How Subscription Service Brands Can Drive Lifetime Value
The global subscription e-commerce market is expected to reach $478 billion by 2025, which means there’s a lot of competition for subscription brands to stay relevant in the market and maintain a loyal customer base. Discover the proven tactics Acceleration Partners has tested across subscription service clients to strengthen lifetime value while driving profitable and efficient affiliate programs.
Understanding lifetime value and how it applies to subscription service brands
We define lifetime value (LTV) as the total worth (in revenue) that a customer generates over the lifespan of their relationship to a business. Often in partnership marketing, brands will prioritize new customer acquisition and reward affiliates with higher commissions for new customers. However, with subscription services, it is crucial to also evaluate the quality of customers affiliates are referring to the brand to ensure these new customers will go on to renew their membership month-after-month.
For some subscription service brands, this means ranking affiliates over a predetermined time period (i.e., 90 days) for how many customers continue with the brand out of the total subscriptions the affiliates drive. If an affiliate drives great subscription volume, but the customers don’t stick around, then it might be a good idea to consider whether that affiliate is the best fit for the subscription service brand.
LTV is an important metric as it costs less to keep existing customers than it does to acquire new ones. Increasing the value of a returning customer type is a great way to drive growth. Lifetime value can work closely with customer acquisition costs (CAC) since it’s the same dollars you’re investing to attract a new buyer.
Common roadblocks for subscription service brands
One common challenge subscription service brands face is the ability to drive quality, long-term subscriptions through free trials or promotions. Affiliate partners are often rewarded for referring customers to such trial periods or promotions, which can lead to partners using incentivization tactics to generate subscriptions that are then quickly canceled. This higher drop-off after the initial discounted subscription (i.e., 10% off the first box) or free trial period negatively impacts LTV, as savvy shoppers are looking to take advantage of the deal.
It’s important to stay close to which partners drive stronger LTV than others and ensure your brand is investing and optimizing accordingly—as well as testing payouts and incentives with affiliates on the second or third order to help strengthen LTV. Acceleration Partners works closely with brands to monitor credit card declines, fast click-to-action times, and subscription cancelations so that these types of partnerships can be caught quickly, and the client’s budget can be spent more effectively.
One of our subscription service brand clients was willing to pay affiliates a higher commission rate upfront on an initial purchase to acquire new customers. However, as a result of significant payouts for top program revenue drivers, that client has experienced challenges maintaining their CAC goal.
To help our client meet this goal, the Acceleration Partners team came up with out-of-the-box, creative ideas to grow the affiliate program while keeping costs low including:
- Incentivizing partners with sample subscription boxes in exchange for coverage
- Negotiating temporarily higher cost-per-action (CPA) rates to reduce overall flat fee costs for placements
These proven tactics are low risk and cost efficient, and they have helped to lower channel costs while driving new customers.
Lastly, it’s important to understand market nuances and how pricing and promotion can look very different by region. For example, the cook-from-scratch Italian culture can create a challenge for meal subscription boxes. Acceleration Partners’ in-country program and partner development teams have the experience and relationships to tailor strategies that account for local nuances and better enable success.
The competition in the subscription vertical is high, but with Acceleration Partners’ approach to optimization and building relationships with top partners, we’re able to help our brands stay at the forefront.
How Acceleration Partners is driving LTV for subscription service brands
At Acceleration Partners, we focus on building quality partnerships and identifying partners who organically drive LTV, then rewarding them for it through different optimizations.
Lifetime value is mainly about forming a lasting, positive relationship with your customer base, making it critical to nurture those bonds. To improve LTV, the Acceleration Partners team strives to ensure that the initial onboarding process is seamless by creating custom recruitment outreaches, incentivizing affiliates with sample products, as well as offering affiliates bonuses for driving a certain number of sales in a given month.
With loyalty affiliates incentivizing customers for repeat purchases, it’s vital to maintain strong relationships with these partners by offering higher cashback rewards during key promotional time periods, as well as testing paid placements for additional exposure to gain new buyers. Another type of affiliate that can strengthen a subscription service brand’s LTV are content sites with proven success in communicating the value of a brand.
By rewarding affiliates with vouchers for free subscription boxes instead of flat fee payments, you can encourage loyalty and ensure that true brand ambassadors are representing your brand time and time again. Acceleration Partners is unique in the way that we create and nurture partnerships with affiliates—we’re always looking at new and innovative strategies, and we have a strong pulse on the competition.
Drawing from our wealth of experience across verticals, Acceleration Partners is able to use evidence from successful programs to advise subscription service brands on the most successful tactics to deliver a healthy LTV. We’re able to find partners that are a great fit for the brand and who will attract new customers that will become lifelong ambassadors for their product.