze’s Matthew McRoberts first discussed the theme of trust: “The context around trust is so important. With the concept of data, and being sensitive and understanding that with data, comes great responsibility.” But how to keep ongoing relationships with customers fresh and engaging? McRoberts said: “So much of it is, again, truly understanding what that consumer wants, what their preferences are, what they are telling you about their experience.”
Higgin’s built on the theme of engagement describing how Harry’s had “built itself up to be the credible number two in the men's grooming space. We started out solely online selling shaving subscriptions, but we're now also available in most national retailers in the US, Canada and UK.” And Dillon-Curran outlined the strong recent success of Peloton: “The world's largest interactive fitness platform - we have 4.4 million members globally - and we offer multiple products.”
But how does a successful subscription-based brand acquire and retain customers at the start of its journey? Dillon-Curran said: “Where I've seen a lot of marketers can trip up is really focusing on acquisition only, and neglecting the retention side of the business. And I think, in particular, more mature companies who are pivoting to a subscription model are not necessarily structurally set up to think that way.”
Are there practical ways to address the issue of customer churn? Higgin explained: “It's actually relatively straightforward with the data that you have to create several hypotheses around why you might have high churn rates. So, it might be that your intro offer is too generous, and so you're pulling a tonne of people in - we call them gamers - and then they'll get their free whatever. And then, ahead of their next paid instalment, they'll cancel that subscription. So I think that it's about trying to isolate the variables and then putting through changes, giving it enough time to see what impact that has.”
Because the nature of the subscription model involves regular customer payments, Higgin added: “I think that radical transparency in a subscription business is super important. And being incredibly consumer-centric. It's little things like ensuring that every time you take a payment, you send your customer an email to make them aware that that payment is coming out of their account, being clear, when a customer signs up what they're signing up for. This radical transparency around the financial transactions in a subscription model goes a long way to build trust with your consumers.”
Dillon-Curran argued that using this recurring revenue to drive more value into the platform is vital for subscription-based brands: “Building your business model around that I think is critical. For us, we are better from the experience-based learning and what we're hearing from our members, and what they want.”
Higgin agreed that not taking subscribers for granted is important: “Yes, as a subscription business, it does take more time to cancel. So you are relatively more resistant to people cancelling your brands, and brands are relatively more resistant to being cancelled than we ever thought. But it's more important than ever to be really cognisant about what you're doing and what you're putting out to the world and making sure that this marries up to the values that you hold yourself to.”
Future opportunities for subscription-based brands were the next subject for discussion. The panel’s answers included subscription travel, and products and services for perimenopausal and postmenopausal women, providing “endless opportunities for growth”. The panellists concluded with a focus on the key elements of running a successful subscription brand – customer centricity, concentrating on delivering value rather than low prices, and focusing on both short and long-term marketing.
McRoberts at Braze rounded off the session by highlighting the importance of data in building an understanding of the consumer and then evolving the service and communications accordingly: “The business value, as both Sally and Ryan said, is to be consumer obsessed, to use that data to understand the consumer, listen to that consumer to understand how they want to be spoken to, and how they want to be engaged with.”
You can watch the full panel here.
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