Subscription Services are Booming – But is Your Data Ready?

By Kerry Young on Dec 23, 2019

Well, Black Friday and Cyber Monday are in the books for 2019, and organizations are left to gather intel on the evolving nature of these shopping holidays. Aside from an overall shift in shopper behavior (like buying gifts online in your holiday pajamas)), customers are also choosing new categories of gifts to pass along to friends and family. Subscription services are one category that continued to grow in popularity this holiday season. And why not – they’re gifts that keep on giving into the New Year. But for these services to score well in the ever-important customer retention metric, retailers and brands must to be able to master their customer and product data.

Monumental Growth

Fortunately for subscription service companies, the industry is in the midst of a dramatic growth mode. A 2018 study by McKinsey & Company showed that the subscription eCommerce market grew by over 100% per year for the previous five years.

That growth has continued to pick up speed, including during the holiday season.

Billing platform Recurly looked at 2019 Cyber Monday stats for 500 B2C subscription businesses. They showed 81.68% year-over-year growth in site-by-site average sales.

Specifically related to gift-giving, gift card purchases for subscription services also displayed substantial gains. This year’s Cyber Monday gift-card tally for subscriptions produced a 54.03% increase over 2018.

Subscription Services: The Challenge of Retention

Despite the fast pace of growth for subscription services, they still face a major hurdle to long-term success – retention. The industry struggles with high churn rates, which limit predictable revenue gains. Subscription services need to retain customers in order to reach their revenue objectives and offset customer acquisition costs.

Unfortunately for these services, when customers churn it’s usually quickly, often within the first two months.

So how do subscription-based companies prevent churn?

They focus on delivering convenient, personalized experiences to their subscribers. These personalized experiences are typically linked to novelty. Our brains are wired to associate feelings of pleasure and reward when we encounter new things. If you’ve ever been excited to try a new restaurant or get a new outfit, this should come as no surprise.

Novelty is especially important in retaining customers for curation services, the category that makes up 55 percent of all subscriptions. When subscription services deliver curated items to you in your subscription box, you get the excitement of seeing what new items they chose for you.

So how does the service know what products will resonate with you?

How Mastering Data Aids Retention

High-quality, contextual data is crucial to ensuring you deliver the products your shoppers want, when and how they want them.

If the service has properly identified your unique characteristics (interests, lifestyle, demographics, measurements, etc.), they have a better chance of matching you with products you’ll find exciting and satisfying. But if the data isn’t properly managed, it can create a disconnect between customer and product, leading to churn.

Customer Master Data Management (MDM) and Product Information Management (PIM) can ensure accurate, governed customer and product data, helping companies provide the right combination of products that the customer will love month after month.

Customer MDM enables the business to holistically view disparate data sets and discover connections and correlations to make informed decisions. Using data quality rules, the service can ensure up-to-date, accurate customer data. MDM helps predict customer preferences based on their behavior, a quality especially useful for subscription services.

PIM can be used to establish hierarchies and link corresponding products, creating a relationship between products which helps recommend specific product bundles. When combined with the customer’s unique data, it helps create a personalized product offering that accurately reflects preferences and provides something new to the customer.

When subscription brands utilize the powerful capabilities of MDM and PIM, they can deliver the personalized experiences that lead to greater customer loyalty and retention.

About the author

Kerry Young

Kerry Young joined EnterWorks in 2006 when Ennovative, Inc., the multi-channel publishing software company he co-founded, was acquired by EnterWorks. He directs EnterWorks’ operations and leads EnterWorks’ professional services and consulting organization, ensuring effective customer implementations and ongoing success. Mr. Young brings more than 25 years of technology and business management experience to EnterWorks, having served as CTO for a subsidiary of the Dow Chemical Company, and earlier as VP, Information Technology for Marshall Industries, a $1.7 billion industrial electronics distributor. He previously managed information systems for a subsidiary of McDonnell Douglas Corporation. Mr. Young holds a B.S. degree in Computer Science from Cal Poly, San Luis Obispo and an M.B.A. from California State University Fullerton.

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