The global subscription eCommerce market was valued at $96.61 billion in 2022 and is expected to skyrocket to $2,419.69 billion by 2028. Considering that repeat customers are worth 22X more than average customers, it makes a lot of sense that subscription businesses are finding so much success.
Whether you’re thinking about launching subscriptions for your Shopify store or trying to scale your current subscription offering, we know there’s a lot to think about to fully take advantage of such a lucrative market — especially since not all subscription brands are able to thrive in this ever-crowded landscape. It’s more important than ever for eCommerce businesses to invest in the right business decisions to cut through the noise and foster lifelong loyalty.
Luckily, we’re here to help with an extensive list of tips and advice to create the strongest subscription program possible.
In this guide to Shopify subscriptions, we’ll be covering everything you need to know to launch and/or scale a DTC eCommerce business on Shopify — from early-stage subscription pricing strategies to tactics for increasing customer lifetime value, reducing customer churn, and everything in between.
Let’s dive in.
So you’re considering launching a Shopify subscription business. We can understand why.
Before we explore the tips and strategies you’ll need to get your new subscription program off the ground, let’s discuss the benefits of the subscription model in the first place.
First up, it’s important to understand the perks from a consumer’s perspective. Understanding why customers are drawn to subscriptions can help you create a strong offering and effectively market your subscription program to your audience.
There are three main reasons why subscriptions benefit consumers:
Remember these perks — we’ll come back to them later.
As for the benefits that subscriptions provide brands, there are quite a few. Understanding these advantages can be crucial to help you make an informed decision about implementing a subscription model in the first place — but beyond that, you can also leverage these benefits to better secure funding as well as guide business decisions and optimization strategies for your brand.
Here are the main advantages of a subscription model for eCommerce brands:
This is one of the most obvious advantages of subscriptions. Knowing precisely how much revenue you’re driving each month enables you to plan ahead accurately. This means better inventory management, better budgeting for marketing and customer acquisition, and better protection against a potential recession.
Having consistent interactions with subscribers means you can foster a better relationship with your audience, which leads to stronger customer loyalty.
This is a numerical way of looking at the stronger relationships that you form with your subscribers. Subscriptions offer so many opportunities for meaningful engagement, which organically leads to increased LTV. Plus, loyalty drives more spending — so the strong relationships that you develop will lead to a higher customer lifetime value.
Acquiring new customers can cost up to seven times more than selling to current customers — and you’re roughly 50% less likely to successfully sell to these new customers than you are to your existing subscribers. Focusing on building a substantial loyal subscriber base is one of the best ways to boost your bottom line while minimizing your customer acquisition costs.
In general, loyal subscribers are far more likely to advocate for your brand than other consumers are — and because of the many engagement opportunities a subscription provides your brand, there are easy ways to incentivize this (which we’ll cover in later chapters).
Let’s face it: not every brand has a subscribable product. And while certain brands and industries are more conducive to subscriptions than others, that doesn’t mean there aren’t clever and effective ways to weave subscriptions into your offering. In fact, we’ve seen many unusual (but highly successful) subscription use cases.
The secret boils down to asking yourself the right questions and ensuring you’re picking a subscription offering that aligns with your product and meets your audience’s needs.
In general, certain industries lend themselves to subscriptions more than others.
Here are the spaces that typically see subscription success:
Whether your products fall under one of these categories or you have a more unique idea, here are 5 questions to ask yourself to determine if your Shopify store might have a subscribable product — as well as recommendations for different types of advanced subscriptions based on your answers:
Okay, this is an obvious one. But we’d be remiss not to state that subscriptions usually work best with items that consumers interact with frequently (think of products that are associated with a routine), like daily vitamins, coffee, or deodorant.
While having some sort of replaceable element to your product is a fairly necessary requirement for subscriptions, the good news is ‘replaceable’ can mean a lot of things to different people.
For one, it can mean your main product is something that physically runs out or wears out, which is a more universal experience. It can also mean a part of your product needs to be replaced — like a vacuum with replaceable filters. In this case, sequential subscriptions (where the purchase of one item triggers a subscription to a complementary item) would be an excellent choice. And that’s exactly how Airsign sets up their vacuum filter subscription.
If you have an already-established business with returning customers, look at their purchasing patterns. Chances are your data will tell a story about whether there’s already a demand for subscriptions, and if so, which products might be great candidates and what kind of subscription might be valuable to meet the needs of your consumers buying these products. This could also help you identify early if certain products get purchased together frequently — in which case, you might consider curated preset bundles.
Plus, these consumers can and should be the first people you target after launching your subscription offering.
