E-commerce subscription business masterclass by Appstle – Lesson 1 of 4
Customers continually seek ‘something more’ from brands. When it comes to subscriptions too, they continually want a change!
There is a high level of competition in the eCommerce subscriptions space. Especially, the recent digitalization shift has allowed businesses to bring in new revenue streams, new ways to reach customers, and increased recurring revenue.
Consider this graph that shows the subscription economy prediction:
Source: Reddit
Businesses are under unprecedented pressure to develop and deliver subscriptions that offer increased benefits to customers. However, the gulf between businesses struggling to deliver effective subscriptions and the evolving customer expectations will only widen if a store’s subscriptions aren’t well thought-through. This puts businesses in a race that requires thorough competence, understanding, and tools that support their subscription or recurring revenue models.
An essential part of running successful subscriptions is to get to know your customers. By knowing your customers, you can ensure that your products/services are relevant to them and that your branding and messaging resonates with them. This will help you convert them into long-term, loyal, and paying customers.
In this guide, we’ll tackle the first hurdle to developing an effective subscription model for your online business. We’ll learn all about knowing or understanding your customers. Here are the topics we’ll cover.
i. Nuances of knowing your customers
ii. Knowing your different customer types or segments
- Primary customers or the Bulls eye target
- Secondary customers
iii. Information or data you need about your customers
- Demographic segmentation
- Geographic segmentation
- Psychographic segmentation
- Benefit segmentation
- Usage rate
iv. How to know your customers
- Pick up notes from your customers interactions with your brand
- Collect customer feedback
- Create customer personas
- Look for current successes
Nuances of knowing your customers
The idea of offering your products and services digitally through subscription models opens your doors to a whole new set of customers.
For example, these are the new type of customers your subscriptions will bring:
- Customers who didn’t want to make a single or one-time purchase due to reasons such as high price, difficulty of logistics, lack of time (to manually repeat the purchase on a frequent basis) etc., but can now purchase via your subscription model.
- Customers who didn’t want to pay a huge amount at the outset , but now have the option to pay on a monthly basis.
- Customers who prefer to have the freedom to flex, change, and adapt their use-based subscription to their needs.
To be able to cater to all these diverse customers with different preferences, you’ll have to first know and understand their wants and needs. Having a good understanding of your customers is essential if you want to develop, market and sell your products/services.
There is fierce competition in the subscription market across industries. A one-size-fits-all approach may not be relevant to all businesses. Building a solid subscription model requires making the customer its focal point – which can be tougher than it seems.
Some aspects of customer-centric thinking for subscriptions:
Will customers value recurring or single orders more?
Depending on the product or service you provide, you’ll have to determine whether your customers will value the ease, price benefit, and service that will come with your subscription model or if they would rather prefer placing individual orders. This genuine insight can be gathered with the help of surveys, secondary research, direct market research, etc.
Do customers want or expect subscriptions from your brand?
Are subscriptions relevant to your customers’? Customer success in the digital and eCommerce realm is reliant on consistently taking note of customer wants and expectations, and fulfilling them. This in turn depends on robust capabilities to be able to stay abreast with the market and customer expectations. Is your company capable of addressing changing customer needs through subscriptions?
How much would customers be willing to pay?
Depending on the value you’d provide via your subscriptions, what would subscriptions mean to your customers and how much would they pay for it? Your subscription pricing strategies should put customer value at the center, and match their purchasing and usage habits. Research on customer perceptions about pricing. What are customers saying about pricing (of your or your competitors’ subscription) in online reviews?
Knowing your different customer types
Every business has different kinds of customers without knowing. While you may look at customers as… well, customers, if you go deeper into certain factors, you’ll realize that you might have more than one target audience. Unless you segment customers, all your customers may fall within oneambiguous category – customers.
Knowing your primary customers
As Robert Simons puts it in an article in Harvard Business Review, “By not identifying primary customers, companies that consider themselves “customer focused” soon become anything but.”
Primary customers are those customers who have used your product/service and find real value in it. They are willing to pay the price for your products/services and are most likely to take your business successfully into the future.
For some businesses, primary customers will be the end user of the product/service. For some others, it will be an intermediary such as a reseller or a broker.
The important thing to note is that the primary customers are those who can unlock the most value for your business, rather than those who can generate the most revenue.
To identify your primary customers, try to answer these questions:
- What does your customer care about?
- Who are you capable of serving the best?
- Who unlocks the most value for your business?
- What would be they willing to pay?
Knowing your secondary customers
Secondary customers are those people who might buy your product but need convincing. These are people who may not be your direct source of income, but they help drive your growth by phishing the value up for the primary customer.
