If you’re in the Subscription Services business, you’ve probably come across the in-depth survey McKinsey & Company released last year.
In the event that you haven’t, here are some important learnings:
- The subscription e-commerce market has grown by more than 100 percent a year over the past five years, with the largest retailers generating more than $2.6B in sales in 2016, up from $57.0M in 2011.
- E-commerce subscription services generally fall into three categories: replenishment, curation, and access.
- A recommendation, including word-of-mouth and positive online reviews, is a key trigger for consumers to sign up with a subscription service, particularly those for curation and access.
- Subscription Services subscribers are most likely to be 25 to 44 years old, to have incomes from $50,000 to $100,000, and live in urban environments in the Northeastern U.S.
- 15 percent of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis, frequently through monthly boxes.
- It can be difficult for subscription e-commerce companies to acquire and then retain consumers.
- Only 55 percent of those who consider a service ultimately subscribe, likely because people are reluctant to sign up for a long-term commitment.
- Churn can dramatically undermine viability, since the cost of replacing lost subscribers could not only make it difficult to meet growth objectives but also quickly drain cash reserves.
- Growing competition.
- The subscription e-commerce market has plenty of room to grow as more consumers become aware of it.
- Subscription services consumers can be sticky once they find a service they like. Replenishment services have particularly high long-term subscription rates: 45 percent of members have subscribed for at least one year, about ten percentage points higher than the level for curation or access services.
These insights were top-of-mind at this year’s SubSummit, an annual conference designed and dedicated to subscription services companies.
With the theme of looking “beyond the box,” this year’s SubSummit was focused on the future of the industry. Attendees were challenged to look at new ways to take their subscription services business – and the industry – to the next level.
With so many new companies entering the subscription services space, growth and marketing were popular sessions for attendees.
From effective website user experience and learning the basics of writing sales copy to grasping paid social and paid search marketing, budding subscription service companies were provided with useful information for how to help their brand gain traction.
For more established brands looking to take their business to the next level in terms of growth and increasing customer lifetime value, sessions on partner and affiliate marketing were eagerly attended.
One panel in particular featured the head of growth marketing at one of the leading meal kit brands. Surprising to most (although not to those of us in affiliate marketing!) was his transparent, candid conversation about how significant their affiliate marketing program is to their growth and customer retention.
Here are a few of the insights he shared:
- Evolving from direct response to full funnel.
- Balancing volume needs with quality filters.
- Differentiating in a crowded space.
- Scaling past current marketing mix of paid search, paid social, display, direct marketing and affiliate.
- Where to put their marketing dollars to get the most profitable customers and maximize customer lifetime value.
While their first few years in business centered around paid social and paid search to establish their name and brand recognition, results from these channels progressively declined. To achieve the same or similar results that they’d realized early on required more and more expense, yet the quality of the consumers they were attracting was lower than they wanted.
After conducting in-depth tests and modelling of all their marketing channels over multiple quarters, the data consistently showed that their affiliate program – a channel that had been fifth on their priority list – was driving the best quality at the lowest cost.
After elevating the priority of their affiliate program to the number two position and testing various ways that affiliate could be leveraged to reduce the cost of their search marketing initiatives, the brand is now taking steps to reallocate all of their Facebook spend to their affiliate program and elevate affiliate to their first priority marketing channel.
In addition to this panel session, Scott Brazina, CMO at Impact, an affiliate technology platform, hosted a Fireside Chat with David Bakey, VP of Direct-to-Consumer at Harry’s, a leading subscription service for new razor blades and shaving products titled, “The Art & Science of Partner Compensation.”
They chatted about Harry’s partner compensation philosophy and approach, and how they align incentives to customer value creation, chained commissions, transparency and more.
Acceleration Partners’ own Senior Director of Performance Partnerships, Alison Chew, also led a panel discussion at SubSummit titled, “Driving Quality Subscriptions with Affiliate Marketing.” Sharing their perspectives on this topic were:
- Alli Hobbs, Marketing Manager at Purple Carrot.
- Mike Ferdinandi, Head of Performance Partnerships at Grove Collaborative.
- Deborah Katz, Senior Director of Digital Acquisition at The Proactiv Company.
Discussion areas from their panel included:
- The evolution of affiliate marketing.
- Misconceptions that they – or their colleagues – had about affiliate marketing before learning the ins and outs of it.
- How their affiliate program is helping their brand drive high-quality new customers and support company goals.
- Aspects of the affiliate model that have surprised them and their company stakeholders.
- What’s excited them most about their company’s affiliate program and what’s ahead for the remainder of 2019 and beyond.