John PhillipsJohn PhillipsSeptember 15, 2020
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10min1111

With the UK officially entering a recession for the first time in 11 years, it’s fair to say that many organisations are facing an uncertain future. Sales and revenues have been rocked in recent months and, with the economy still struggling to catch up alongside the threat of a second wave still on the horizon, we’re not out of the deep end just yet. 

This time of hardship for businesses has also brought about some key changes in consumer behaviour. The need to stay at home and socially distance in order to meet government guidelines has meant that buying preferences have altered as individuals sign up for services that they potentially hadn’t thought about before. COVID-19 has propelled a declining rate of ‘ownership’ in Britain. A 2018 report found 25 percent of UK adults believed they’d be subscribing to more services over the next five years and more research finding 57 percent of adults globally wish they could “own less stuff”.

As a result, subscription-based models have witnessed a boom in popularity, becoming a key means for businesses to ensure a stable revenue stream and for consumers to get the products they want in a convenient, low-cost way. In fact, a recent Zuora report found that more than half of subscription businesses have not been impacted by the pandemic, while one quarter are actually seeing subscriber acquisition rates accelerate.

Yet, whilst these stats are positive, subscription businesses cannot afford to be complacent – especially those offering Consumer Packaged Goods (CPG). In order to continue to prosper during these tough times and beyond, businesses need to focus on forming direct relationships with their customers, to both increase satisfaction rates and encourage loyalty. Ensuring positive customer experiences has never been more integral to future survival and success.

A shift in mindset

During the peak of the pandemic, with supermarkets and shopping centres closing their doors and millions of households asked to stay at home, many consumers took to ordering products online. Signing up to subscription-based models became a way of ensuring that they were able to access the goods and services that they wanted and needed. From groceries and meal-planning boxes to coffee delivery services, the businesses already implementing subscription-based models saw an increased demand for what they had to offer.

One such business is subscription-based recipe box provider Gousto. Despite the economy still being in turmoil, the growth that this business witnessed during the first half of 2020 – with a 115 percent spike in sales – has meant it has been able to create 1,000 new jobs as part of an expansion. In recent months, this success has been echoed by subscription businesses in many different sectors. For example, according to the Royal Mail, the growth of the subscription box economy has caused a huge surge in parcel delivery, with 15 percent of adults ordering a paid subscription box online during the first couple of months of the pandemic.

According to the same report, digital news and media also saw large growth from March through to May, with a growth rate of 110 percent in comparison to the baseline growth rate captured from February 2019 – February 2020.

This demand for subscription-based services is likely to increase as time goes by, with our recent CPG Subscription Report discovering that consumers who already have a subscription are 2x more likely to get another in the next 3 years. But, as things return to some semblance of normality and restrictions begin to ease, in order to continue to drive this growth and build loyalty within their customer-base, CPG subscription businesses need to place a renewed focus on customer experience initiatives.

Adding true value

In the past, CPG brands could let retailers worry about the customer experience; they only had to provide the products. Now, in a direct-to-consumer reality, CPG brands need to forge relationships based on customer experiences they themselves have created if they want to succeed. Creating a seamless and positive experience has never been more important to ensure stability moving forward. But what is it that makes a positive great experience?

For consumers, whether in prosperous times or in the midst of a global pandemic, the priority is remarkably consistent: they want subscriptions to deliver real value. But their definition of value is much more than simply a price point. Whilst saving money is important to 72 percent of consumers when signing up to a subscription service, it will often not be enough to make them stay long term. This is because cost alone does not equal a good customer experience and is, therefore, not the true driver of subscription decision making.

Today’s consumer wants to be put in the driving seat – therefore businesses who ensure both flexibility and convenience are likely to come out on top. For example, the ability to opt-out or even just temporarily suspend a service is seen as a really important factor. Moreover, the fear of being bound to a company or service is enough to put 42 percent of consumers off signing up in the first place. The delivery mechanism for the subscription must also be more convenient than traditional purchasing. It must take the pain out of tackling the high-street but still provide the experience at home for customers. There is a common thread that the most popular subscriptions will save time, deliver to the home or be something that the customer would struggle to get hold of under normal circumstances.

Customisation is also crucial when it comes to improving the customer experience. Consumers have higher expectations for a subscription model than they do with a single purchase. Taking unique preferences into account is likely to enable businesses to build a better relationship with their customers, encouraging a longer commitment and lessening churn.

In fact, research from the Subscribed Institute recently discovered for companies where one in 10 subscriptions has a change after the initial sign-up, for example, this could be an upgrade, downgrade or add-on, the growth rate more than doubles to 20 percent YoY revenue growth.

Once these models are adopted, focusing on adding value and improving the overall experience for customers will prove critical for building and retaining loyalty long term.

Getting ahead of the game and tapping into the subscription economy now will not only help organisations to bounce back following the global pandemic. It could help ensure future success. However, in order to capitalise on the changes in consumer behaviour and come out on top, businesses need to focus on adding true value and improving the overall experience for customers. Instilling the right blend of flexibility, convenience and customisation for those using a product or service could help your business boost profitability further down the line.




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