5 Steps to a Successful Convenience Commerce Model

Dec 03, 2013 1:18 PM  By

In 1936, the founders of Harry & David began a “Fruit of the Month Club.” The revolutionary service promised fresh, handpicked fruit delivered to customers’ doors monthly. Consumers and companies quickly jumped on the bandwagon, leading to clubs for everything from cheese to cigars within a few short years.

Fast-forward seven decades. To win customers’ loyalty, many of today’s sophisticated omnichannel retailers are revisiting the “Fruit of the Month Club” business model, with the goal of providing both convenience and excitement to customers.

These clubs may seem outdated, but they did — and still do — get quite a few things right with subscription commerce. They established an effective sales and marketing technique that combines the power of convenience with the excitement of receiving packages.

Although the concept isn’t revolutionary in 2013, who wouldn’t want a box of ripe mangos automatically delivered to them on a dreary January day?

I call the more modern, scalable version of this phenomenon “convenience commerce,” and it’s gaining traction with some of retail’s biggest names.

Discovery vs. Convenience
Subscription commerce today falls in two categories: discovery commerce and convenience commerce. The difference between the two boils down to necessity.

Discovery commerce is geared toward the customer who wants to try something new. This type of commerce is about “surprising and delighting” customers, making the act of discovering a product enjoyable. Startups like Birchbox and Barkbox adhere to this model, and it serves brands well on the customer acquisition side of marketing.

Convenience commerce, on the other hand, is aimed at customers who need certain products regularly and find value in having them delivered. This service enables marketers to leverage the power of convenience to retain and re-engage their most loyal and profitable customers.

Why Convenience Commerce Wins for Big Brands
While both subscription commerce business models are meant to foster brand loyalty and increase sales, retailers like Amazon.com, CVS, Freshpair, and Lancôme are finding that convenience commerce is a more effective channel for maximizing customer lifetime value, purchase frequency, and annual spending.

Unlike startups and new brands, established companies have a pre-existing customer base. These companies find a higher ROI when they focus on customer retention and referrals over customer acquisition. In fact, repeat shoppers demonstrate conversion rates up to nine times higher than first-time buyers. Repeat shoppers, who represent only 8 percent of all website visitors, account for nearly 41 percent of total online sales.

Five Steps to a Successful Convenience Commerce Model
For merchants wanting to implement a successful convenience commerce program, there are five ways to make it both convenient for customers and profitable for your business:

Offer the Right Incentive
When you offer an incentive for a subscription signup, such as a discount, free shipping, or new product samples, do your homework. What do your customers buy, how often do they buy, and which price points attract them? Analyze their shopping habits to ensure you’re offering the right incentive.

Pay Attention to Retention
When are customers opting out? Did they end up with too much product? Analyze retention to optimize the lifespan of subscriptions. The difference between a 50 percent and 90 percent retention rate can be in the tens of millions for a large retailer.

Focus on the Customer
Give customers control over their subscriptions. Let them change, skip, or accelerate deliveries. Allow them to opt out when they want. This might seem counterintuitive, but it’s crucial for subscription success. Keep asking for their feedback.

Offer Upsell and Cross-Sell Opportunities
A week prior to a subscription order’s scheduled shipping date, use email marketing to offer related products that can be added to the shipment. This can trigger customers to add on for convenience’s sake — or out of curiosity.

Get Recurring Payment Processing Right
A successful subscription platform requires sophisticated payment processor integration. Retailers need to optimize credit card systems and utilize data-driven subscription content to ensure a customer’s payment experience is flawless. Otherwise, they could face inventory control issues, missed transactions, and low credit card approval rates.

Convenience-focused subscription programs go the extra mile to connect with high-value customers. When done right, subscriptions allow retailers to provide both a product and a service to their most valuable customers, a surefire way to retain them and build brand loyalty. Who knew the Fruit of the Month Club was right all along?

Greg Alvo is the CEO and founder of subscription-based ecommerce solution provider OrderGroove.