Retaining an existing customer is 20% of the cost of acquiring a new one. Besides the increase to your bottom line, the more brand loyalists you can have, the better.
Offering product subscriptions, or even basing your entire business around them, is becoming a great strategy for many businesses. Gartner predicts that by 2015, 35% of Global 2000 companies will rake in 10% of their revenue from subscription models (and this isn’t even counting media digital services, like Netflix).
Subscriptions extend lifetime value and reduce customer churn. In turn, your brand a chance to cultivate a base of loyal customers who help your business grow. This stability also gives you better insights in production and logistics, which helps you control costs.
But are subscriptions the right strategy for your brand? At Symphony, we offer industry leading Subscription commerce services – pre-paid, customer editable, administrative editable – with features like pause, accelerate and change. We’ll ask a few questions to see if you have the kind of products that customers would want on a consistent basis.
1. Is your product consumable?
If your product is something that needs to be bought again and again, then it’s helpful for you customer to have a subscription option. Baby wipes, for instance, are great subscription products since they’re one-and-done products. Baby blankets are generally not, since there’s no reason for customers to subscribe to a product that’s assumed to last.
It’s an obvious question, but still important.
2. Do you have a lot of repeat business?
Being a consumable isn’t enough for a product to succeed as a subscription. It has to be a product that your customers keep coming back for.
As such, your most popular products are ripe candidates for subscriptions. If it’s something that consistently flies off the shelf, then you can safely assume that customers would gladly pay for the convenience to subscribe to recurring shipments of it.
Even better, take a look at your order history and see if your returning customers continue to buy the same product. These are the kind of customers you want to target subscriptions towards anyways, because they’ll be more likely to purchase the subscription and less likely to cancel them.
3. Do you have the resources to build infrastructure around subscriptions?
Offering subscriptions is tricky business. You have to have software that’ll keep track of the customer’s payment and shipping information while enabling orders in sync with the customer’s preferred subscription plan.
Subscription errors can lead to costly chargebacks and dissatisfaction that nullify the business-growing benefits that subscriptions offer.
There are a couple of ways to build proper commerce infrastructure around subscriptions. First, you can find a specialized subscription solution that can integrate with your current set-up. The best subscription commerce services enable various forms of subscriptions – pre-paid, customer editable, administrative editable – with features like pause, accelerate and change. Finding a partner that can handle the integration and maintenance is essential, especially as you look to scale.
Or you can deploy with an end-to-end solution that offers subscriptions as part of its solution, which makes the maintenance and stability of your subscriptions naturally scalable.
There are plenty of compelling reasons to consider expanding your business model to include subscriptions: Greater lifetime value from your customers; better forecasting for your inventory and logistics; and cultivating brand loyalty.
Just make sure your products are good fits for subscriptions, and take care to choose the right solution to help you build your subscriptions out. At Symphony, our industry leading solution powers subscriptions for many of the market’s fastest growing brands.
Want to learn more about how Symphony can help you get your subscription business off the ground? Let’s talk.
$3.5 billion. That’s how much online retailers lose every year to fraud. With ecommerce and mobile commerce on the rise through the holidays, credit card and data theft should be on every e-tailer’s mind.
- Overall, merchants are reporting fraud loss as a percent of revenue at 0.68% this year compared to 0.51% in 2013.
- Although the average value of a successful fraudulent transaction fell this year ($155 in 2013 vs. $114 in 2014), fraudsters are bombarding merchants with 61% more attempts at fraudulent transactions—only 55% of which are prevented.
There are two main ways that cyber criminals steal payment card data and personal identifiable information (PII). The most sophisticated hacking involves targeting an enterprise organization, usually a financial institution or large retailer like Target or Home Depot, to steal millions of customer records. Some 375 million data records had been confirmed stolen or lost worldwide.
The second way is to target individual consumers by capturing credit card information at POS payment processing, or creating elaborate ways to trick consumers into divulging personal information via fake online websites, phishing emails, or even fake charities!
So how can busy brands protect their profits from malicious cyber criminals, who are most active during the lucrative holiday season?
The keys are proactive planning supported by aggressive automation to reduce the manual oversight required to spot – and stop – potentially fraudulent orders.
