An old-growth tree is a mighty sight to behold. With centuries-old trunks, they draw stability and nourishment from their deep roots. For forest newcomers, it can be challenging to establish such a foundation. Freshly germinated seeds compete for air, sunlight, and water. Once safely anchored in the soil, tiny buds become more resilient.
The same is true for merchants, who, like those small sprouts, must navigate a challenging environment. In today’s world, merchants vie for attention, resources, and market share. Just as a sapling requires nutrients to grow strong roots, merchants need the right support to launch successfully.
Customer retention is the bread and butter of a thriving enterprise, and subscriptions offer multiple pathways to achieving this. Budget-conscious consumers are slowly starting to spend their money again after record-breaking inflation and uncertainty over a potential recession. With the economy on a more stable footing, people seek better value at a lower price.
Nowadays, consumers expect personalized, seamless, and exceptional experiences. When merchants fail to meet these demands, customers become dissatisfied and churn. Meanwhile, those who fulfill and even exceed these requirements will enjoy better financial results and unlock growth. With subscriptions, merchants can win the hearts of loyal customers, retain them, and start firmly planting roots.
According to McKinsey, 80% of the value created by successful merchants comes from generating new revenue from existing clients. That’s why merchants must establish a harmonized, seamless customer journey for people to follow. This costs far less than acquiring new customers.
People who are already familiar and satisfied with a product or service cost less to maintain. Additionally, happy customers are 20 to 30% more likely to stick around than unhappy ones. At a time when incumbent merchants are reaching a point of saturation, it is imperative to develop a comprehensive strategy for customer retention.
With subscriptions, merchants can continuously deliver improvements and support to their customers. This model allows merchants to focus on nurturing long-term relationships and prioritizing exceptional service, rather than just one-time purchases.
In a densely saturated forest of legacy competitors and industry incumbents, subscriptions provide merchants with the health and vigor needed to stand out and thrive. For example, Amazon Prime, perhaps America’s most popular subscription, offers innumerable benefits to those who sign up for it.
Loyalty program. Streaming platform. Content producer. Direct-to-consumer distribution channel. One-off purchases. Recurring purchases. Amazon is everything and more. The technology giant has found innumerable ways to attract, engage, and retain customers. Altogether, this increases the customer lifetime value, an indispensable metric for sustainable growth.
A tree standing tall and proud didn't spurt up overnight. Instead, it is the result of many seasons of growth and perseverance. Customer retention is like the stable roots that firmly ground merchants, enabling them to endure every winter and flourish every spring.
One of the best ways to measure the success of retention efforts is through customer lifetime value. This metric represents the total value a merchant can expect to earn from a customer over the entire relationship. It reflects not only the revenue generated but also the quality and loyalty of customers.
A subscriber with a high lifetime value can be worth more than three lower-value customers. By analyzing customer lifetime value, merchants can determine which segments of their customer base are more likely to remain loyal and which are at risk of churning.
With this knowledge, merchants can tailor their strategies to retain high-value customers and address potential churn before it happens. As well, they can evaluate long-term profitability, make better marketing decisions, and optimize resource allocation.
Unlike one-off purchases, subscriptions are easier to retain. Since customers must take deliberate action to pause or cancel a subscription, reacquisition is less challenging. When someone considers ending their subscription, merchants have several options to prevent or dissuade this outcome while continuing to provide value and strengthen the relationship.
Research from McKinsey indicates that the primary reasons people churn include a perceived lack of value relative to the price, insufficient new or engaging products and services, and a lack of flexible pricing options within subscriptions. With this in mind, the top elements of customer retention include quality and variety.
These attributes can vary widely from merchant to merchant. That's why merchants must gather and analyze data specific to their customers. In turn, they can figure out what customers are looking for and tailor their offerings to meet that demand. Additionally, merchants can identify gaps where they are not living up to customer expectations.
With a mixture of feedback mechanisms, artificial intelligence, and machine learning, merchants can personalize customer experiences. This provides people with an assortment of fresh, original products and services. People who are served up new, varied experiences will stick around.
Drawing upon platform analytics, merchants can share personalized product and service recommendations based on a customer’s previous purchases and browsing history. Merchants can also offer exclusive discounts, early access to new products and services, and special promotions curated to the individual preferences of their most loyal subscribers.
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Additionally, merchants can have tiered memberships, meaning the higher the tier, the more benefits in tow. These benefits can include access to premium content, new features, or additional customer support. It is also possible to include a points-based loyalty program, whereby subscribers can earn points each subscription cycle. People can gain points through referrals and social media engagement too.
A great measure of quality is outstanding customer service, offering assistance to customers along the buying entire journey. This means being accessible and responsive via several channels, whether live chat, email, phone, or social media. Maintaining regular feedback loops, like surveys and reviews, is another ideal way to improve subscription offerings and better the customer experience.
Not only should customer service be top-notch but also quality and consistency of products and services. Maintaining high standards in everything available via subscriptions builds trust with customers. As well, being transparent when it comes to sourcing, production processes, and benefits produces the same results
When communicating with customers, merchants should ensure a personal touch in everything they do. This means personalizing emails and messages so subscribers feel valued and appreciated as individuals. On top of this, it’s always a great idea to keep people informed about new features, product and service launches, and upcoming events via email, social media, and other channels.
With a loyal customer base, merchants can grow deep roots and stand the test of time. From a tiny bud to a towering giant, no matter where they are in their business journey, merchants can stay resilient through every season with customer retention. In the nurturing soil of subscriptions, which yield personalization and exceptional service, merchants can cultivate lasting relationships and ensure growth and prosperity.
Firmhouse is shifting commerce for good. Our recurring commerce platform empowers merchants to seamlessly shift to more sustainable practices without technological constraints. Whether it’s extending the lifetime value of durables with rental options or increasing the value of consumables with unique services, anything is possible.
We support every recurring commerce model, allowing merchants to customize and combine product and service offerings. By adopting a future-forward, customer-centric approach to business, merchants can provide customers with convenient, flexible options. This brings added value to every purchase.
Looking to launch a thriving subscription business? Book a demo with Firmhouse today.
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