Subscriptions (they're so hot right now): When to consider an ecommerce subscription model

Beyond the Cart Lightburn Podcast - Ecommerce
Person sitting down opening up a cardboard box from a subscription box order.

Today we're talking about subscriptions. They're all the rage right now, from meal planning kits to makeup. It might seem simple to just add a subscription button to your product page, but there's a lot more to consider. For some expertise on this topic, we're excited to have our friend and former colleague, Kristine Howell, joining us today. 

Hosted by:

Andy Winthieser
Partner
Nora Lahl
Partner

Today’s Topics:

  • Why ecommerce subscription models are so popular
  • When to consider offering a subscription service
  • Simplifying the buy-in and cancelation process
  • Getting feedback from users and stakeholders
  • Investing in the emotional experience

LOOK & LISTEN

Welcome to Beyond the Cart presented by Lightburn. This is a podcast all about ecommerce, where we share some of our experiences building, managing, and promoting direct to consumer brands. I'm Nora. And today we're talking about subscriptions. They're all the rage right now from meal planning kits to makeup. It might seem simple to just add a subscription button to your product page, but there's a lot more to consider for some expertise on this topic. I'm excited to have my friend and former colleague Kristine Howell joining me today. Kristine is the co-founder of a UX consultancy. Lyssna Method with 30 years of combined experience in product and design leadership. Listen, a method builds strategies for passionate product and entrepreneur leaders to increase customer loyalty by measured actionable insights. Kristine, welcome.

Thank you so much for having me. Thank you for joining us for beyond the cart. We go way back. Yes, we do. I met you 12 years ago when I started at light burn and you were a designer there? Yes. And did your own build, we were just joking about that, that, And very, very pregnant at the time. I think. Uh, You had just, I think you just had your son. Okay. Um, so what have you been up to in the last decade? Oh my gosh. So I've been focused past after, after light burn, which was an amazing experience. I went to a product company called Connecture, so spent about seven years in the healthcare field, uh, really focused on building, um, ecomm, BTA, B2C, B2B brands, um, for them. And then I transferred into a consulting for five to seven years. Oh, that time isn't adding up. I'm 150 years old. Um, well Close enough a few years.

So I, a few years, uh, in, in Chicago area doing consulting for higher education, nonprofit, um, companies and I, my favorite experience with that whole thing was being able to redesign the, um, Chicago Botanic garden site. Oh cool. Which was really fun. Yeah. Um, and then, uh, recently went into a subscription club startup for about a, a little bit over a year, um, and was the UX director over there. And, you know, after that, I wanted to shake things up and ended up founding this company, uh, this UX consultancy. So that's kind of been my, I guess, less decade of work. Yeah.

Lots, lots of background in this. And so, you know, we are talking today about subscriptions, which are all the rage. Yes. Um, they're very hot right now. Kind of everywhere you look mm-hmm, you know, what, what are your thoughts on why that's so popular with users?

Why ecommerce subscription models are so popular 

I think that with all the products out there, there's just so many choices, so many selections, where do you go? What do you do? Subscription models have a really interesting perspective that the customer doesn't have this analysis paralysis. Sure. They can really come in. They can, it's a personalized experience. Typically they answer a few questions and they get this curated box at their door every single month. So it can take the guesswork out of things. And depending on your areas of interest, whether it's wine, um, learning more about wine and growing in that space, whether it is clothing, you wanna be more fashionable, but you don't know where to start and healthy meal clubs. You know, you don't wanna cook, but you're not sure where to begin. Um, so that's kind of, I think the, the draw to those types of programs.

Yeah. I mean, it totally makes sense when I look at, when I've been drawn to a subscription, some of it is that sampling, like you wanna try a bunch of different things and some, someone else knows more than you. Right. Or ease. Right. like, I don't wanna think about it. Right. Which, or like the dollar shave club, that kind of thing, which is kind of a different side in your experience, and you were at a wine subscription company do you feel like it was a combo of both?

I think that it was really about in, in that industry, there were a couple things happening. One, they were disrupting an old, old industry sure. Where it's been around. I feel like it's one of the oldest industries there, there is. And one of the challenges that they're having nowadays with wine is how do you get millennials and younger people into it? Are they into it? How do you get them passionate about it? So there's this desire to kind of grow that audience segment. And I think with some of these startups, um, they're trying to focus on that type of millennial, um, persona to be able to really expand into that market, but also like, think about yourself, going to the store and looking at hundreds of bottles of wine, how do you choose what you're gonna try? You're typically a customer will go to the store and they'll pick the thing that they know they've tried it before.

