Table of contents:
- Subscription sales in the context of the e-commerce industry
- What can be purchased through subscription sales
- Advantages of subscription sales
- What are the benefits of subscription sales for the automotive industry
- What discourages customers from subscribing?
- Technology to help you execute your strategy
- Safe and effective introduction of subscription sales to an organization
- Support your e-commerce website with Hicron
Although the trend was started by digital service providers, it quickly moved to physical goods. Currently, it is possible to subscribe to a wide variety of products and services. Users are often unaware that the orders they receive are delivered to them on the basis of a subscription solution.What can you currently subscribe to? Why is this sales model so popular? In order to answer these questions, it is of course necessary to start at the beginning.
Subscription sales in the context of the e-commerce industry
The origins of subscription sales date back to the early 17th century, when book subscriptions were first offered to buyers. Since then, sales based on regular deliveries of products and services at a time chosen by the recipient have changed and evolved beyond recognition. What has not changed, however, is the goal – to deliver orders to the Customer without the need to place them repeatedly. It allows the buyer to use this option as long as they do not cancel it.
In the e-commerce industry, however, subscriptions guarantee much more, and the possibilities are growing by the day. For example, they provide users with earlier access to services or products, richer offerings, and enhanced functionality. In addition, sales platforms offer subscribers attractive prices and purchase packages that give them the feeling of money well spent. For vendors, it is an opportunity to expand the group of recipients and gain long-term Customers.
What can be purchased through subscription sales?
This model in e-commerce often includes more and more surprising areas. Through online stores and marketplaces, you can subscribe to services such as receiving a daily portion of fresh, healthy food at the address of your choice. As research conducted on consumers shows, they are not aware that using this type of service is a subscription. Cyclical deliveries of food or cosmetic products are also subscription-based in the majority of cases. Entrepreneurs are choosing to provide their customers with more and more options through subscriptions. It is therefore possible to receive regular deliveries of coffee, workout plans in video form, foreign language lessons, contact lenses, medical equipment, access to apps, software, and updates, access to specific electronic devices, recipes, various guides, or even accommodation in luxury hotels. The possibilities are virtually endless, which is great news for entrepreneurs looking to add subscription sales to their business.
Advantages of subscription sales
Subscription sales are a way to establish a long-term relationship with the Customer. Online shopping is one of the most convenient solutions, as most buyers found out during the pandemic. Surveys conducted on groups of consumers clearly show that those who use subscriptions and are satisfied with them are rarely interested in offers from other providers. These are not the only benefits of implementing this sales model.
Offering subscription sales online makes it easier to determine the company’s budget and profits. The more Customers choosing subscription-based purchases, the more regular transactions. This makes financial performance predictable and provides the company with consistent, stable revenues. This applies not only to monetary profits, but also to stock levels, operation of delivery vehicles, or organization of work within the company. It also allows you to target marketing content more accurately and plan far-reaching strategies.
Offer tailored to the buyer’s needs
Subscription sales also allow for a more in-depth analysis of store users’ preferences. The cyclical nature of orders, the number of products/services purchased, their features, user spending, or even the color range of the items selected – all this allows you to target buyer-oriented content more efficiently. Knowing the needs and preferences of users well allows you to offer them purchases that will meet their expectations and ensure their satisfaction, thus positively influencing their opinion of the store and perhaps even encouraging them to recommend the site or leave a good review.
Getting to know the Customer better by analyzing their purchases also helps the company expand its offer with the products they are looking for. As a result, business grows and the flow of items in the store is smooth.
Loyalty programs and higher profits
This particular sales model also provides more opportunities to “reward” Customers. We are talking about loyalty programs and various types of gifts or discounts that evoke positive associations with shopping in the recipient. This form of gratitude can be shown to the buyer through discount codes, tailored promotions, or loyalty packages that are not available to other users. This not only encourages existing customers to make more frequent or regular purchases, but also to become subscribers.
What are the benefits of subscription sales for the automotive industry?
The advantages of using this business model for e-commerce platforms with more “traditional” sales are quite obvious. But what about businesses that seemingly have nothing to do with online stores? A perfect example of the effectiveness of subscription sales for very particular businesses is the automotive industry.
Secure one-touch transactions
The market will soon see the first cars that allow payment via on-board computers. As part of a subscription from one of the car manufacturers, Customers will be able to synchronize payment cards with their fingerprints and make payments with a single touch on a dashboard screen. This will allow them, for example, to pay at gas stations or update the manufacturer’s hardware software on demand. Based on research, one manufacturer estimated that by 2026, there will be approximately 4.7 billion subscription payments using these technologies. In-car payments are not just an enhancement to the technology of the vehicle itself. They also guarantee secure and controlled transactions. The first manufacturers who decided to introduce in-car payments did so in cooperation with major electronic banking providers. As a result, they operate smoothly and are built on the experience of two solid businesses. The assurance of verified purchases builds trust with recipients. This is ensured not only by partnering with a mobile payment service provider, but also by a properly executed Customer account creation process. Following the example of one of the first automotive companies to introduce the possibility of in-car transactions, it is worth giving recipients the ability to create a personal ID for each user. This would be the only way to log in to the manufacturer’s package of owned and available services.
