The Subscription Box 2.0 — Nine Recipes for Success
(Or Why We Love Bespoke Post So Much.)
Venture capital investment in subscription box services has seen a notable drop over the last three years. Some technology and investment pundits suggest this is due to overcrowding in the market and the declining novelty of these services. Blue Apron’s struggles this year seem to confirm this. We’re into the eighth year of the “subscription box craze,” first pioneered by Birchbox in 2010. The fad may well be cooling. Subscription customers are certainly becoming more discerning — expecting higher value and great customer service from the services they trust.
Yet, revenue from subscription businesses continues to grow by 100% year over year. And a number of subscription box companies are growing faster than ever. Bespoke Post, for example, has taken off over the last two years. Founded in 2012, Bespoke Post just took on its first Series A round of funding in 2017 — after already having grown its team to over 40 staff and 100,000 customers with relatively little seed investment.
Why is Bespoke Post doing so well while services like Blue Apron are struggling? Admittedly, there are fundamentally different business pressures placed on subscription meal preparation services when compared to curated box subscriptions. But more universally, Bespoke Post doesn’t take its customers for granted, the way that some subscription services have done over the last couple of years.
Bespoke Post has remained nimble. It has crafted a subscription experience that’s engaging and flexible, allowing the company to inspire, retain, and upsell its customers.
Building upon the Bespoke Post example, we believe the subscription market is moving into a new era of curated subscription box experiences, The Subscription Box 2.0 Experience.
Here are nine features shared by modern, successful subscription box companies like Bespoke Post:
1. Start Lean
The beauty of a subscription business (both in the curated box and product replenishment verticals) is focus and simplicity. You don’t have to manage a huge product catalog. You don’t need to be making one-off sales across multiple platforms. You don’t have to invest heavily in product discovery and the “browse and buy” user experience. You job is to first create a single, great product and then build an experience around it that delights new customers and inspires retention through personalization and brand community.
When consulting with new subscription box businesses, we encourage them to get to market as quickly as possible and to fail fast as a way to experiment and learn about their customers. Frankly, we caution our clients not to take on significant early investment, particularly VC investment, before launch. We’ve seen some VC-backed subscription companies struggle to maintain a tight focus and targeted customer acquisition funnel under the pressures of VC funders, who demand rapid growth across multiple sales channels.
2. Gauge Your Funnel
Customer acquisition and conversion look different for subscription box companies, when compared to more traditional e-commerce. While the shape of your acquisition funnel will change organically over time, a benefit of subscription over browse and buy is that subscription allows you to sell an experience, or even a way of living.
Bespoke Post’s tagline, for example, is “Discover a Box of Awesome.” Their demographic is clear: men with higher disposable incomes and busy lives that don’t allow for proactive product discovery. Bespoke Post then casts a wide net across key social media channels to attract these potential customers. Once the brand has piqued interest, it reduces as much friction as possible in its sales funnel to drive signups and ship customers their first box.
3. Design an engaging “taste discovery” process
Whatever your selling, the first rule in sales is to get your leads talking about themselves. This is especially true in the curated subscription box industry. The most successful subscription signup experiences are built around beautiful, easy-to-navigate “taste discovery” tools. Well designed taste discovery experiences share these traits:
- The user immediately understands that the process will be quick and painless.
- The user understands that they will have an opportunity to go back and change their answers at a later date — nothing is truly at stake in their response.
- The user anticipates half the questions, but is surprised and delighted by the other half — suggesting they will experience something new, something they never knew they needed, with the subscription.
- The discovery tool is accessible and easy-to-use across Internet devices (phone, tablet, desktop, etc.).
- The tool captures the user’s email address and then begins the discovery process, before asking for additional contact information, account creation, and payment preferences.
As you would likely expect at this point in the article, we again refer to Bespoke Post and its subscription sign-up workflow as an example of a stellar “taste discovery” process.
4. Data, Data, Data
The last feature of successful taste discovery tools listed above touches on a key point: Successful subscription services capture email as a recurring touchpoint first, and then collect as much data as possible, as early as possible, in engaging with new potential customers.
