Looking for a way to build stronger, lasting customer relationships, as well as a reliable source of recurring revenue? If so, you could consider offering your customers subscription products or services like Huel does.
Founded by Julian Hearn in June 2015 with a clear mission: “To make nutritionally complete, convenient and affordable foods with minimal impact on both animals and the environment.” Their products are made from sustainable plant-based ingredients such as oats, peas, rice, flaxseed, coconut and sunflower, available in a range of 4 products: powdered, hot and salty, ready to drink and bars. Huel saw the opportunity to launch his brand in the busy life of people today who barely have time to cook and end up resorting to junk food. In addition, they are aware of the amount of waste that food generates and the impact that this has on the environment, for this reason the products that they launch on the market are designed to generate the least possible impact on the planet.
How does it work?
If you access its online store and enter any of the products, you will see how Huel offers its customers the possibility of subscribing to that product to receive it at home every X time.
What is this about subscriptions?
I guess you've already heard about it or you're even already subscribed to something like the Netflix series and movie platform, right?
Simple, a subscription business model is one that charges customers a periodic fee, typically monthly or yearly, for access to a product or service.
But, in the case of an ecommerce, things go further.
In e-commerce, it's all about building strong, long-lasting relationships with customers.
Subscriptions turn customers into loyal fans who end up being a reliable source of recurring revenue.
Returning to Huel, we enter a product, we have entered “Huel Ready-to-drink” and there we are going to see how they carry out subscriptions.
Well, the first thing to do to be able to subscribe to anything is to choose the products you want and the quantity of them.
If you are thinking of offering subscriptions in your business, tell yourself that 15% of all the people who buy online have subscribed to some e-commerce service in the last 12 months.
As you can see in the Huel subscription example, you have to choose the flavors you want to include and the quantity.
We have chosen 1 box of 12 bottles of each flavor.
After choosing the flavors and the amount of product we want, we move on to the next step: “Purchase Type”.
Here we have to choose if we want to buy the products only once or, on the contrary, we want to subscribe and have them sent home every x days, weeks or months.
In this case, we have chosen to have it sent to us every 5 weeks, thanks to which we obtain a 10% discount on our purchase, this discount being an added benefit that you would not obtain in the case of making a single purchase.
It is very important to provide information about how the subscription works, as Huel does in this case, saying that you can cancel at any time without any penalty and you can also manage the subscription yourself by adding flavors, quantities or shipping frequency.
After this last step, all that remains is to click on the subscribe button and you will be added to the cart so that you can continue with the purchase process and thus end your subscription.
This type of business model is becoming a very valuable option that helps online companies to get more recurring customers.
According to a Mckinsey study , 15% of all people who shop online have subscribed to an e-commerce service in the last 12 months, so it is a fact to take into account if you are considering offering this type of service in your online store
What is it for?
Customer Lifetime Value - CLV
Using the subscription model for your ecommerce helps increase the customer life cycle also known in English as "Customer Lifetime Value".
Subscription business models are becoming an increasingly popular way for e-commerce stores to increase customer lifecycle, as they are based on retention and when a business is able to keep a customer, can better predict its life cycle.
The difference between the traditional model and subscription models is that subscription models create ongoing relationships with buyers to drive more sales and increase the revenue stream coming into your business.
That is, customers end up paying more, last longer, and become highly valued customers.
Customer acquisition cost - CAC
According to the Harvard Business Review , acquiring a new customer costs between five and 25 times more than retaining one we already have.
For this reason, the subscription model can help reduce the CAC (Customer Acquisition Cost), creating a constant flow of money coming in with subscribed customers.
Additionally, a subscription model is also a great way to maximize the time and money you spend on sales and marketing thereby helping to lower CAC.
This all makes sense since you don't have to spend time and resources searching and finding a new client, but instead just focus on keeping your existing one happy.
Abandonment Rate - Churn Rate
Offering your customers a subscription model also helps reduce churn as you continually provide value to the customer through new product discovery or discounts, making it more difficult for them to opt out.
If you keep the subscribed client up to date with news, the launch of new products or services, new promotions, etc., you will make them feel happier with your company and therefore they will not cancel the subscription, helping you to reduce the rate of customer abandonment.
Recurring Purchase Rate - RPR
Getting your customers to sign up for a subscription service is a very effective strategy that can help you improve your recurring purchase rate, also known as Repeat Purchase Rate.
Incentivizing visitors with a discount on products for signing up like Huel does, instead of waiting for the customer to return to the store on their own, helps increase this rate.
In short, subscriptions help brands increase recurring purchases, since you don't have to always be on the lookout for new customers if you have a loyal customer base that is already subscribed.
How can you apply it in your ecommerce?
A subscription-based model can be built with basically any type of product that customers need to replenish on a regular basis. Let's see it with some examples:
Do you sell personal hygiene products such as razor blade refills or cosmetics, for example?
If so, offering your customers the possibility of subscribing to receive these products at home on a monthly basis could be very useful and beneficial for both parties.
The customer will be able to subscribe once and forget about it until they receive it at home, in addition to saving money for subscribing and not having to waste time, something so valuable today, in going to buy it at the store.
In your case, as the owner of an online store, you can know in advance what your income will be, in addition to many other benefits that we have been counting throughout the article.
As you can see, all are advantages!
Do you offer fitness or similar programs that allow users to exercise or follow courses from home?
If you had a store that offered this type of service, it would also be very interesting to create subscription models for customers so that in this way they could watch the videos, training... from home paying a fee that can be monthly, annual...
In reality, and as I have already mentioned, this type of business model can be implemented for any type of product or service that you sell, as long as you believe that receiving it at home every x time adds value to the customer.