According to a report by Cybersouce, online brands use over 20 dimensions to “flag” suspicious credit card orders by checking customer history, purchase device tracing, multi-merchant purchase history and validation services.
According to the survey respondents in the report, the most successful management tools are fraud-scoring models. The fraud management system evaluates each order at checkout and instantly assigns a fraud score. Brand owners set the fraud threshold based on unique business rules, so any order above the threshold is automatically halted for further review.
This is a huge time saver because the operations team now only reviews suspicious orders: they are not inundated trying to manually review every order. This also increases the efficiency of the operations team by allowing them to focus on fewer orders, so fewer mistakes slip through the cracks.
Stopping the order before shipping is the holy grail of fraud detection. Upon review, the ops team can push the order through to fulfillment, identify fake accounts or block bad customers. Catching the order before it ships avoids costly chargebacks that can harm your business.
The most successful businesses treat fraud prevention as an ongoing process. The most frustrating thing about fraud is that it evolves: if criminals get flagged for certain behaviors, they’ll simply think of new ways to beat the system. This is why your fraud prevention strategy needs to be just as flexible to minimize the impact of fraud on your bottom line. Many solutions can be adjusted to fit the fraudulent behaviors that you see most often. However, best-in-class solutions run on algorithms that improve and adapt to your unique use cases as well as the shifting fraud landscape.
In any case, as you continue to formulate a game plan to the holidays, it’s important to seriously consider an approach to fraud detection and prevention. You’ve worked too hard to let fraudsters put their hands in your pocket. Luckily, there are tools out there that can increase the odds in your favor.
Symphony client SpiritHoods was recently featured in Mobile Commerce Daily with the provocative headline: “SpiritHoods’ Mobile Revenue Surge May Quiet Responsive Design Critics.” The business case for mobile optimized commerce is clear: SpiritHoods mobile revenue increased 1,000% in the first four months after launching a responsive site, and now half of SpiritHoods’ site traffic is coming from mobile traffic.
But making extensive changes to a commerce site may disrupt existing business. To mitigate risks, brands need a strategic framework to successfully redesign a brand for mobile commerce. This is the design process that Symphony developed relaunching hundreds of mobile optimized commerce sites like SpiritHoods.
Symphony’s design team has a philosophy of “mobile first” design, which means that the site is built on the smallest screen first, and then expanded to tablet and desktop store fronts. Using responsive design, the site is built once, and adapts to all screens.
By starting on the smallest screen, the design team and the brand stakeholders are forced to work in a highly constrained environment. Fewer elements can fit on the smaller page, so the brand must prioritize the most important elements. The design team starts by asking three fundamental questions to determine what “makes the cut” on the tiny screen:
- What are the most important things for the customer to see?
- What are the most important things for the customer to do?
- What are the most important things for conversion?
Symphony identified four steps to launch SpiritHoods’ new mobile site:
- The most important thing on the page is the call to action, so each page leads with a call to action.
- Simplify navigation and eliminate links that can distract the shopper or worse, move them further away from the call to action.
- With stripped down pages, there is a danger that the mobile pages will look the same as everyone else’s pages. The brand’s distinct personality must shine on every page.
- To optimize for conversions, checkout has to be frictionless. Reduce barriers so the shopper can complete the order as quickly and easily as possible on a small screen and phone keyboards
Here is how the four steps were manifested in SpiritHoods’ mobile redesign.
1. Make the Call to Action Prominent on Every Page.
There are two main calls to action on the site: Add to Cart and Checkout.
Add to Cart is prominently displayed on each product page immediately below the product photo, and before the long form sales copy and customer reviews.
Once a customer adds the product to the cart, the “sticky” shopping cart drops down and stays open until the customer takes an action – either by tapping away or selecting the large, brightly colored Checkout button. Customers can easily check out without tabbing to another screen.
2. Simplify Navigation
The key to effective navigation is to reduce the shopping experience to just what the shopper needs to see, while making it intuitive and accessible for shoppers to find more information when they want it. For SpiritHoods, the home page navigation only includes shopping links for Women, Men, Kids, Teens, and Accessories.
