Retail and brand leaders face a common and critical challenge today: finding new ways to retain customers in a hypercompetitive marketplace.
Consumers have more choices than ever when it comes to where and when they buy. This forces retailers to think differently about how they keep customers coming back — to avoid incurring all the up-front cost of customer acquisition, only to lose the long-term customer value that comes from the second and subsequent purchases.
Savvy retailers recognize that traditional approaches to retaining customers are becoming obsolete, and are looking seriously at the role recurring revenue programs can play in their overall business strategy. According to a recent survey of retailers commissioned by Ordergroove and conducted by NAPCO Research, 83 percent of retail leaders surveyed agree that converting one-and-done buyers into recurring customers is very important for their overall retail strategy. Additionally, 54 percent of respondents expect significant growth in revenue in 2019 and beyond from recurring customer purchases.
Consumers and retailers appreciate the benefits. More than half of retailers surveyed reported that their overall Net Promoter Score (NPS) increased since launching subscription offerings. In addition, the majority of respondents cited “greater revenue” (67 percent), “greater profitability” (61 percent), “greater revenue predictability” (50 percent) and increased customer satisfaction, with 86 percent indicating subscription customers are more satisfied than their non-subscription customers.
As these results indicate, the question today is no longer “Do I need to offer some kind of relationship commerce program?” These programs have become mainstream and yield tangible benefits. Instead, the conversation has shifted to, “How can I differentiate my programs to offer the ultimate experience for customers?”
As you consider the future of your relationship commerce strategy, a few things I’d recommend you keep in mind:
- Make it personalized. To make it easy for customers to get the products they want, offer subscription programs that allow them to personalize their relationship and have maximum control over the promotional cadence. For example, pet owners can answer a set of questions about their pet’s breed, activity level, weight, age and other characteristics, and create a personalized blend of food and delivery schedule for their pet via a guided selling experience. Letting customers determine what works best for them leads to greater loyalty and higher revenue opportunity. This level of personalization is only possible with a solution that’s tailored for your business. While you might think going with an out-of-the-box subscription experience is best to get you started, that approach won’t provide the flexibility that the consumer demands.
- Consider incremental spend. The value of relationship commerce is not just in having customers enroll in a subscription program, but also the incremental revenue that typically comes from those subscribers. When setting up a subscription program, build in experiences that make it easy for subscribers to add incremental items, including complementary products. You’ll be adding value for your customers while increasing revenue. Across verticals, I’ve seen subscription customers spend more incrementally, sometimes leading to a 4x improvement in revenue impact when following best practices.
- Give it an exclusive feel. Membership programs are a great option for customers that want high-value experiences. For example, health and wellness customers have their own unique needs and want to feel that the brand’s products and services were designed specifically for them and come with exclusive benefits. To strengthen the relationship with customers, brands can offer personalized gifts, invites to exclusive deals and events, and complimentary shipping, rather than only accruing traditional points.
- Don’t overlook your store associates. While great online experiences, metrics and artificial intelligence help establish a rapport with customers, there shouldn’t be anything artificial about it. Relationship commerce is about putting the customer at the center. For example, if you have retail stores, your store associates can play an important role in keeping you true to that and also helping you convert one-time customers into repeat purchasers. Store associates can strike up a conversation at checkout about a customer’s purchase history to find out if a reorder or subscription program would be beneficial, then enroll them on the spot.
Today, people shop in a lot of different places, and the number of options available to consumers is only set to rise. Now is the time to think about how you differentiate to retain and grow long-term customer relationships across channels. To get there, you need to know your customer better than anyone else and offer them choices that make your brand indispensable. The opportunity for predictable, profitable and repeatable revenue is there for the taking.
Greg Alvo is the CEO of Ordergroove, a company that helps brands and omnichannel retailers practice and achieve relationship commerce, shifting consumer interactions from one-and-done transactions to ongoing, highly profitable relationships.