Loyalty Programs Smooth the Path to Wider Adoption of Subscription Commerce
Subscription commerce’s turbo-charged growth, unsurprisingly, has been fueled by the pandemic.
Trace Galloway, chief strategy officer at Vindicia, a software-as-a-service (SaaS) subscription-billing and revenue recovery platform, told PYMNTS the model is making inroads into verticals well beyond streaming media and same-day delivery. The double-digit growth rates that earnings reports from the likes of Netflix have spotlighted will be sustainable even as the pandemic shows signs of easing.
“The subscription model, in a variety of different forms, is here to stay,” Galloway said. Almost every company is launching a recurring-revenue model — or is in the process of launching one. And that applies to firms offering goods and services that haven’t typically been available via subscription before.
But in an age where the average U.S. consumer may have as many as 10 subscriptions in place, it’s critical for merchants to battle what might be a looming “subscription fatigue.”
As Galloway noted, at least some of that fatigue, and subscriber churn, can be traced directly to failed payments.
“I, myself, see hiccups in my relationships with merchants that were not caused by them and were not caused by me,” he said. “And I think that if we can get to a place where there’s a lot more consistency and success in payments, that would get you closer to an ideal subscription relationship.” He pointed to Vindicia’s revenue recovery services offered across its platform, underpinned by artificial intelligence (AI) and machine learning that “follow” transactions to ensure they are completed — in the background, without the customer’s notice.
But promoting true stickiness entails a move beyond simply providing a good or service — and toward an idealized experience. Rewards programs that cement customer loyalty, Galloway said, can foster relationships in ways that benefit merchants and subscribers alike.
Convenience and Loyalty
As consumers, we’ve certainly become more familiar with subscriptions. Amazon Prime has become a staple for many individuals and families — a lifeline for getting the things we need, ranging from our weekly groceries to computer hardware for jerry-rigging our work-from-home spaces.
Among the overarching themes that have given subscriptions tailwinds and staying power, according to Galloway: convenience. But convenience is not enough to keep revenue streams recurring. More recently, numerous companies have capitalized on convenience while adding rewards programs to sweeten the deal. Galloway pointed to Taco Bell’s Taco Lover’s Pass, which allows users to redeem a taco a day for 30 days, adding it to their cart at online checkout. He noted, too, that grocery stores — especially those with gas stations on premises — have been offering reward and loyalty points, allowing for cross-promotion that gives them an edge in two hypercompetitive markets, food and fuel.
“Those rewards points are driving my behavior toward a particular grocery store that I’ll be going to most often,” said Galloway. In other cases, said Galloway, these consumer-facing programs offer a way for merchants to sidestep interchange fees and processing costs tied to private cards while reinforcing the loyalty companies have typically relied on such cards to generate.
“You’re going to see more merchants look to build up that loyalty,” predicted Galloway, especially with differentiated or niche offerings (the Taco Bell promotion comes to mind).
At a high level, he said, rewards programs can spur positive feelings on the part of consumers towards the brands with which they are interacting — they feel that the merchant “gets them” as consumers, while promoting a sense of community.
Cementing that loyalty has benefits to the merchant, too: loyalty programs, sometimes featuring premium pricing, can keep customers in place while keeping retention costs low (a boon for margins) and can attract new customers (which of course benefits the top line).
Crafting successful loyalty programs, Galloway maintained, can be aided through advanced analytics that examine consumer behavior — whether they buy in store or online — ensuring a seamless experience that moves with the consumer across channels.
As he told PYMNTS: “There isn’t a company that we talk to today that isn’t thinking about in some way offering a recurring model for products that traditionally had not been purchased that way … a good loyalty or membership or club concept will build brand affinity and loyalty in a way that, long term, will serve those businesses very well.”