To reduce the real estate in the footer, the team moved links to the collapsed navigation menu. This reduced the number of links that customers see on the mobile version: Home, Terms, Help, and Shipping. This does not mean that the other pages are omitted; rather, additional links are available in the navigation menu without cluttering the mobile page.
3. Make the Brand Unique
SpiritHoods wanted a design to reflect their edgy urban aesthetic. The product is interesting and highly visual, which translates to extremely shareable content. The product pages lay out each element in order of importance to SpiritHoods: large, vibrant product photos, product name, Add to Cart button, long form sales copy, social sharing icons, and tons of product reviews that scroll effortlessly on mobile devices.
4. Easy Mobile Checkout
Frictionless checkout was achieved by designing a scrolling checkout instead of multiple page checkout. Customers are comfortable scrolling on phones, so it makes sense to scroll down the page, rather than force the customer to click or tab to additional pages to get to the next step in the checkout.
Since the site launched in 2012, SpiritHoods has been redesigned for a smoother shopping experience with improvements to online checkout. SpiritHoods’ checkout now features enhancements including fewer fields, progressive field reveals, address auto-populate functionality. Auto populating addresses is a godsend for mobile shoppers because it reduces the keystrokes customers need to type to get the full address. This in turn reduces billing and shipping errors due to typos.
As mobile phones evolve and customers become more sophisticated, mobile design evolves to meet customer expectations. By focusing on four steps: strong call to action, streamlined navigation, strong brand, and optimized checkout, brands now have a strategic framework to launch mobile commerce design for success.
Here come the holidays. The good news is that 86% of retailers expect holiday sales to increase YOY, and online sales will be the fastest growing segment. The challenge is that sub $10M ecommerce brands and Fortune 500 corporations prepare for retail’s biggest season in dramatically different ways. Most notably, SMBs don’t have the staff and resources to offer the volume and breadth of promotions, web site optimizations, marketing campaigns and volume discounts that are standard for mega-retailers. So what can SMBs do to increase efficiency and sales given constrained resources? Stick to the basics: focus on these five areas to deliver an awesome shopping experience and maximize revenue regardless of your brand size.
Get your mobile experience right.
Many of Symphony brands see upwards of 45% of traffic coming from a mobile phone or tablet. And guess what? Some of the biggest brands are difficult to shop on mobile—it’s hard to build a mobile site on top of decades-old technology. Here’s where being a smaller, more agile brand works to your advantage. Optimize your marketing emails to be read on mobile phones, use large call to action buttons in these emails to direct traffic to your site, and make sure it’s as easy to browse and checkout from a phone as it is from a computer.
Keep your online store open 24/7.
Shoppers can’t buy from you if your site goes down. Last year, Symphony’s top clients experienced 1100% increase in traffic during peak periods like Black Friday and Cyber Monday. Check with your hosting provider to make sure that your site has sufficient bandwidth to handle demand spikes without going black.
Focus on the big five days.
Black Friday, Cyber Monday, Free Shipping Day, Shipping Cutoff Day, and Christmas Eve each require a different messaging strategy to tap into the holiday buying cycle. For Black Friday and Cyber Monday, set up your email and social campaigns in advance and offer your most competitive pricing – shoppers are cruising online for deals before they hit the mall and your online ads should be firing at maximum capacity during this time. At a minimum, ensure that your ads, emails and landing pages are all aligned with the same messaging.
For Free Shipping Day and Shipping Cutoff, messaging switches to delivery times and “Guaranteed Delivery” messages should be more prominently displayed. Once these dates pass, make sure to pull your ads and swap them out with the next promotion messaging. Expect to severely slash your online advertising after Shipping Cutoff, and switch all messaging over to “last minute gifts” such as digital gift cards.
Christmas Eve is the biggest day of the year for digital gift cards. Yes, all of those last minute shoppers are desperate for something to stuff in a card or wrap under the tree, and digital gift cards that have a coupon or promotion code are just the ticket. Make sure your brand is ready and able to cash in on this trend.
Plan your shipping strategy.