Maybe your friend recommended it. Maybe your mom, you know, used to drink Zinfandel. And that's what you drink now that you're older. But a lot of people don't go out of their comfort zone. So it's a really safe space in some of these more complicated industries, to be able to say, we're gonna take all that guesswork out. And we're actually gonna have you answer a few questions about your taste preferences and then match you with wine. And then you get to rate that wine and month over month, your taste preferences improve. So it creates this very easy space to experiment, try new things. And I think the, you know, stitch fix, if you're thinking about some of those subscription clubs yeah. Where you wanna refresh your wardrobe, but you don't really know where to start or you're busy and you you're working and you don't have time for that.

You can take a quiz, you can say your preferences, put your size in and they'll just ship you boxes. And if you wanna keep it great. So there's really like that low risk factor with it where you can try it before you buy it. If you don't like it, you return it. And I think that people in this busy day and age just wanna take all of that time away from that and be able to really like experience these things and subscription clubs have just been booming in that area. And they're finding that customers want this and they're excited about it and they wanna try new things, but they wanna be guided.

Yeah. And also I've seen it be a really nice opportunity for gift giving too. I look to, even if it's just the one off of the subscription, maybe a three month, I've used that a lot. Like I, you know, when we were talking earlier and kind of planning what we were gonna talk about, I didn't even think of that aspect of it. Yeah. But I think that's a huge one too, where you can like send somebody to a subscription and then they can, they have choice in it. and it's, um, a little bit more personalized experience. It does. It feels personalized. It feels like you took the time out of your day to really think about what they like and what they could experience versus you just went to the store and grabbed a gift card and threw it out. Yeah, exactly. And it sort of is that much effort. Yeah. But it feels better <laugh> um, so, you know, there are a lot of reasons that users, uh, love subscriptions and are drawn to it. What's, what's the benefit for the business side of it. Why, why would you want to, you know, when we're talking in this podcast to people who maybe are already doing e-commerce and considering adding subscription, when is that a good idea?

When to consider offering a subscription service

Sure. I think subscription is challenging in the sense that you have to have a very strong value proposition that makes that customer want to kind of take that affordance to say, I'm going to month over month pay for this. So I think that's the biggest hurdle to really get over from a, from a business perspective, clearly having a recurring customer on a month, over month basis is ideal. So how do you keep that customer sustaining? Um, I think it also offers businesses the opportunity to start to expand their inventory, because if you're bringing in more people and more people are buying on a month, over month basis, then you can, um, you know, buy your, buy your product in bulk, in higher volume and then get rid of it faster. And your margins get, get a little bit looser from that perspective.

Yeah. And I've certainly seen some subscriptions where you have some level of choice in, in what you're building out, but then there's also, you know, a portion of it is whatever's determined by the company. Right. And that's probably where that inventory, like, you have a little control over like offload that Zinfandel or you do whatever. Yep. Yeah. so any other, you know, reasons that a business might wanna pump the brakes on doing subscription? Where is, where is that like, no, that's not gonna work for your, your business or, you know, you're not ready for It. I think if you don't have a clear understanding who your customer base is, or you don't have a clear value proposition, that's really gonna tie and connect that customer to your brand, it's going to be challenging for you to get over the hurdle of someone doing a one-off purchase, versus someone taking that extra step to say, I actually want this month over month, what's in it for me, you kind of have to sit down and think about from a customer's perspective, why would they sign up for that? What are they going to get that they're not getting somewhere else? Petco is a great example. I go to Petco, you can buy, I have two Guinea pigs. So they're going through their little bedding. They're stuffy. Oh yeah. 

Constantly, constantly, And so I don't wanna have to go to the store and carry that thing and do all of that. But they have a subscription model where I get a certain percentage off. I think it's like 15% or something per month for me to be able to do that. And I think that's a really smart way to lean into subscription when your foundation is e-com and you're doing one off purchases that, you know, what, if a, if a customers using that product or repurchasing, Amazon does it too. If you're buying it month over month, then they have that option to say, well, this is just something that's a staple in my home and I want it every month. And so therefore I can purchase that if you're talking about the foundation of a subscription and a subscription club, whether it's makeup or clothes or wine, or, or maybe there's steak coming to your house, um, there's so many different variations of that right now. You really have to kind of frame these curated boxes, like what what's coming to the customer. Um, you're putting something special together. It feels personalized each month. It changes. Um, and there has to be that benefit to that. Like whether it's cost or value for the product.

How to create a feedback loop

Yeah, totally. You know, another benefit for companies to do the subscription model is that feedback loop, you and I were talking about the value of that and you as a UX designer and researcher probably are like, that's the most exciting thing is to see those patterns and like be able to have that feedback loop and dialogue with customers kind of um, so, you know, that's hugely valuable for a company to get that information from their subscribers. What do you do with all of that information? Like how, how do you take all of that and, and get value out of it?

