FMCG giants risk extinction if they ignore the subscription hype

Unilever snack subscription service Graze / Graze

There was a time when the only thing the majority of people subscribed to on a regular basis was a magazine, and later a handful of ‘essential’ lifestyle products: satellite TV, a mobile phone, contact lenses. Then came Netflix and Amazon Prime Video and suddenly the whole concept of subscriptions as a business model was blown wide open into the mainstream.

Today there is virtually no product type that cannot be ordered via subscription and delivered to our door on a regularity of our choosing. Clothes, razors, meals boxes, beauty products, children’s craft projects, books, cards and even socks.

Whether we select a fixed time period for our product of choice to be delivered, or simply press a button to summon a new box of washing powder, beer or condoms, retailers have got it covered.

So, is there now such a thing as a ‘subscription model’ or has offering a subscription element become an essential route to survival for every brand?

Brands born today are built entirely differently to those built 30 years ago. Firstly they no longer need to have a physical high street presence. The internet allows brands to set out their stall quickly and cheaply, threatening disruption at the touch of a button. If a business – big or small - identifies an untapped consumer need – and has a solution to fill it – they need no more than a website and a strong communications strategy to make an impact. (Of which more later.)

And, as a result, many long-established British brands are left playing catch up. Their outdated approach and juggernaut-like processes mean they are being too slow to put customer experience and brand values at the heart of their business.

But where the likes of Persil and Andrex could once relax as the lords of all they surveyed, their market share is being threatened at every turn by agile young competitors that believe there are enough consumers out there who want their washing powder and loo roll delivered with the regularity that the predictability of their routines allows.

So regardless of the size and scale of their brand, it is essential in 2019 that every marketer is working on strategies not just for customer acquisition but also retention.

It’s not what you said but the way you said it

In face-to-face communication what you say only counts for around 35% of the impression you make, while body language, posture, eye contact and facial expression make up the rest. This ratio is no less true in brand communications, where how, where and when you speak to your customers is as central to the relationship as what you post to their home every month.

One faulty product, late delivery or missing item – not to mention one negative interaction - and the relationship could be left hanging by a thread, while half a dozen rivals wait in the sidelines with their cheaper product, better customer service, more efficient delivery partner or stronger incentive scheme. This is the harsh new reality for FMCG brands, and it is completely redefining the retail landscape.

A recent study showed the vast majority of brands are still using email to communicate with their subscribers, while only 9% of 16-24s and 18% of over 55s actually want them to do so. Most prefer the likes of WhatsApp and Facebook Messenger. How are brands still getting this so wrong?

Personalisation is also far more important to consumers than some brands seem to realise. Some 70% of 16-24-year olds are passionate about the importance of personalisation but 60% of respondents to our survey said they receive communication that is not personalised to their needs or interests.

The key to winning the battle is to know your audience and, crucially, to know how they think. Who are you targeting and what are their priorities? Teens want instant gratification; 16-24s are brand focused; millennials are all about brand purpose. If a brand gets it wrong now, they will have an uphill battle to re-engage that audience at a later date. Young people are notoriously unforgiving and will not look for a reason to stay loyal to a brand that they don’t believe warrants it. Oh, and they will talk about your failings to their friends.

The answer is staring you in the face

Customer level modelling – now more powerful than ever through the introduction of machine learning – can help brands break down their sales to what find out what is driving each customer, allowing them to be more effectively targeted in future. This level of information will also tell you which of your customers will be open to an upsell and which, conversely, are most likely to ditch you after the free trial and so probably aren’t worth concentrating your efforts on.

Whether it’s laziness or ignorance, a small change in your communication strategy will pay serious dividends down the line. Customers will feel more valued, they will stick around for longer and, the holy grail, they will tell their friends about you.

For any future-facing business selling a physical product, subscriptions should be an essential part of your business plan, and data is the secret weapon that will dictate success or failure. So marketers, if you aren’t mining all that amazing data out there, or you have a dozen databases listing out all manner of information you don’t understand, you are setting yourself up to fail. Which is music to the ears of the start-up with an eye on your customer base.

Experiential

In a virtual world where people buy online and only see money coming out of their bank account, brands have to remind people they’re real, filling the relationship void that is lost by the absence of a physical store visit. Experiential activity is set to grow further as a platform as businesses look to bring their brand to life and break through into people’s consciousness, particularly those of millennials for whom experiences are so important.

Values

People use their subscriptions as a badging exercise, showing the world what they stand for and what they represent. Brands need to behave better and be different in every respect. Consumers will work harder to find a brand that fits with their ideologies and behaves well. If you can find a greener or more ethical way of offering a product or service, do it, you will win hearts and wallets.

Partnerships

Opportunities to partner with other brands - sending out free gifts or vouchers with a partner, for example, are a clever way to reach new people without being in breach of GDPR rules. If you are clever and find the right business you will not only complement each other’s offering but also one another’s customer base. Just be sure to do your due diligence on whoever you decide to buddy up with.

By Robin Trust, chief executive of The Kite Factory

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