As an SMB, the economics of fulfillment and shipping are stacked against you: you can’t negotiate the volume discounts that the mega-retailers can. Worse, 71% of consumers EXPECT free shipping, which puts pressure on your brand to compete on services that eat into your bottom line. As an alternative to a blanket free shipping policy, SMBs can implement smarter and more targeted promotions such as tiered shipping rates, free shipping to your best customers, free shipping on certain days (Today Only!), free shipping in exchange for referring a friend, or even free shipping in exchange for social media participation such as liking you on Facebook.
Optimize your web site for holiday shoppers.
For many shoppers, this may be their first experience with your brand, so your first impression has to be a great one.
Leading up to Christmas, make it easy for customers to find what they want by creating gift guides (“Gifts for Him”, “Gifts for Her”, “Gifts Under $100,”), easy to understand return policies (in case the gift doesn’t fit), explicit delivery times (including updating your normal shipping delivery times to account for holiday delays), easy gift messaging options, and automated package tracking so frazzled customers can quickly locate where their package is and confirm it will arrive on time without burdening your customer service team.
After opening presents on Christmas Day, consumers are back online looking to spend those nifty gift cards and hunting for bargains on gifts they wanted but didn’t receive. Make sure your site messaging ties into post-Christmas shopping experience by featuring new items (at full price) for those gift card shoppers who want to splurge, and swap out your gift catalogs with “After Christmas Sales” to move excess or seasonal inventory. Whatever they want to buy, redeeming their gift card should be quick and easy.
From planning to promotions, there is much that brands can do to boost holiday sales. For SMBs, just keeping up with holiday demand can be a daunting task. By covering the basics, SMBs will be ready to take on this holiday season with a strategy that addresses consumers needs on five levels: be where your customers are shopping (mobile), be open when your customers want you (increase site bandwidth), communicate differently during the buying cycle (pay attention to calendar milestones), anticipate consumer demand for free shipping (craft your free shipping strategy) and make sure your customers have a great online shopping experience (optimize your site for gift buyers).
A high Google ranking is a great way to boost site traffic, and Symphony’s latest release helps make that happen. Starting this week, all Symphony sites automatically send daily sitemaps to Google Web Toolkit (GWT), helping your brand achieve the best Google ranking possible.
What’s a Sitemap?
Sitemaps organize the information stored throughout your website and arrange it in a way that’s easily read by Googlebot, the giant Google machine that crawls the Internet and ranks web pages.
Why Should I Submit a Sitemap?
Sitemaps lead to a more efficient Google crawl by telling bots how to crawl your site. Sitemaps pass along information like what links are there, how to find them, how frequently they’re changed, and so on.
Who Benefits From Sitemaps?
Every site can benefit from submitting well-organized sitemaps. You might benefit even more if you have:
A large website: If your brand has a big catalog or lots of static pages, Googlebot is more likely to miss some pages, especially ones with new or changed content. A sitemap is a giant sign that says “Hey, Googlebot, stop here for instructions about where to go.”
A new website: Older and/or popular sites have more clout with Googlebot. That’s partly because there are more sites linking and directing traffic toward them. Delivering a clear sitemap to Google helps you compete with these sites.
A lot of product photos: Sitemaps with properly named images help your photos rank higher when customers search for products in Google Images.
A lot of static pages that don’t link to each other: Your static pages probably all link out from your home page, but they might not always link to each other. If your site doesn’t have a strong network of interlinking pages, listing them on a sitemap can ensure Google
doesn’t skip some pages.What Information Does my Sitemap contain?
Symphony-generated sitemaps are generated and submitted daily. They contain all of the following features:
- A sitemap index, which links to the following individual sitemaps:
- Static page sitemap
- Product page sitemap
- Category page sitemap
- Image sitemap (including all product images)
- Googlebot-friendly naming and prioritization.
- Pages are prioritized so the bot understands that a Home page is more important than a Category page, which in turn is more important than a Product page.
- Images are properly named
- Submission logging. In addition to being automatically generated and submitted to GWT daily, sitemaps are fully logged in case of errors.
By making it easier for Google to crawl your site in an efficient way, you can cut down the time it takes to earn a higher Google ranking. This extra boost to your Google ranking works best when paired with other SEO-driving tactics like secure HTTPS sites, solid site architecture, and stellar product copy. Start paying attention to all three, and you’ll see your rankings rise with less work, less upkeep, and improved results.