It can be really overwhelming. Yeah. Like I feel like a lot of companies have everybody has analytics. everybody has these things hooked up, but who's really looking at it and what are they doing about it? So I think that if you approach it, that you have to know everything, it can just shut people down. It can make people feel like I don't even know where to start with this, but sending out a simple survey, even monthly, if there's a recurring loop where you're getting customer feedback and being able to review open dialogue, feedback, questions, answers, responses, you know, we've had MP, which a lot of people, it can be controversial because I think companies can put a lot, a lot of over emphasis on MPS and the value of that. , I think there's always going to be a value. You wanna look at your industry, benchmark of MPS, try to see where you're sitting.

If you're below it, then why are you below it? If you're above it, then you're doing some really great things. And what are those things that you're doing that are differentiating you? For example, a higher MPS score could be from my experience and seeing feedback, customer service, having an exceptional feedback loop when a customer has a problem, they call up, you'd be surprised how many customers note that and say, I had a wonderful experience with so and so, and they were just kind and helpful and a real human being and help me through this problem. And that can really bump your, your MPS score or your customer satisfaction score. The lower side of that spectrum, um, can be from frustration things like I wanted to cancel. And it was super hard for me to cancel because I had to physically call a person. And why should I have to do that? It's the 21st century. And it's annoying. So. Yeah, that's a big turnoff, right? 

Simplifying the buy-in and cancelation process

Yeah. Like, and what did you, you called it it's the friction, right? Yeah. Of that. Um, pausing your subscription or ending it, like where's that line um, since you brought it up, like yeah. What, you know, what do you think is the right line to draw? There, there are a lot of places where this applies newsletter, subscriptions come to mind, which are, you know, gonna be almost any e-commerce hopefully has a newsletter of some kind so yeah, that friction point, like where do you wanna land in that?

I think it's a testing into your customer base as well. Like there are things that might work for one company that are not gonna work for your company. Sure. So you really have to figure out how do you create hypotheses quarter over quarter and then test those hypotheses and say, for example, you know, we wanna test out from a cancellation model, what would happen if a customer could pause a subscription or maybe do it bimonthly or do it quarterly, what kind of impact would that have to the business or cancel online versus adding that friction in? Um, and what is the level and degree of friction that should be there? For example, there could be, uh, still a digital experience where you're able to cancel, but I might offer you up a reason to stay. Maybe you'll get 60% off next month. If you stay. Um, most people won't take that when they're ready to cancel something, they've kind of made their minds. 

Up. They're done. Yeah. Versus I'm making it so difficult for you that now you're going to be an angry customer and you have to physically pick up the phone and get a hold of someone and ask to cancel. And now they leave and yes, it caused friction and you might have saved on the back end, maybe 10, 15% of your customer base because they just don't feel like dealing with it. So they're just gonna sit on it and leave it and, and put it and delay it. But is that the customer experience that you want? So you kind of have to figure out where those lines are and then through a series of experiments, figure out how to pull those levers. 

Get feedback from users and stakeholders 

And from a UX perspective, I think a lot of us get hung up on, it has to be the perfect customer experience, but there's still a balance to the business and you have to figure out what does the business need and how do we bring those two pieces together and make sure that, you know, you're having that balance. I fel like that's a whole other, like we could have a whole conversation just about like who's sitting in the room and who's the designer right on like, you know, is it, are we gonna lean on the business need versus the user need? And I think, you know, having a really open, you know, conversation and having people who are invested in each other so that you can't have those conversations and trust each other, cuz if you had your, you know, sales guy or financial guy just telling you to do what's best for the business, every time that's gonna, you know, turn off any great UX researcher or designer and they're not gonna wanna work on it. Right. And in the end, it's not good for users. You wanna like strike that balance of something that's good for both parties. and hopefully you've got a business model. Yes. That works for that. <laugh> yeah. Or you have other problems. 

That's so right. And I think if you approach anything at very pragmatically, you don't have a motion in it. And if a stakeholder comes to you, whether it's a C-suite member or whatever, and they have a assumption about, I've had this question all the time, like, well, I've got my boss and he's got assumptions and I don't think they're right. Well, that's a hypotheses create a hypothesis statement, figure out a test plan of how you're gonna test that hypothesis and come back with data to say, either you've disproved that, or you've proven that it's actually something that you should be moving forward with. I've been disproven 10,000 times in my career where I thought that's a crappy user experience, but it actually was amazing for the business. And so, you know, over the last 18 years of doing this, you kind of get to this place where you're very humble and you have a lot of humility. At least that's how I feel. Some older designers get a ton of ego, but I feel like I, I go in the opposite direction where it's like, I don't feel like the more I know the less I feel like I know

Totally. And I think, you know, the best UX designers in my experience are the ones that know that they don't know everything and all there, they're like looking to be a sponge and learn more from users from other people and reflect that back. Right. And that that's like, if you're looking at it from that perspective, , you can't go wrong.

