Are you missing out on something that 15% of online shoppers love?
You might be if you haven’t expanded your sales to include subscription-based ecommerce, delivering products on a recurring basis to your most loyal fans. McKinsey says that 15% of online shoppers have signed up for at least one, from the renowned Dollar Shave Club and Blue Apron to countless small, niche services around specific products, fandoms, and hobbies.
It’s an incredibly lucrative option when done right because satisfied customers are less likely to churn. Securing this almost guaranteed recurring revenue is tricky, and subscription boxes come with plenty of challenges you need to avoid.
Here are the five most common pitfalls along with tips on how to avoid them.
1. Poor customer service
It’s natural to start with what’s in the box. That is your sales proposition, defines your audience, and gets the foot in the door for potential recurring revenue. However, all of that goes out the window when customer service is poor.
Delays that don’t come with notification, issues with billing, slow email responses and no help when an incorrect product arrives are all guaranteed ways to lose customers. At the heart of these problems is a breakdown in communication.
So, addressing the issue of poor customer service requires creating a clear communication plan. Give your team clear expectations and instructions, such as answering every email within Xhours, even if it is just to say that you received it. Automating alerts for shipping, delays, and other issues can also help you establish rapport with customers.
It’s still a differentiator in many subscription-based ecommerce niches
Customer service also starts with your channels, not just direct interactions. This requires you to have a presence on social that delivers general updates as well as a robust FAQ page to answer frequent questions. The more helpful you are, the happier the customers will be.
2. Delayed fulfillment
Subscription boxes are often a little bit of magic in the mail every month or quarter. Your biggest fans will wait patiently until their box is supposed to arrive. But if those boxes are late, you better be prepared for anger and irritation.
Sanrio’s Hello Kitty-themed subscription box through the Loot Crate service ships quarterly, and it’s showing exactly how you don’t want your 2019 to go.
Few things cause more tears than a 3-month delay on a Hello Kitty
Customers were billed in February for a March item that is still delayed and then again in May for a June item that’s also late. They’ve paid roughly $80 for zero products delivered in the first half of the year.
What we can’t tell, and is especially damaging, is whose fault this is. If you look at reviews like those on Trustpilot, Loot Crate has been late on a wide range of boxes and has abysmal trust scores. For Sanrio, this could mean substantial reputational harm.
Choice is the crux of addressing these concerns.
Your boxes need options to adapt to different circumstances. From the contents side of things, that means having multiple options to substitute in case production on any one item is delayed. With alternatives, you never have to wait.
The other smart choice is your fulfillment partner. Choose someone who knows how to run a warehouse and offers kitting services appropriate to your size and industry. It’s essential to realize that who is the best fulfillment service company will depend as much on your business as it does theirs. Find a fulfillment partner who will be able to match your demand and controls inventory well enough to report problems with stock long before you experience a three-month delay.
3. Bill shock
Yes, people subscribed to your box and said they would pay you $19.99 per month. However, three months in they may see that charge and be shocked, or confused, or angry. Then, they cancel.
The subscription box model has moved to recurring billing that charges saved credit or debit cards. It’s standard practice for the industry, but not every customer is used to it. They may not like the setup or tend to forget about how quickly costs recur.
You can avoid this with two clear, straightforward steps:
Treat people with respect, and you’ll earn their trust, which is crucial for creating recurring revenue.
4. Faded interest
Your box may arrive every month or every few months. While people love unboxing their goodies, that’s generally one big day of interaction and love for your brand. If the products themselves are great, then you have some continual interest, but it may not keep you top of mind until the next box arrives.
Would anyone actually space out candy across a whole month?
So, the threat is that someone will enjoy your box but get to a point between shipments where they feel “meh.” Or they’re not very interested when they pay their credit card and decide to cancel you because they’re spending too much on your category.
Beat the complaints and reduce churn by reaching out to your customers regularly. Nostalgic Candy does this by talking to customers directly through email and even text messages.
It doesn’t have to be anything fancy. You could do an email survey about what people want to see in the future. Teaser images for next month are also great ways to build interest. Memberships that generate constant attention create both value for the customer and continual revenue for the company.
The last and perhaps scariest thing to address is your profit margin or lack thereof. Many subscription services don’t initially make a profit. The initial stages are about building demand and seeing what products people like, helping you finalize price point and selection.
It’ll keep you up at night, but it is also okay not to make money right away.
You can address this by taking the time to learn about your market and do research, then adjust either box contents or price to ensure the values match. Subscription boxes often break even on the third or fourth box, so you’ve got to keep someone around for a while to start turning a profit from them.
Handle this problem with research on pricing and persistence. Match what you deliver to expectations, remembering that people set quality expectations based on cost.
Like all things discussed, it comes down to respecting your customers’ time and money.
The post Subscription-based ecommerce and its 5 biggest challenges appeared first on Get Elastic Ecommerce Blog.