The Flaws of Ecommerce Subscriptions and Loyalty Programs

– Brands like ecommerce subscriptions and loyalty programs for repeat revenue, protection of margin, and auto-pilot retention.
– Consumers like these programs for the bigger discounts on items they were already planning to buy.
– However, the author believes that these programs are often gimmicky and focus too much on price, leading to high cancellation rates and a lack of connection with the brand.Reevaluate the implementation of ecommerce subscriptions and loyalty programs to ensure they provide value beyond just discounts and cater to a wider audience, rather than solely focusing on existing high-spending customers.E-commerce subscriptions and loyalty programs. Let’s talk about them. Why brands like them:
1. Repeat revenue
2. People forget to cancel them
3. Protection of margin
4. Auto-pilot retention

Why consumers like them:
1. Bigger discount on stuff they were already going to buy

Things don’t seem to add up here. What seems like something that could potentially be a win-win is really just a more predictable revenue cash grab on one side and discount-seeking behavior on the other. I’ve been anti-subscription for a while because I don’t see it as something that’s pro-consumer. With most implementations, it always comes off as a bit gimmicky. The value is tied up entirely in the price (some might say otherwise, but price is really the main advantage). When you tie value up into price alone and also offer sales and constant discounts (99% of brands), it skews things a bit.

There is a consensus that you shouldn’t lead with a subscription, but you should offer one based on behavior. But that’s not the way things work in practice. Instead, people offer the subscription, they sign up for the lower price on the goods, and then they cancel the subscription. The first purchase to second purchase has a massive cancellation rate. So when you anchor a behavior or price rather than something more, it becomes a catch-22.

It’s become clear with the amount of retention fanatics I see on LinkedIn that most people don’t fully understand unit economics over the long haul. We’ve run the math too, and a 7% increase in retention with a discount is more profitable than not having that increase. But a lot of those that subscribe aren’t going to be part of that increase. Brands are still making the cardinal mistake of investing capital allocation 1-1 instead of 1-many and driving people to a website or not in the case of a subscription, and removing them from having to take any value in your website. Ouch, so more revenue that’s predictable but less connection with the elements of the brand.

What seems like a really great idea instead relies only on a few things that just aren’t going to be the case:
1. That someone will stay subscribed forever
2. That someone needs all the stuff you’re sending them

To me this is flawed logic.This works for marketplaces, but most brands aren’t a marketplace.Subscription boxes don’t really hold the power they once did, but hey, let’s reboot this with more loyalty programs with at best discounts and access to new products. Unless there is a secondary market for the goods the value of these programs only apply to people that are already planning on spending a lot of money with your brand. You’re catering to your already great clients and just eating margin. #marketing #ecommerce #strategy

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