All about the bundles: Subscription firms package data and customization to build trust
Jan 21, 2021 | By PYMNTS.com
The subscription business is all about the bundles. For years “unbundling” disparate elements of subscription offers were all the rage when it came to reaching consumers. The concept of “bundle” became interchangeable with the concept of bloat, which meant consumers had to pay a lot of money to access the one element of the subscription they actually wanted, and waste money on the ones they didn’t want but had to pay for.
“People got fed up with bundles because they didn't know what they were getting out of them,” said,” Vindicia CEO Sharath Dorbala said in a recent conversation with PYMNTS CEO Karen Webster. “The classic version is cable providers, they gave consumers about 200 channels of which 195 are useless to the point we didn’t even watch them. What's happened is now subscribers are much smarter. They understand the pricing. There's much better transparency and businesses are able to build trust.”
The concept of bundling was front and center for Dorbala and other executives in a recent On The Agenda Conversation with Webster, Babbel CEO Julie Hansen, HOMER CEO Neal Shenoy, BloomsyBox CEO Juan Palacio and Nuuly Director of Marketing and Customer Success Kim Gallagher on the future of the subscription marketplace and the role bundling can play. The panel discussed the necessity of meeting the consumer’s ever-evolving needs in a world that has undergone a significant digital transformation and faces a still uncertain future.
Customization, the panel agreed, is often the magic ingredient both in bringing consumers onboard in the first place and fighting the churn that is an inevitable part of the business.
“If you as a subscription brand are true to your promise of discovery, if the customers trust you and your curation and logistics, it's much more likely that they're going to trust you to be their one-stop shop,” BloomsyBox’s Juan Palacio said.
Building the right personalized experience
Part of the transparency that has been achieved in the subscription business has come from artificial intelligence. Among the amazing contributions AI has made to the world of retail, Babbel’s Julie Hansen said, is how clear a window into the consumer wants and needs it is possible to see with the data. Babbel sells language learning products and in its case, that means gaining insights into a consumer's educational journey and then curating additional products into that experience. A subscriber thriving in listening activities might be recommended a podcast, a struggling consumer might be guided to a tutor, all of which are additional services that can be bundled in through Babbel.
At the same time, women's clothing subscription firm Nuuly’s Kim Gallagher said data can do more than illustrate what customers want on the basis of their past purchases. It can also help provide clues to put products in front of new customers.
“We don't want to just serve her the same coat that everyone likes to rent. We also want to push her a little bit out of her comfort zone. So, we have a ... little bit of that randomness baked into our algorithm,” Gallagher said.
And that attitude to keep the consumer constantly engaged with something new and relevant to their specific needs is critical. Learn-to-read company HOMER’s Neal Shenoy said that variety is important during the entire lifecycle of the customer, not just at sign-on. HOMER, he said, works with children ages 2-10 — a demographic set more or less defined by constant changes in ability level and support needs.
“Part of the design for us in combating churn is allowing our users in this case, children, to graduate into different experiences,” Shenoy said. “When that efficacy occurs, that creates trust. Parents say, ‘wow, my child is engaged. My child is learning. I trust this brand. What else can this brand do for me?’ And then that creates the opportunity for us to gain additional share of engagement, other things that we can offer like physical products, classes, experiences, tutoring; and that ultimately yields more share of wallet as well.”
But while the opportunities for upselling and expansion are the most tempting for retail brands pushing into subscription services, Dorbala said, it is almost as critical for brands to honor consumer choice with options to downscale as well. Subscription fatigue is a real thing, as is economic hardship. Smart providers understand that consumer choice really drives subscription services and is what keeps the customer engaged in the long run. That means giving them choice, even when it comes to wanting to unbundle their services to cut out a few things or hit the pause button from time to time when the fatigue is setting in. A short pause, he said, is still better than a long loss and subscriptions at the end of the day are a solution to the retention issue that every retailer faces.
Predictions for the coming world
All the panelists have been forced to reckon with the great unknown of what the post-pandemic world will look like. But, as Nuuly’s Gallagher said, in the rental fashion segment, a return to events is surely good news. The company has seen its business pushed forward by the rapid digitization for the market, she said, but the fall-off in weddings and other special events has cut off what for many consumers is their initial touchpoint with the brand.
Similarly, Babbel’s Hansen said, the return to more normal business operations will likely see a pick-up in Babbel’s B2B business as face-to-face communication between workers returns to being a norm that firms will invest in additional language training for.
For other businesses in the subscription industry, flower subscription company BloomsyBox's Palacio said the return to consumers getting back out there probably will be likely to be accompanied by some hard times.
“The food subscriptions, I think they're going to suffer,” Palacio said. “People are spending their time at home trying new things to cook and to entertain themselves which has been a huge boon for these companies, but I think they're going to be suffering a lot when people go back to normal. Even if any customers already acquired a habit of using any given platform, I see a trend where there is some at-home fatigue and consumers just really want to go out.”
But for all those potential bumps in the road, Vindicia’s Dorbala said, subscriptions will keep right on expanding and adding new types of players as more of the old economy goes back online. He believes they represent a chosen model for bringing consumers on board and keeping them over the long term. That, he said, will be important in verticals like education and consumer goods, but will likely expand to others too.
“I think that we have not dug into transportation and we will,” Dorbala said. “I would not be surprised if airlines and other companies actually start providing subscription-based models and get into that because there's all this capital that's not being spent and these companies want a way to get consumers to start pushing it back into the market.”