While you still need to have a subscribable product, a loyal community can have a powerful effect on subscription success. After all, just a 5% increase in customer retention has been shown to increase profits by as much as 95% — and creating a communal feel for your brand makes subscribers feel important, thereby greatly encouraging retention.
If you already have a vibrant social presence, host in-person events, and run successful giveaways — or you feel confident that you can make headway in these areas — then this might indicate that you could benefit from a subscription offering.
Plus, if you see a lot of seasonal buzz on your socials, leaning into anchor dates to release seasonal product drops could be a great way to leverage your community and promote subscriptions at the same time.
Another way to offer a subscription is by leaning into a giftable option. If you have a product that could make a great gift for a set period of time, featuring a giftable prepaid subscription is a seamless way to weave subscriptions into your brand and also encourage word-of-mouth marketing. Scotts Flowers does this beautifully, allowing consumers to repeatedly gift freshly-bloomed florals to a loved one.
And here’s a bonus perk if you offer a giftable subscription in conjunction with another subscription model: almost 70% of consumers that received a subscription gift continued their subscription.
Of course, after determining which advanced subscription model works best for your brand, you’ll need subscription software to make it happen. Smartrr has a range of completely out-of-the-box advanced subscription offerings to get you moving on your shop as quickly and effectively as possible, and we’ll also provide you with the blueprint you need to grow your subscription offering.
Whether you’re still wondering which subscription model would be right for your brand or you now have one in mind, we’re here to talk.
As you’re launching your subscription offering, it’s important to consider your pricing strategy.
Per Shopify’s Future of Commerce Report 2022, pricing is a key factor that influences 74% of consumers — and remember, the ability to save money is one of the main ways consumers benefit from subscriptions in the first place. Ensuring your pricing strategy is aligned with the products you offer and comfortably in the budget of your target audience is absolutely essential.
Plus, subscribers are far and away your most valuable customers. It’s highly important that you give them a great deal, and we promise, this investment will more than pay off in the long run.
Going off that, here are some questions you can ask yourself before picking your subscription pricing model:
Now let’s briefly review the different subscription pricing models that are commonly used among DTC subscription brands:
Flat Rate or Fixed Pricing Model
Flat rate or fixed pricing operates on a set price for your products. If your subscribers will all interact with your brand in a similar way, then this model might make the most sense for you. Chillhouse’s Mystery Box is a great example — the brand offers a flare rate of $24 for two surprise Chills Tips every two months. A lot of subscription boxes in general would fall under this category.
As we mentioned, this could also come in the form of a sequential subscription, where customers pay a fee for a one-time purchase and then automatically pay a flat rate to subscribe to a complementary product.
Tiered pricing offers subscribers a chance to choose between different levels of subscriptions. Take Xendurance, for example. Consumers can choose between the option to do a regular monthly subscription and get 10% off or they can opt to join TEAMXND for $95 per year and get additional sitewide discounts, more loyalty rewards, and other perks.
The most popular pricing model among DTC brands, the pay-as-you-go model charges based on the extent to which a customer uses a particular product or service over a given period of time. Subscribers can choose which products they want to subscribe to and will subsequently be charged based on what they choose.
Prepaid subscriptions, which are often combined with another pricing model, simply enable the subscriber to pay in advance to get access to products for a set period of time. This is especially common for giftable subscriptions.
Once you’ve selected your subscription model, you need to consider the actual pricing of your products. That’s where subscription pricing strategies come in.
Keep in mind that many brands use a variety of these strategies; in fact, they often intersect with one another.
Here are the main strategies to know:
Competitive pricing is setting your price based on whatever your competitors are doing. It requires monitoring the market in order to position your pricing at or slightly below average. This is a great place to start if you really aren’t sure what price point your product should be aiming for.
Competitor pricing fails to take into account how your offerings are superior to others on the market. Value-based pricing, on the other hand, considers what consumers believe your products are worth and requires extensive market research. It’s an especially effective strategy if your product has a particularly unique angle.
Price skimming is the practice of setting your prices high (usually for unusual or innovative products) to maximize revenue before similar businesses crowd the market. As soon as competition intensifies, brands typically lower their prices to compete. This pricing model is best if you’re paving the way with a new concept and don’t yet have any major competitors.
Penetration pricing involves setting low prices in an effort to win new customers and acquire market share. This is best used if you’re entering a crowded market and are competing with already-established brands. The idea is that after you start to establish a loyal customer base, you can gradually raise your prices. Keep in mind that you have to be wary of this strategy coming off as a ‘bait and switch,’ which could rupture trust and alienate any subscribers who came to you specifically for savings.
