US Insights

Infusing Subscription Box Services With Customer Centricity

Jon Wood

Global Knowledge Management Director

Brands 03.05.2018 / 08:00

kt_com_Takeaway 3

The concept of subscription boxes expanded to other categories over the last year.

A year ago, doubt was growing that the still-nascent category of subscription box services would survive the threat posed by rising customer attrition. These services began as ways for customers to receive regular packages with new, exciting personal care and beauty items without having to invest time searching online or in store.

It seemed like a win all around. Consumers discovered new items with little time or effort. Brands could expand their reach through a new channel. And subscription box services could quickly build a customer base and client lists. But despite these advantages, the novelty seemed to be wearing off without much to offset natural attrition.

But in the past year, two things occurred that have infused, refreshed and reenergized the potential of this business concept. First, the concept of subscription boxes expanded to other categories and, second, the business model was enhanced to address a newly discovered truth.

Subscription boxes are now popular for many types of things beyond personal care and beauty, including ready-to-cook food, board games, STEM projects for girls, and even cannabis and fine wines. There is also a developing market for subscription boxes of stylish clothing for men and women who don’t have the time (or fashion sense) to choose attire for themselves.

But something more fundamental took place during the past year. Subscription box services discovered the upside potential of increasing market fragmentation. Early iterations of subscription boxes touted their expert curators. Yet buried in customer feedback was a critical insight: Customers expected more personalization. They wanted products that were not just curated by experts but curated by experts to their personal, individual tastes. This identified the need to update the business model by utilizing more customer data, not relying solely on expert opinions. Building a data spine as the platform for the business is key.

The subscription box services that realized this and acted on it have reversed attrition and are growing by taking advantage of a marketplace fragmented by personalization.

Both Ipsy and Birchbox, two of the most popular subscription box services in personal care and beauty, have turned their business models toward the customer and away from experts by personalizing selections in response to previous purchases and returns. While it remains important to have experts weighing in on the latest and greatest products, consumer tastes rather than expert tastes are now central to the business model. As Jennifer Goldfarb, President of Ipsy, put it, “Over time, the most common question we hear has shifted from ‘What are the best products?’ to ‘What are the best products for me?’.”

Something else has shifted in the past year as well. Major brands tied to traditional channels were reluctant to jump into subscription boxes. Their main fear was selling to a distributor at a discount without much to show for it and putting brand image at risk. Additional sales data have become available showing that the customer journey of subscribers to box services has shifted.

All of this has added up to a big win over the past year thought room remains for further optimization. To do so, brands need to do something uncomfortable. They need to accelerate the development of their capabilities for capturing as much relevant customer data as possible in order to deliver a truly personalized experience. This is uncomfortable because it requires new technology. Brands must invest in new tech and these investments will require that brands establish new ways of organizing and operating.

Even more, customer data will need to be converted into products and experiences that fall somewhere between an exact match of what the customer has come to expect and something different from typical expectations but still worth consideration. This is the sweet spot of subscription box services. This offers a growth experience for customers, but it means that brands must learn to do business in a more sophisticated and better-personalized way. As noted, investment is required. Subscription box services should also reassure customers that the data collected are secure. They should also be upfront and transparent about the fact that detailed customer data are being collected for good reason—it fuels the service.

For brands considering partnerships with subscription box services, it is critical to think about the consumer decision journey and how these new touchpoints will fit into the total brand experience and business model. Over the past year, this has proven to be worth consideration as these services have now proven that they have the potential to increase the lifetime value of consumers and switch on growth in a fragmented marketplace.

Source: Kantar


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