Putting subscription commerce’s ‘get, keep and grow’ playbook to work
Dec 21, 2020 | By PYMNTS.com
In the beginning, there were bundles. Then came unbundling, followed not long after by the introduction of “rundles,” or recurring revenue bundles. And now, thanks to a global pandemic that has pushed more business online, tightened wallets and compressed delivery times, the retail landscape has undergone huge changes in a relatively short amount of time.
“So when you take all of these consumer behavioral changes, there's a big seismic shift, and merchants have had to adapt really fast,” said Sharath Dorbala, CEO of subscription management platform Vindicia, in a recent conversation with PYMNTS’ Karen Webster.
From Dorbala’s point of view, any online subscription model's implementation and retooling must focus on and follow three basic use case criteria.
First, does a move improve retention? Second, does it increase wallet share from existing customers? And third, does it help in the acquisition of new customers?
Because consumers have gotten smarter over the years and are more likely (and better able) to compare prices and services, merchants need to make sure they’re showing the value they deliver to win part of a finite retail pie.
“Subscribers have only so much spend available,” Dorbala said. “It's not like my disposable income has increased over the last few years.”
New solutions for new times
“We all know we’re living in a fully different age,” Dorbala noted.
He said that merchants need to be nimble and flexible, whether dealing with COVID-19’s social, logistical or economic impacts or millennials’ changing habits and rising online expectations.
Companies appear to be noticing, as seen in the surge in free trials or “try and buy” offers and the increased availability of “subscription pause” options that many merchants are now offering.
According to Dorbala, such moves send a message that a business is confident consumers who shop around will come back.
“Saying ‘you’ll be back’ is a different way of doing retention,” he explained. “It says, ‘okay, go try something else out. We know you'll come back.’”
That said, Dorbala warned that it’s not okay to play around with hidden charges and billing in the era of the super-informed consumer, as even a comparatively small unexplained cost can ruin an otherwise successful relationship.
“Subscribers don't like phantom charges,” he said. “They see their bill.”
Dorbala noted that even a random $1.99 fee within a $100 monthly spend could get people upset, and it’s just not worth it: “Although $1.99 doesn't even buy a coffee in Starbucks … still people get upset.”
Target recently decided to cancel a subscription plan that enabled bulk re-ordering, and Dorbala believes the company was caught between a membership and a subscribe-and-save model.
“They realized that in COVID, it's more about ‘I want goods right now’ because it's the stay-at-home economy model,” he said. But between auto-replenishment, on-demand and membership purchases, there were just too many variables to handle. So, Target simplified things.
Dorbala said the retailer “has gone to the other extreme, saying, ‘this is a pay-as-you-go subscription model’ without there being a subscription. And for them, the economics make sense.”
In fact, the change is really about giving customers “ultimate control.” For example, when a consumer runs out of milk, they can run out and buy more. “Target is saying: ‘We will give you that flexibility,” explained Dorbala. “If you're running out of [something], don't worry about it. Go online, order it and we’ll just send it to you the same day’” — whether the consumer has a Target card or not.
What about Walmart+?
As far as Walmart’s introduction and delivery enhancements offered through its new Walmart+ subscription product, Dorbala said the world’s largest retailer was late to the membership space, but had no choice if it wanted to compete with digitally-native Amazon.
However, he said Walmart brings its own unique tools and advantages to the battle. “They have such a loyal fan base that believes in Walmart's value [proposition],” Dorbala said.
He expects Walmart+ to go through a customer acquisition phase and then offer loyalty cards, memberships, free trials, and subscribers' subsidized rates.
“They'll do everything Amazon does,” Dorbala said, noting that Walmart+ is already more price-effective than Amazon Prime. “It then becomes a question of who delivers a better experience and more convenience.”
But as various online and omnichannel retailers continue to find new and faster ways to serve customers, the big takeaway Dorbala sees is that the marketplace will give consumers an unprecedented choice — and ultimately help retailers, too.
“It's good for Amazon that there's another good competitor — Walmart — because it will keep everybody on their toes,” he said.