Subscriptions are big business. In fact, Entrepreneur magazine will name the booming ecommerce model one of the top business trends for 2014.
In simple terms, a subscription is a single purchase set to a recurring schedule. While any product can be turned into a subscription, certain products naturally lend themselves to this model. The best subscription products typically have three major characteristics: they are consumable, they have a relatively short product cycle, and they are used on a regular basis.
This is one of the most important characteristics for subscription products. The product needs to be consumed (i.e. “used up.”) For instance, a piece of wall art is not consumable, therefore it does not make much sense to offer a subscription for wall art. On the other hand, coffee beans are an excellent product to offer subscriptions for because coffee drinkers looking for their daily fix go through a bag of coffee beans relatively quickly.
Short Product Life Cycle
If the product has a long product cycle, it is difficult for customers to anticipate when the product will need to be replenished. In our experience, customers are reluctant to subscribe to products with a life cycle longer than 3 months. For example, you probably use salt or sugar often, but you don’t need to buy salt or sugar packages on a regular basis. On the other hand, a shaving razor is an ideal subscription candidate because the blades dull and need to be replaced every one or two weeks.
Used on a Regular Basis
Sporadically used products also make it difficult for customers to predict when they will finish the product – or even whether they will need to restock the same product once they finish. For example, liquid clog remover is consumable and has a short product life cycle. One bottle of regular liquid clog remover is intended for only one or two uses. However, it’s hard to predict when you’ll need a new bottle, so you probably wouldn’t subscribe to this product. On the other hand, cosmetic and grooming products that are used daily are excellent candidates for subscription, as successful subscription businesses Birchbox and Dollar Shave Club will attest.
Subscription Model Benefits
Compared to a one-time purchase, subscriptions offer ecommerce merchants three major advantages.
High Life Time Value
Subscription customers represent higher long term value due to the fact that they are expected to make multiple purchases in the future. Signing up for subscription is like a self-selecting process for VIPs: subscribers are telling you that they are going to continue buying your product. VIPs typically spend more on products and interact more with companies. They are also more likely to spread positive word of mouth about your brand because they are exhibiting a high degree of satisfaction with your brand, product or service. According to an Amazon survey, Amazon Prime members spent almost twice as much as non-Prime members, largely because they’re more likely to set up subscriptions. Clearly, subscribers are high value customers, and smart brands target this group with special marketing and engagement incentives.
Compared to a one-time sales event, revenue from subscription customers is predictable. Notwithstanding cancellations, brands know exactly what kind of products the subscription customers will order and when they will order. Brands can forecast product and delivery demand with incredible accuracy, which leads to reduced costs in manufacturing and carrying inventory at the warehouse – which flows directly to your bottom line.
Subscriptions also provide an easier shopping experience for customers by eliminating repetitive tasks. Think about shaving razors or pet food. You never really think about re-purchasing these items until you’ve already run out, which means an emergency trip to the store to get Fluffy’s dinner or a new blades. Today’s customers are increasingly willing to spend a little extra money for the convenience of having regularly consumed products (coffee, cosmetics, grooming, beverages, pet food) delivered to their door. Dollar Shave Club solves this practical problem by replenishing shaving razors by mail every month; PetFoodDirect solves the same problem for pet owners.
Subscription Model Risks
The risks of a subscription business can be as great as the appeal. Incorrect billings, inability to cancel easily, unrecognized charges, etc. can all add up to big customer chargebacks. Without the proper controls in place, brands end up having provided a service for free. Clearly, managing customer expectations and having a robust customer service plan in place can help preserve your resources and ensure that your subscriptions are a source of income and revenue; not headaches and losses.
Managing Your Subscription Business
To understand your subscription business, the most important metrics to look at are retention rate and churn rate. Churn rate is a measure of the number of individuals who move out of your business over a specific period of time. A high churn rate means that subscribers are not staying around for multiple purchases. Consequently, the business impact of a high churn rate is lower lifetime value per subscription customer and lower overall revenue.