Totally. And you have to look at it from a wide. Uh, I always think of, of it as a kaleidoscope where you're trying to look at it from all these different angles, what the business is saying, what that, what that CEO is saying, they founded the business, they understand, they know. Something. They know things. And so do customers. But if you go off and you just listen to what a customer said, a nugget of what they said, that can be the wrong direction. Like you can't just focus on one piece, you have to look at the whole puzzle, you have to look at your analytics. What is that telling you? What is, what are the stakeholders telling you? Where do you think, you know, the position could be, there are so many different factors, but that's what makes it complicated. And fun. Yes. And fun. That's why we're still doing this. Right. <laugh> if we bring it back to subscriptions and I, I'm curious to know if you have any larger takeaways when we're talking about, you know, that customer feedback answering their needs. , what's the, the big takeaway for like how, how to like use that subscription, how to tune that and make that subscription even better. 

Understanding you customers 

I think it's, again, it always starts with understanding your customer base. Do you feel like you really know who these customers are? Are you talking to them on a regular basis, weekly, biweekly, monthly, I highly recommend that you are creating a schedule and building in testing, just like you would build in a development cycle. You're building in times when you are talking to your customers and getting feedback. Um, and that can be of various, various ranges. It could be maybe you wanna find out, um, information about people who are in the one month kind of early stage subscribers. And what do they really think as they're experiencing your product from the beginning versus someone who's been there six months to a year to two years, how do they feel about it now? Is it still, is it stagnant? Is it still interesting? Are they still growing?

Are they still feeling like it's valuable and you can get a really good balance kind of segmenting those periods of time along the lifeline of a subscription. So I think that's one way is just get a schedule and try to get things blocked out. And then if you do feel like you understand who your lifetime value customer is, then start to figure out how to create enhancements for that demographic and that segment. It doesn't mean you can't target different personas or different target audience segments that you're trying to move into, but really understand who's the core of your business and where is your revenue coming from and make sure those people  to them. Yes. Right? Like don't get distracted by, you know, maybe 50% of your one month subscribers are always gonna drop off. Yes. And that's just how it is. so let them go. Right. Don't get distracted. focus in on the ones that are the right fit rr find out why they're dropping off. Yeah. Maybe we can convert them into that. Yep. onger term. Are you te are your, is your social campaign targeting the right person? Is it targeting someone that can even afford this? Is it targeting someone that's even in the demographic and is interested in it? Like where is it breaking in that funnel? Yeah. Yep. Uh, it goes back to like, it's so intertwined with the way we think of marketing funneled stuff too. Totally. It's all intertwined. Yeah.

Invest in the emotional experience 

Oh, and one last thing. So when we think about buying something, it really is an emotional experience. And if you think about your product, your digital e-com experience as an emotional journey, you have to figure out how do you connect to that person on that level. And that's why understanding your customer, understanding who they are, their needs, their desires, their frustrations are so critical. And being able to elevate that brand that you have, whether that be a good for the world brand, that you are connecting to them because you're a sustainable brand and your audience or your target audience cares about that or whatever your, whatever that emotional connection is because people don't buy things based off of feeling that they need something, they buy it off of that emotion. So if you can tap into that, that shows that value or benefit, what is it doing for me? Um, and you have to express that very quickly on a digital channel. Yeah, Yeah. Really fast. That's like such a, such a high point to kind of end the conversation on. Like, it makes me excited to go like, get to know some customers and do good and, you know, make, make somebody's day with whatever we're selling. Um, so Kristine, I'm glad you ended on that note. Yeah.

Christine, thank you so much for joining us today. Thank you. It's always a pleasure. We like didn't talk for two years cuz everything was shut down. I didn't see you at industry stuff. So it's just really nice to reconnect and same year. Um, I hope we can have you again sometime. That would be great. It sounds like we have four more topics here. Thank you.

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Beyond the Cart is produced by Lightburn. Our episode today was produced and edited by our very own Staci Tischer and it was recorded in person for the very first time with our pal Ray Fister at 5th Floor Recording Company. 

Our music is the song Let's Go Go Go by Tigerblood Jewel. Be sure to subscribe on Apple Podcasts or wherever you consume your audio, and you can always learn more about ecommerce at lightburn.co

We'll see you next time on Beyond the Cart.

 

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