Authored by Parham Saebi, Customer Service Solutions Director at ArvatoConnect
Appetite for subscription or leasing based services has been growing exponentially as consumers seek more convenient, flexible and cheaper ways to buy.
In recent years, subscription-boxes have proven to be one of the most popular formats, with options for almost every retail category, from beauty to meal kits, flowers to wine. According to the Royal Mail Group, the UK subscription box market is forecast to reach £1 billion in value by 2022, a 72 per cent increase from its value in 2017.
However, in the last year, it’s not just boxes that have taken retail by storm, wider-subscription and leasing models have been growing in popularity. Over 57 per cent of Brits now have at least one subscription, up 10 per cent last year according to cashback website company, TopCashBack.
An area that’s gathering particular interest is in subscription-type models that support the circular economy. Consumers are increasingly looking for brands that align with their personal values, particularly when it comes to sustainability and social responsibility.
This is giving rise to a number of new subscription or rental offers that reduce the use of new resources and drive down emissions as a result. Ikea is one such example, having introduced a trial for a furniture leasing service in Switzerland, with the aim being to reduce waste by refurbishing and reusing products at the end of the leasing period.
With all the signs pointing to the number and breadth of subscription services growing, how can retailers use the model to build better customer relationships?
How subscription-models benefit customer relationships
Subscriptions offer a multitude of benefits for both the retailer and consumer, particularly when it comes to ease of purchase, flexibility and costs. For many customers, knowing their chosen products will arrive regularly is convenient and can also help them budget with regular payments, rather than facing larger upfront costs. While for retailers, subscriptions offer a consistent and more predictable revenue stream, and the low barrier to entry means it can require less resource and expenditure to set up.
But the opportunity subscription-models offer retail brands when it comes to building customer relationships goes much deeper than just providing a quick and cost-friendly product or service.
While sales channels may be shifting between online and bricks and mortar stores, providing exceptional customer experiences and building customer loyalty remains at the heart of most retailers’ ambitions.
Central to achieving this is developing a true understanding, or 360-degree view of the customer, that reveals their purchasing and communication preferences, allowing retailers to personalise their experience.
Current subscription models are typically set up online and can encourage more details to be shared than would typically be required in any normal transaction. Significantly, this can include a range of personal details, such as hobbies and interests, as well as more usual product preferences. The information is often used to tailor the subscription itself but is also a unique opportunity to build a detailed profile of each customer that can inform and tailor how a brand communicates in the future.
And the future is a key element of subscription models, with most typically representing the intention of a long-term commitment to a brand. There is an opportunity for retailers to not only build their profile of the customer over an extended period, but to nurture loyalty by proactively providing relevant and tailored products, experiences and communications. This could include exclusive offers, access to virtual events and personal shopping experiences, that engage and deliver the customer value beyond the original subscription.
With retailers now juggling many different technologies and ways of collecting customer data, from social media integration to analytics tools, chatbots and proactive outreach, it’s vital this information gathered is easily available to all teams in one place.
This is particularly important as it’s not just marketing teams that benefit from increased customer knowledge, ensuring this data is shared with the customer service and aftercare teams can make all the difference in delivering a positive, personalised experience. With data on a customer’s purchases, how they interact with the brand and their sentiments at their fingertips, a customer service agent is properly equipped to provide a detailed, relevant response much more easily and quickly to an enquiry.
While subscription models may not be new to the retail industry, they will play an increasingly central role in the future. With the right technology in place, they offer increasing opportunity for brands to diversify their offerings while building their customer relationships and loyalty.
To find out more about what the future holds for customer experience, read our latest report What’s in store for retail? with exclusive insight from Benefit Cosmetics, Mamas & Papas, Lloyds Bank and data science consultancy, QuantSpark.