Feb 1, 2024

In the Year of Retention Are Subscriptions Your Best Bet? Subscription Prescription Founder Matthew Holman weighs in.

Matt started in eCommerce as a SAAS marketer, first on logistics and then on subscriptions. After working with his own customers for several years and seeing so many of the same issues with subscription programs, he founded Subscription Prescription. With a weekly newsletter, podcast, and consulting, Matt aims to provide a clear framework for brands to grow subscription revenue. He has helped brands like Legion Athletics and Mixhers with their subscription programs.

Subscriptions are an attractive growth tactic for many eCommerce businesses as the cost to acquire new customers keeps rising. In this blog Matt pens his thoughts on the revenue opportunity of eCommerce subscriptions in 2024 and what merchants should consider when building a subscription program.

Against the backdrop of the current economic climate is it a good time for eCommerce merchants to consider offering subscriptions?

Many are calling 2024 the year of retention. With rising inflation, weakened economic growth, and the rise of more products, there has never been greater competition for the consumer’s wallet. Retaining existing customers has never been more critical, but even more important is the need to capture more revenue from existing customers.

Subscriptions can be a part of this strategy, but is not the only opportunity. Any brand considering subscriptions – either a launch or improvement – should consider what about their offering is most valuable to their customers. Content, exclusivity, memberships, and new products are great ways to deliver additional value and keep customers returning.

Keep subscriptions simple. Focus on a core offer, collect feedback from subscribers, and look for ways to improve on the offer over time.

What is the revenue opportunity of eCommerce subscriptions?

For most SaaS businesses, subscriptions are the core revenue offering. You build scale around the number of subscribers on your platform each month. For ecommerce brands, this is not the same. There is no scale with subscriptions – you still have product and shipping costs for each one.

The opportunity for revenue on eCommerce subscriptions is in profitability. Acquiring a subscriber allows you to offset higher acquisition costs over time. Each subsequent purchase is made without the cost to acquire them.

Furthermore, a great subscription program will expand revenue opportunities for each customer. This is done through upsells, new product launches, and saving on shipping costs through bundles.

Research suggests customers who do churn do so relatively quickly after signing up for a subscription. How can merchants reduce churn within those first 3 months and keep customers?

Churn can feel overwhelming. Many brands I work with have steep churn right away because people are buying more for the discount than the ongoing benefits of the product. To understand how to lower churn, first look at the top subscribers (those that make it the longest and spend the most). What do they value the most? Who are they? Why did they buy in the first place? Identifying these things – through surveys and phone calls – will let you change who you try to sell to in the first place.

Additional ways that are low-cost but have a high impact include onboarding subscribers. Most bought the product but don’t know how it works. How long does it take to see results on a weight loss supplement? How does this new pet food affect your dog’s diet? Educating customers on what is happening will help increase the chances they stay.

Identify the top reasons for churn in those first three months and address them directly. If price is the problem, you can give additional discounts to get someone past the third month. If they have too much product, you can sell the same on a more extended frequency, like six weeks compared to a monthly renewal.

What are the top eCommerce subscription service platforms for 2024?

I get asked a lot about what subscription apps to choose from. For anyone starting out, look at Awtomic or Loop because they offer a lot on their lower plans and can scale with you as you grow.

Beyond that, each platform has specific strengths depending on what is most important for your business. ReCharge has the most customization available and support for enterprise brands. Stay AI has a beautiful retention platform and customer portal. Skio has great support and features at scale as well.

Yotpo is making some interesting innovations as well, as they unify the email/sms, reviews, and loyalty with subscriptions.

Look at your core use cases. How do people buy? (For example, a starter kit or build a bundle.) What actions have lowered churn or increased AOV for your brand? Knowing those things will help you better evaluate the right subscription partner for your offering.

For more expert advice and strategy on eCommerce subscriptions, follow Matt on X, connect with him on LinkedIn and be sure to tune in to his podcast and sign up for the weekly newsletter

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Neeta is the Content & Community lead at AMP. She has over 8 years experience in eCommerce marketing having previously worked for TradeGecko.

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