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Financial Solutions
13 Mar 2018

Customer focus tips the scales in subscription commerce

With these challenges, retailers are struggling with subscription models

Razor blades, socks, care products, cereals, drinks, pet food – the list of products that can be ordered online by subscription is long. Last week I showed why there are good reasons for online retailers to opt for flexible subscription models. The most important point is customer loyalty. Retailers create additional touchpoints through subscriptions for consumers, who value the convenience and flexibility of these solutions. A further advantage of these long-term customer relationships is secure revenue that ensures long-term economic planning.

You’re probably wondering why all retailers do not opt ​​for a subscription solution with their products, if this model leads to stronger customer loyalty and, in the long run, higher sales. The answer is simple: business models of this kind are linked to challenges that not every business can handle seamlessly or on their own.

First, a market analysis is essential before deciding to launch a subscription model. If the product is aimed at a target group with a temporary interest, the acquisition becomes a permanent topic. Retailers are then almost always forced to tap into new customer groups. Also, of central importance is the binding force or sustainable vitality of the product. What good is a subscription with flexible or no notice periods if customers are not committed to the product?

You have surely noticed that it’s all about the consumer. Subscription commerce also emphasizes the notion that the customer is king. These flexible models require a service mentality that is more demanding than traditional e-commerce. Companies should realize that they are not selling a finished product, but a service that extends over a long period of time, during which the customer relationship must be maintained.

Consumers generally have a need for transparency and flexibility. While transparency can be achieved through a clear customer account, the second major challenge affects several processes. Consumers not only want options in the selection of products, they also want to determine at what intervals and at what time the goods are delivered.

This involves significant logistical effort, since product sourcing has to work punctually and reliably. With a unique sales model, the course is set for a successful subscription model, but the technical requirements in the background are just as important.

Another important component of a flexible customer relationship is the payment process and processing. Merchants must offer the right payment method mix of credit card, direct debit, and invoicing, but they also have to consider the challenges of their subscription model. In most cases, products that are sold by subscription require a dynamic rate structure and tremendous flexibility in terms of payment, billing, and administration.

Are you considering offering a subscription to your product? Download our new ebook to be prepared for these challenges and get three tips for a higher conversion rate in subscription commerce.

Sebastian Kespohl

Managing Director | AfterPay Germany

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