For example, a young boy who wants to buy a playstation with the help of his father. Or, people who prefer to use free software services and have no interest in paying. This customer group might be the harshest critics of your product/service – such as its ease of use, features, etc. These are people who are users of your products/services but not your direct source of income.
Now, why is knowing these secondary customers important? This is the group that might be taking your service for granted, but you will still need to know and understand them, satisfy them, offer them the best, and make them dependent on your product/service! Because, they will help you attract the paying customer groups.
Information to gather about your customers (segmentation)
For subscription businesses, there are two types of segmentation:
1. Pre-subscription segmentation: For the purpose of attracting relevant customers to join subscriptions. There are multiple facets or factors of this segmentation, We have added the high level list below:
Demographic segmentation
- Gender
- Age
- Family
- Family Life Cycle
- Ethinicity
- Education
- Income Level
- Marital Status
- Occupation
- Ethnicity
Geographic segmentation
- Country
- Region
- Urban/suburban/rural
- City
- Climate
Pyschographic segmentation
- Lifestyle
- Personality
- Self Image
- Attitude
- Values
- Interests/hobbies
- Behavior
Benefit segmentation
Expectations from product use
Problems that can be addressed by your product/serviceProblems that can be addressed by your product/service
Usage rate
Heavy Users
Brand Loyalty
2. Post-subscription segmentation: For the purpose of identifying the performance KPIs, study customer behavior, devise strategies to reduce churn rate, etc.
From post-subscription segmentation, you’ll get two segments:
- Dormant subscribers – try to find the reasons for their dormant status, and tie back to their pre-subscription segmentation to arrive at ways to re-interest them
- Active subscribers – devise strategies to retain them and offer them a better experience
How to uncover insights from your customers
Note your customers interactions with your brand
What questions are customers asking? Which product/service are they talking about? What are they looking for? What aspects of your product/service are they talking about? Collect these and more such data from customers’ interactions. Gather insights.
- Include interactions from all your communication channels – website, live chat, email, SMS, WhatsApp, social media, phone call, etc.
- Consolidate all interactions and pick the most common talking points.
- Address those talking points in your marketing campaigns.
- Marketing campaigns that focus on telling customers the benefits they’d receive, have better results than those that focus on other factors, for example, product features.
Collect customer feedback
- For this, bring your customer service, sales, and marketing teams to work in collaboration.
Customers’ needs and wants keep changing. And hence, it is essential to collect customer feedback on a regular basis. Customers provide their opinions about the brand, product or service or any other aspects, depending on the questions asked. Besides, customers have post-purchase requirements.
Customer feedback data can help different teams analyze data and use it to make customer-driven updates. This data can also help identify customers who may be at risk of churn and take steps to reduce churn rate.
Create customer personas
Customer persona is an archetype that represents the key traits of a large segment of your customers. They help you understand customers’ needs and wants. They help guide your product/service development and offering effectively.
Customer persona will help you understand a wide array of reasons why your customers need your products/services, how you can target them, convert them, and create long-term relationships with them. Moreover, it helps to stay focused on your target customers.
Look for current successes
When researching your customers, don’t just look at what new you can offer to them. There might be products and services that are currently working well for them. This could be valuable information for you. It tells you about your customers’ continued need for your products/services.
It will also give you information about why they like those products/services. As your suite of products/services evolves, you can refer to this information when making decisions to ensure they are beneficial to your customers.
Note what your competitors are doing
It’s important to constantly keep an eye on what your competitors are doing. This helps you identify what they’re doing well, what’s not working well for them, how they’re targeting customers you share with them and what those customers are saying about your competitors. By knowing what your competitors are doing, you’d be able to address your customers’ wants in an effective way.
Experiment and test
To gain a better understanding of your customers, don’t hesitate to experiment and test. You can do so in many ways:
- Experiment with marketing content
- Test new features in your products and services
- Try out new subscription models
- Experiment with new ideas
- New communication channels, new designs, just about anything new that will help you evolve your subscriptions
Conclusion
Knowing your customers is critical to the success of subscription models. Instead of looking at it as a one-off step, companies that consistently try to understand their customers, evolving preferences, changing attitudes, stand a better chance to optimize and scale their subscription models. Now that you know who your target audience for ecommerce subscriptions is, the next step is to identify the products that should be a part of your model.
In the next lesson of our ecommerce subscriptions masterclass, we will cover how to find the right products for your ecommerce subscription model.
Don’t want to wait another day and get started with ecommerce subscriptions? Install the Appstle Subscriptions app on your Shopify store. Or reach out to us for a demo
