The subscription economy is booming, and showing no signs of slowing down. The subscription eCommerce market is worth about $10 billion1, growing more than 100% YOY in the past five years2. Over 15% of online shoppers3 have signed up for one or more subscriptions. And they get hooked: the average active subscriber has two subscriptions, and over a third have three or more subscriptions.
While consumer behavior and preferences are rapidly evolving, so too, is the competition. Scrappy startups are competing against established brands to win the hearts, wallets and loyalty of customers. It’s not enough to offer quality products delivered with zero effort from the consumer. To thrive in today’s increasingly crowded subscription landscape, box services need to prioritize customer service. Support is where companies stand out.
In this article, we’re diving deep into the subscription industry and how companies can use AI to standout and differentiate:
- What’s driving subscription market growth
- Why do subscription companies need to prioritize customer service? Choice, Churn and Competition
- How subscription companies can stand out with customer service: Convenience and Surprise
- The subscription is here to stay – and good customer service is what solidify a company’s position in the market
It’s easy to understand this overwhelming growth. Subscription services fit in perfectly to key fabrics of our society: convenience and surprise.
A big portion of subscription companies replenish items that we would otherwise need to buy elsewhere – razors, makeup, cleaning products, diapers. These companies deliver what we need to our door – and completely eliminate the need for the consumer to ever even think about it. There’s no going to the store or digging up a credit card for an online order. In some cases, people never have to log in to modify their order. Convenience is the catapult for adoption.
Another large percentage of subscription box companies, according to McKinsey, provide the element of surprise that the modern consumer loves3. These companies deliver specially-curated boxes filled with highly specialized or unique beauty products, candles, pet toys, beer, designer clothing, children’s products or a plethora of other items. With each delivery, a person tears open the box only to be delighted with a perfect arrangement of new items to enjoy.
Competition within the subscription box industry is skyrocketing. The number of available subscription boxes has risen over 40%, with nearly 47% of these boxes were created since 20172. These new entrants are specializing in everything from makeup and hobbies to obsessions (i.e. hot sauce), athletic wear and meals. In fact, there are now over 3,500 services that can be delivered to your door on a recurring basis2. Choice is everywhere.
Competition is not just from young, nimble startups with fresh ideas. Established retailers and consumer brands are getting in on the action by launching their own direct-to-consumer subscription services (for example Procter & Gamble’s Gillette on Demand and Walmart’s Beauty Box). Meanwhile, other behemoths like Unilever are expanding their influence in the category via acquisitions (the CPG giant acquired Dollar Shave Club for $1 billion while Albertsons paid $200 million for Plated).
To effectively compete, grow loyalty and generate a higher lifetime value, subscription companies need to stand out by not only what’s in the box, but just as importantly, the customer service and experience they provide. Customer service directly impacts churn, which is a huge challenge for the industry. The average churn rates for subscription services are estimated to be between 6-8%4.
No matter how unique the item is in your box, there is always a company following closely behind that will have a comparable offering. Differentiation today comes from providing effortless, convenient support that matches the convenience of the service. Companies need to look at every interaction as an opportunity to deepen a relationship and minimize churn – whether a person is looking for advice on how to use a product or needs to skip a delivery.
As discussed above, the consumer of subscription services is a customer for two primary reasons: convenience (for replenishable items) or surprise and delight (for the curation boxes). These are also the foundation of customer service in the subscription industry.
Across every industry, the support that customers expect today centers on convenience. Companies now must provide support 24/7 on every channel, whenever and wherever a person needs it. People expect to send an email, chat or social message and get a quick resolution.
Consider a scenario that likely happens thousands of times a day. A subscriber to a meal kit service is heading out of town, maybe even sitting on a plane, when they suddenly realize that next week’s meals are still set to be delivered. In the usual chaos leading up to a trip, the distraction of packing and setting out-of-office alerts resulted in the person forgetting to log-in and skip their next delivery. A person would likely send an email and wait over 12 hours for a response. This customer is now stressing about this for hours, growing increasingly annoyed. This frustration could have lasting business implications.
In a survey, we found that 78% of customers say good customer service is essential to loyalty and business. And poor customer service directly leads to churn: 61% have switched brands due to poor customer service with nearly half having done so in the past 12 months5.
This all-too-common scenario would play out completely differently if this meal kit service used AI to automatically resolve everyday tickets. AI-powered virtual agents working across email, chat, social and voice channels can resolve over 50% of tickets immediately, without any human intervention. Instead of hours, or days, tickets are solved within seconds.
Example customer issues that AI can automatically resolve:
- Modifying an order
- Skipping a delivery
- Updating a delivery address
- Updating billing and payment information
- Updating preferences
- Canceling a subscription
A customer might pause or cancel a subscription for many reasons. By leveraging AI to make the experience as quick and easy as possible opens to the door to regain their business in the future.
With AI managing mundane, costly tickets, human agents are freed up to exclusively focus on more complex or sensitive scenarios, including trying to incentivize a churning customer.
We’ve just discussed how subscription companies can offer convenient customer service with AI. The element of surprise in customer service, though, is also important. With support, surprise happens when companies get out in front of issues and proactively resolving an issue before a customer even knows it exists. Examples of this include:
- Delivery delays, accompanied by a credit or other incentive in an account.
- Education on how to best use, store or care for a product.
- Missing item or ingredient alerts, with a notification of when the items will arrive.
- Anticipating when an order will be skipped. By integrating with the customer’s calendar, which shows OOO due to travel, the company can remind the customer to cancel orders for next week. An AI can also remind the customer to turn the ordering back on once they return.
By proactively communicating an issue, and perhaps pairing it with a gift or credit, positions the company as the hero in a customer’s eyes. The company is looking out for their customers and are doing everything to be transparent and make it right.
Without AI, subscription companies will be limited in the amount of proactive service they can offer. An AI can link to CRM, Order Management and Logistics systems to anticipate and identify potential problems and automate the resolution and communication.
The subscription is here to stay – and good customer service is what solidify a company’s position in the market
The subscription business shows no signs of slowing down. It’s drastically changing customer behavior. As competition increases, the subscription companies that prioritize customer service and provide effortless and proactive resolutions will be the ones that will win customers hearts and wallets for the long-term.
If it’s the Subscription Economy, then Customer Service is the capital.
Can we help you grow your subscription company with excellent customer service? Let’s chat.
- Business2Community: https://www.business2community.com/ecommerce/the-radical-growth-of-the-subscription-box-industry-in-ecommerce-02222097
- ProShip Inc: https://www.proshipinc.com/about/news/how-subscription-boxes-solidified-their-niche-shopping-world
- McKinsey: https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/thinking-inside-the-subscription-box-new-research-on-ecommerce-consumers
- Business2Community: https://www.business2community.com/strategy/how-to-beat-the-average-churn-rate-for-subscription-service-enterprises-02158484
- Microsoft: https://cloudblogs.microsoft.com/dynamics365/bdm/2018/08/30/now-available-the-2018-state-of-global-customer-service-report/