As we enter a period of economic uncertainty due to a growing threat of a recession, now is the time to tighten up your businesses operations. While opinions differ as to if or how long a potential recession may last, one thing is for certain; it never hurts to prepare for the worst.
The ecommerce industry has experienced rapid growth and acceleration due to COVID, but that growth may soon slow as consumers begin to cut back spending. Knowing this, we’ve outlined tips for you to prepare your subscription business for a potential economic downturn so you can weather the storm and potentially even grow your businesses bottom line.
Enable your subscription business to block churn as best as possible
Even when the economy is strong, reducing churn is on the mind of a subscription business. It is estimated that the average churn rate for a subscription B2C brand is just over 8% throughout a 12 month period. And when the economy slows down and consumers begin to lose their confidence, it can be expected that subscription churn will increase as consumers look for ways to cut spending.
Knowing this, it behooves you to pull out all of the stops in an effort to reduce churn. When you run your subscription business through Upscribe, you get access to out-of-the-box “churn deflection” actions. Example churn deflection actions include offering a subscriber a discount to stay with you, allowing a subscriber to skip an order (rather than churning all together), or making it easy for them to either gift a subscription to a friend or changing the frequency of their subscription. These tactics give the subscriber the flexibility that they may need to get them to stop from churning. And the best part? They can be enabled in a matter of clicks when you run your subscription business on Upscribe.
Offer unique subscription packages
Perhaps a consumer is going to churn from your brand because they already have too much of the product that they have subscribed to and simply don’t need any more of it. Knowing this, instead of offering a “basic” subscription where a customer can sign up for and get the same product every month or two months, get creative! Say you are a coffee brand. Instead of offering a subscription featuring the same coffee blend every month, offer a variety subscription that sends a customer a different blend every other month.
Doing this makes it less likely that a subscriber will churn because they have too much of the same product. It also allows a subscriber the ability to test out new products which could lead to them purchasing more of the product off of your website (if they enjoy it), which increases the AOV and LTV of the customer.
Reward existing subscribers with special offers
Instead of constantly thinking about how to acquire more subscribers (which is costly and will impact your bottom line), change your mindset and think about how you can keep your existing subscribers. One way to do this is to reward them with special offers. Some ideas for special offers and or incentives include:
- Giving a subscriber a free gift with purchase after the third subscription shipment. This makes it so the subscriber is incentivized to stay with you at least for three shipments and may push a non-subscriber over the fence to subscribe with you to begin with.
- Providing a loyal subscriber a special one-time discount code or dollar amount off of a future order. This will make the subscriber more brand loyal towards your brand and potentially make them spend more money with your brand.
By treating your existing subscribers in a way that shows them how important they are, they will gain more of an affinity towards your brand and should be less likely to churn from your brand.
Limit the number of SKUs that you offer
As a subscription brand, it may be easy to think about expanding your product line to offer your customers more to choose from. However, this is costly and a heightened risk if you are not able to move the product. Having too much inventory on hand will hamper your ability to move the business forward. Too much inventory will reduce the cash that you have on hand to spend on other critical business functions such as meeting payroll, paying suppliers and simply keeping the “lights” on in your business.
Having a smaller product assortment allows you to be more nimble and quickly pivot when needed. If you have too much inventory on hand, you may not be able to adapt to market conditions which could lead to big challenges. The wise move would be to leverage your existing historical sales data to determine the right amount of inventory and SKUs to have on hand. Now is not the time to explore something new with unproven sales metrics.
Deliver a frictionless experience to your subscribers
Just as your business faces uncertainty thanks to economic turmoil, your subscribers are in the same situation. They may be dealing with financial stressors that they weren’t dealing with a few months ago. Knowing this, you need to make your subscription offering as frictionless as possible. Ways that you can do this includes:
- Simplifying the way that a subscriber accesses their account by removing any headaches that go along with a subscriber forgetting a password.
- Making it simple for a subscriber to make changes to their subscription.
- Meeting a subscriber where they are and allowing them to manage their subscription through email or SMS.
The more that you can do to subtly show your subscribers that you care about them by making it easier for them to get what they need, fast, the more loyal they will be to you. Even if you do end up having a larger number of subscribers churning during an economic downtown, it’s possible that once the economy bounces back they will come back to you. Customers tend to remember strong customer experiences and by delivering a strong one, you will be setting yourself up for success today and in the future.
Upscribe will arm you with all of the tools that you need to navigate your subscription ecommerce business through economic uncertainty. And we make the tools easy to implement and realize value from. Learn more about our product offering by signing up for a demo here.
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