Stable income and loyal Customers thanks to easy login to the e-commerce platform
Such an ID allows the user to instantly log in to their account in the manufacturer’s online store (both from an on-board computer and a mobile device) and extend the package of services that are made available to them immediately after purchase. This is a useful feature, especially during long journeys, which often generate specific needs for the driver and passengers. The manufacturer’s services and tools are, of course, tailored to the specific vehicle, its year of manufacture, equipment, and the country in which it is driven. The ability to quickly expand the manufacturer’s service package is an incredible convenience for the user. It allows them to save time spent on searching for the necessary solutions, and even save money, as partnership with the brand’s store often guarantees discounts. As a result, Customers are willing to invest in extensions that ensure comfortable use of the vehicle and remain loyal to its manufacturer.
These functions may seem to be just interesting additions. In-car payments, access to the manufacturer’s online store, or secure transactions are not the main factors taken into account when choosing to buy a particular vehicle. However, Customers show interest in these options because of the convenience they provide. More than half of the surveyed German users of a car brand introducing subscription sales in vehicles said they would be more likely to choose cars with this option when buying from that manufacturer. It is slowly becoming an important piece of equipment for Customers to have in their car systems. As a result, the introduction of such options into the automotive offering can be expected to increase interest in the brand.
What discourages customers from subscribing?
In order to maintain a good quality of product/service delivery and the widest and most loyal group of recipients, several practices should be avoided.
1. Avoiding price increases
It is obvious that Customers are never satisfied when they have to pay more. However, it is important that subscription price increases are introduced gradually and almost imperceptibly. It is also always worthwhile to “make it up” to the buyers, either through discount codes or additional materials available after the subscription is renewed.
2. Complicated cancellation of subscriptions
Consumers are generally unhappy when they have to spend more time on this operation than they had planned. By streamlining the subscription cancellation process, the company still has a chance to win back the Customer. Knowing how easy it is to do this, they will not be discouraged in the future.
3. Inflexible deadlines
Some users of e-commerce sites plan their spending carefully. This is why it may be important for them to be able to change their subscription payment date. The lack of such a solution may discourage them from using the service.
4. Too frequent or too infrequent fixed charges
Most buyers are used to a monthly subscription fee. This allows them to better manage the budget and anticipate expenses. If a service or product provider takes funds from the recipient’s account too often or too infrequently, it can discourage the recipient. Annual payment programs often require too high one-time payments. On the other hand, too frequent transfers for a subscription may give the consumer the impression that the monthly price for the subscription is too high.
Technology to help you execute your strategy
We already know what the subscription-based business model is and what benefits and risks it brings. Subscription sales take place online, so it is required – as in the case of one-time purchases (pay-now) – to prepare a strategy specifically for this business model.
Such a strategy primarily involves:
- catalog of products to be offered in the form of a subscription,
- pricing plans ensuring the profitability of the enterprise, which will include multiple variants depending on the period for which the subscription is purchased, the Customer’s profile (new/current), the number of purchased products (for example: licenses), promotional campaigns, and the like,
- Marketing strategy and Customer communication strategy,
- appropriate technology that supports either a subscription-based or a mixed business model that allows one-time (pay-now) purchases and subscriptions, even within a single shopping cart,
- choosing a secure payment gateway that offers payment methods popular on a given market,
- integration with financial and accounting systems or systems responsible for stock levels,
- analytics on both customers and their preferences, payment statistics that help determine the optimal billing time for subscribers, the effectiveness of marketing campaigns, or the usability of the store
- locations in the case of international business.
Subscriptions in comprehensive e-commerce platforms such as SAP Commerce Cloud or Adobe Commerce (Magento) are managed with dedicated modules to support this sales model from both the Back Office (store management) and Storefront (store customer interface) sides. They constitute part of the platform or are available as extensions (plugins). Many SaaS e-commerce solutions, which themselves are mostly subscription-based, also provide services for subscription management.
The main functionalities of such modules are:
- managing the terms of subscription services (primarily: defining frequency, duration, payment terms),
- configuration of pricing models and pricing periods,
- rights management,
- personalization based on the Customer’s profile,
- handling recurring payments or combinations of recurring and one-time payments and their automation,
- managing active subscriptions,
- viewing and managing subscriptions by Customers, for example: changing the plan (package), changing the payment method.
Safe and effective introduction of subscription sales to an organization
In the era of rapid development of e-commerce platforms, virtually any company can diversify its offer with this sales model. It should be done before your Customers express such a need. Meeting the expectations of the recipients generates a positive reaction. However, a favorable, rich offer, low shipping costs, loyalty programs, convenience, and security of transactions will not always lead to success in this model.
Its implementation is only likely to be successful if it is properly planned and executed. It is therefore worthwhile to seek the help of experienced specialists. Competition in the online sales market is fierce, so it is a good idea to get support from advisors who understand the realities of this environment. Choosing the right tools is just the beginning. Only their proper implementation and use will lead to results that are satisfactory for both parties – the organization and the Customer.
Support your e-commerce website with Hicron
With more than 15 years of experience in implementing business IT systems and supporting their development plans, our specialists have a good understanding of the business needs of organizations and their specifics. We are successful also in the e-commerce industry, supporting implementations around the world. In addition to consulting, we offer assistance at every stage of the implementation and optimization of e-commerce solutions. We also provide our Clients with post-implementation system support. Looking for a trusted and experienced expert to guide your organization through the successful implementation of subscription sales? Contact Hicron consultants!
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