Symphony conducted an analysis of subscription retention and churn rates across our portfolio of brands. In order to make sense of subscription trends over time, we used cohort analysis to look at data that share similar discreet characteristics (groups) instead of analyzing the entire data set as a single output. For our analysis, cohort groups were based on the time the customer joined the subscription service.
Graph 1 is an illustration of how we structured the analysis. Each row represents a cohort group by the week a customer joined the program. For instance, the first row indicates every subscription customer that joined in Week 1. Each column represents the week into their subscription. The first column, “1” indicates the first week of a new subscription. Afterwards, we calculated the average cancellation rate across all rows. In other words, we have an average cancellation rate for each week of ‘membership length’.
We plotted the average cancellation rate to get Graph 2. For confidentiality reasons, we have removed the actual cancellation percentage from our graphs.
Finally, we ran the analysis for three different customer segments: “non-VIP”, “VIP+1”, and “VIP+2”.
Non-VIPs are new customers who have not made any prior purchases from the brand. VIP+1 are customers who made at least 1 purchase before, and VIP+2 are customers who made at least 2 or more purchases before signing up for a subscription. We plotted each segment to get Graph 3, which illustrates the retention rate, or the percentage of subscription customers who remain engaged in the service.
Results and Insights
There are two key takeaways from our analysis.
Repeat Customers Make Better Subscribers
We see from the Graph 3 that non-VIP customers behave quite differently from both VIP+1 and VIP+2 customers. Non-VIP customers are much more volatile than VIP customers. Non-VIP cancellation rates are much higher than VIPs across different stages of their subscription cycle. This makes intuitive sense because VIP customers have additional experience upon which to base their subscription decision: VIPs already tried your product and returned for a follow up purchase.
Cancellations Spike at Delivery Time
Cancellation does not happen linearly. In fact, based on our data, we see a large spike for cancellations around the time of delivery. In our data, the default delivery cycle was 4 weeks. We see relatively flat cancellation rates leading up to week 4, 8, and 12. However, during the week that the delivery is scheduled, the largest groups of people defect.
How to Improve Your Subscription Business
Based on our analysis, here are four ways that ecommerce merchants can improve subscriptions and boost recurring revenue.
Market Subscriptions to Your Best Customers (VIPs)
Clearly, we can see how customers behave differently based on their prior purchasing history. Before pitching a subscription offer, it is critical to have a thorough understanding of your customer profiles to run a successful subscription campaign. Don’t waste your efforts pitching subscriptions to first time buyers; instead target repeat purchasers for subscription offers.
Target Retention Efforts during Peak Cancellation Periods
Based on our analysis, cancellation rates spike around delivery dates. Thus, it is important to target retention offers at those times – especially during the first three deliveries. One effective technique used by our clients is to include bonus coupons with the subscription delivery. Coupons can be applied to future subscriptions or additional orders, with the rationale to keep customers around for their next delivery.
Give Your Customers Control
A good subscription business allows customers to modify their subscription orders to fit their unique needs. At a minimum, customers should be able to change their delivery frequency or pause their subscription if they go on vacation. Customers who want to make modifications, but are unable to easily change their subscription products or delivery dates, will simply cancel the existing subscription. Whenever there is cancellation, there is a very high risk of losing that subscription forever.
Let Your Subscribers Know You Care About Them
Brands realize subscription customers are important, but may not take the extra step of creating separate engagement campaigns. Treat your subscribers like the VIPs they are. For example, offering test products, early purchasing for new products, special discounts like free shipping, or other unique membership “perks” can be the difference between an engaged subscriber and one who cancels.
Subscriptions are one of the hottest ecommerce trends for three reasons: high customer lifetime value, revenue predictability, and customer convenience. But managing your subscription business requires a different mindset from one-off acquisition marketing. First, not all subscription customers behave the same. Customers who have made at least one prior purchase from your brand tend to be more stable and continue subscribing longer than first time buyers. Second, customers tend to cancel their subscription service around the delivery time. Savvy brands proactively try to reverse this trend by providing extra attention or promotional coupons along with the subscription deliveries.
The key to analyzing your subscription business lies in cohort analysis. This techniques provides the granular insights to understand your customer behavior and develop intelligent marketing and engagement strategies to produce long term success including predictable, recurring revenue.