Subscription box companies have the potential to generate extremely detailed profiles of their customers. A traditional browse and buy customer might visit an e-commerce website once — leaving the retailer to scratch her head, trying to build customer personas and cohorts with extremely limited insight.
But subscription companies with consistent touchpoints and a focus on membership experiences can consistently learn about their customers and predict their needs — sometimes before their customers know themselves.
Of course, this is predicated on subscription businesses having the correct tools and processes in place to collect meaningful, actionable data. One of the major complaints we hear from our customer base is that data collection and analysis is a major challenge. In fact, a major 2017 survey of e-commerce businesses suggests that 39% of online retailers struggle to “turn customer data into intelligent and actionable insight.” Consequently, we encourage customers to implement data aggregation and analysis tools such as Segment and Looker.
5. Create Taste
“I never knew I needed it.” This is the number #1 response that curated subscription box companies should want to hear about the items they ship out each month. (“Incredible value” is the second.) Great subscription box companies are taste masters. They build a membership base and then introduce them to new product experiences.
This is the true key to successful subscription box businesses. It’s also what differentiates them from product replenishment services. Subscription boxes generally have a higher price point than replenishment services, like Dollar Shave Club. With services like Dollar Shave Club, customers can set their subscription and forget it. If they go on vacation and they get sent a box of razor blades they they don’t need, it’s not the end of the world when a box of blades costs $6/month.
With curated subscription boxes that cost $40 to upwards of $100/month, there’s constant pressure to delight and surprise.
6. Invest in Referral Marketing
Nobody wants to join a club when you don’t know any members — especially not on the Internet.
Across all e-commerce models, referral and influencer marketing is becoming critical to success. This couldn’t be more true with subscriptions. Subscription box experiences are built upon trust — especially when you don’t really know the exact product mix you’ll receive every month. In building a referral base and influencer base, subscription businesses need to build campaigns that help potential customers see themselves as part of a subscription membership base. Dollar Shave Club doubled down on this premise with its new inclusivity-driven campaign this summer.
7. Add Browse and Buy After Subscription
As implementation partners, we can’t stress this point strongly enough. Many companies that are interested in getting into the subscription box market insist on implementing a traditional e-commerce store at the same time that they are launching their subscription business. In certain cases, this can work — but generally speaking, we find that online retailers grow significantly faster and reduce their go-to-market spend if they first focus on their subscription business.
Again, Bespoke Post has done this exceedingly well. In the words of their co-founder, Rishi Prabhu, in a 2013 Techcrunch article:
“Subscription is a great way for us to start because it gives us scale and an interesting value proposition to customers, but we see a lot of opportunity in expanding generally into commerce, and introducing a really innovative way for men to buy products.”
Bespoke Post initially focused on creating customer choices that were simple. Then, once they had a strong, committed customer base that understood the brand’s value proposition, they added more traditional, one-off e-commerce sales as an opportunity for upsell. Similarly, as they have grown, they have added more “flavors” of subscription boxes. But the initial KISS approach is critical.
8. Include “The Pause”
With high customer acquisition costs, many subscription box services actually lose money on their first customer billing and product shipment. Subscription services feel a great deal of pressure to get to the magic third and fourth billing cycles with their customers, as that’s when they start seeing meaningful profit.
Consequently, many subscription businesses don’t offer an option for pausing subscriptions. Less scrupulous subscription businesses create friction around the cancelation process.
Bespoke Post realized early that offering a “pause” option would help reduce churn and increase sales long-term. Offering the ability to skip, or pause, a monthly billing dramatically increases customer trust, which helps both customer acquisition and retention.
Interestingly, Bespoke Post sends out an email to its customers 5-days before billing/shipping, providing customers with an opportunity to either skip a box or modify their order for the month. This creates an incredible touchpoint for upselling one-off products.
9. Lead with Customer Service
Finally, all successful subscription box brands prioritize top notch customer service, including:
- Self-service subscription management options
- Phone, email, and chat support options
- Crowdsourced, peer-to-peer support
- And more and more, AI-powered chatbots
Regardless of the support channel, customer retention is built on great support. As mentioned above, most curated box experiences aren’t cheap and customers are motivated by feeling part of a brand community. Brands that are accessible and put their customers first win.
Learn more at: https://humancode.io.
