The keys to making a subscription work for brands

Consumers want convenience and a great discount when they opt for a subscription.
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· 5 min read

The pandemic pushed many Americans to retreat to their homes for both work and play, and subscription services are making the most of it.

  • About a third of Americans signed up for a retail subscription box as of last year—spending $57 a month on average—per Emarsys research.
  • The subscription boom is predicted to reach $1.5 trillion by 2025, according to UBS.

What’s happening? Whether it’s clothing rental services like Nuuly, beauty fixes like Birchbox, or meal kits like HelloFresh, consumers want ease and a great discount when they opt for a subscription, explained Inna Kuznetsova, CEO of intelligence platform 1010data.

“Certainly, they get multiple benefits, including price discounts with subscription deliveries, and convenience and eliminating the reordering from their to-do lists,” she told Retail Brew.

Nutrafol, a hair wellness supplement company, has been offering monthly subscriptions (hero product price point: $79) since 2016, and CEO Giorgos Tsetis said one key to a successful strategy is encouraging customers to “create a habit.”

“There’s no benefit for us to just sell a bottle and someone not to be successful with the product,” he noted.

  • A whopping 90% of Nutrafol’s DTC revenue stems from subscriptions, and in 2021, the company’s subscriber count increased 102% YoY, according to Tsetis. (He didn’t share specific figures.)
  • Kuznetsova also noted that nutrition and wellness-focused companies could have an edge as their products already lend themselves to being part of a daily routine.

But for price-conscious customers, shelling close to $80 a month requires more than just the promise of a good product. “What consumers have told us is that in order to build trust and loyalty [in a brand], what they want is consistency [in terms of quality],” said Katie Thomas, who heads up Kearney’s Consumer Institute.

Tell us about it: For some subscription models, like renting clothes, that could require extra effort.

At URBN-owned Nuuly, for example, it turned out that a number of its customers had never tried a clothing rental service before, noted Kim Gallagher, its director of marketing and customer success.

“There is definitely a learning curve there about what to expect out of renting and how to navigate our assortment, the fact that not every product is available every month, that things flow in and out of our inventory,” Gallagher explained to us.

  • Nuuly, first introduced in 2019, lets shoppers choose six pieces each month for $88.

While dealing with expectations gets easier as the customer becomes more acquainted with the subscription, Nuuly has also relied on consistent customer feedback and satisfaction surveys to keep track of their needs.

  • It appears to be working: The company said it has reached its “end-of-year subscriber goal” in 2021 and started the year with 50,000 active subs.
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Pause for a minute: The feedback is particularly helpful if someone pauses or cancels their subscription. The brand can then “do proactive outreach from our customer service teams to see if there’s anything that we can do to win them back,” Gallagher noted.Nutrafol follows a similar policy whenever someone cancels their subscription, asking customers to fill out a questionnaire to get a sense for their decision.

“We want to understand why people cancel so we can improve the consumer experience,” Tsetis said. “On top of that, we can offer something that makes sense. For example, if they cancel after three months, but they’ve seen good results, [we want to know if] the product is too expensive for them…That’s why that type of a cancellation flow on the backend is that important, so you can receive that type of feedback.”

Ease up: It’s also important that companies actually let consumers stop their subscriptions when they want. Nuuly and Nutrafol say their asks stop at asks. But the internet is full of complaints against services that make it incredibly easy to subscribe but nearly impossible to cancel.

While such businesses might be able to make some extra $$ by trapping customers into a seemingly never-ending payment cycle, it doesn’t build loyalty or trust, noted Mark Brandau, group research manager at Datassential.

“If you have to go through that to cancel something, and successfully cancel it, that probably precludes you from going back to that service again,” he told us.

  • Brandau added that while companies might think that complicated cancellation processes are a smart strategy, there is ultimately “a kind of a loss of goodwill.”

And at the end of the day, the subscription has to make sense.

“There [are] a lot of new [subscription] companies that are starting, and it’s like, is that really making sense for the company? Or is it just making sense for the customer?” Tsetis said. “That’s what the pandemic has [taught] us: Businesses that are just marketing businesses—or they’re just selling things that are not that great—they don’t survive.”

Retail news that keeps industry pros in the know

Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.