Psychological pricing specifically aims to use psychological tactics to make the pricing seem more enticing. Going just below a whole number with $.99 (also known as charm pricing) can make an item “feel” more affordable while still maximizing revenue for businesses. Additionally, odd numbers are said to drive more conversions. Emphasizing discounts with strikethroughs on your PDP is a great psychological practice to encourage subscriptions.
Bundles are a group of products that are sold as a group at a lower rate than the sum of the individually-priced items. Playing off psychological pricing, bundle pricing gives consumers the perception of getting more for less — meaning it encourages subscribers to buy more than they otherwise would have.
In this section, we’ll explore some general best practices that can be applied whether you’re just launching your Shopify subscription or optimizing an already-existing subscription offering.
Optimizing your product detail page (PDP) is one of the best places to promote your subscription offering to one-time buyers.
In general, great PDPs should provide essential information about your product offering — like price; images; different color, flavor, or size options; ratings or reviews; purchasing options; and an overall description of what the product does or its main characteristics.
Your PDP is also often where subscribers are first introduced to your subscription offering — and it can impact subscriptions in an indirect and abstract way, namely from a trust-building perspective.
Brand trust is becoming increasingly important to consumers, and a recent study found that one of the driving factors in forming trust with a brand early on is the PDP. And since subscriptions strongly rely on loyal customers, optimizing your PDP across the board is a smart way to establish trust from the get-go.
Assuming your basics are nailed down (like having a quick-loading and mobile-friendly page with great images and not too much text), here are some PDP best practices to promote your subscription offering:
Simply switching your default settings to subscriptions is a super quick strategy that can have an immediate impact — but it’s important to be thoughtful about this.
Ask yourself to what extent your product truly lends itself to subscriptions. Many brands offer thriving subscription programs but understand that their product is still frequently purchased as a one-off item, in which case, it’s best to leave the one-time purchase as your default.
However, if consistency is built into your product offering — which is the case with, say, health supplements — then defaulting to a subscription makes a ton of sense. As soon as you start collecting subscriber data, be sure to set your default cadence to the most popular option rather than the highest frequency. That way, you’re truly catering to your subscribers’ needs rather than just trying to boost your bottom line.
Your brand presentation pertains to the overall vibe of your PDP. We’re talking colors, brand voice, and style. A strong brand presentation will not only elicit positive feelings in your audience but it’s also been shown to boost revenue by as much as 33%.
Let’s talk about what Bubble skincare does well. Their target audience is Gen Z, so their overall brand vibe is young, fun, and bright. As such, their brand colors are vibrant and pop on the page — and this style persists in the copy and even the heart-shaped rating system.
You should ensure that your product detail page is a cohesive continuation of the brand style you’ve already established. When you’re picking a color for your CTA button, make sure it fits in with your overall style but is the most eye-catching aspect of the page, which is something you can test with your consumers to find the most optimal color.
🧠 Smartrr Bonus: Smartrr makes featuring your subscription program simple with a widget that allows you to customize your own ‘Subscribe & Save’ button on your PDP right upon implementation.
Since the PDP is often the first introduction to your subscription offering, it’s crucial to illustrate some of the benefits that come with subscribing. Displaying savings with the ever-popular ‘subscribe & save’ is one of the best ways to entice consumers to subscribe.
Further, leveraging strikethroughs or side-by-side price comparisons are effective ways to emphasize savings. You might also consider offering free shipping just for subscribers and promoting that clearly on your PDP.
Even though there can be so many benefits to subscribing (exclusivity, guaranteed access to inventory, loyalty rewards, etc.), it’s important not to overwhelm your PDP; you’ll have plenty of chances to relay the long list of perks in later email & SMS marketing.
Pick one or two of your biggest draws (like savings and free shipping, the ability to cancel anytime, etc) to display above the fold — and then you can opt to have further perks available somewhere on your PDP, either below the fold or in a clickable pop-up.
Optimizing your PDP for subscriptions doesn’t just happen on the page. Returning one-time buyers who are visiting your PDP to purchase again are prime candidates for a pop-up about your subscription offering.
Social proof is highly important to consumers — in fact, 88% of consumers actually trust user reviews as much as personal recommendations. In addition to including a star rating above the fold, it’s crucial to include a range of reviews below the fold as well. These reviews add validity to your brand as a whole and help consumers feel more comfortable committing to a subscription. Bonus points if some of these reviews mention your subscription specifically, but it’s most important to sell your product over your subscription.
Now let’s dive into your actual subscription. Offering flexible subscription management is essential for ensuring your subscription can meet the needs of your subscribers and their changing lifestyles — and it’s also fairly necessary for remaining competitive in the crowded subscription landscape.
The most important component of flexible subscription management is the ability to mold your subscription to your subscribers’ lives, no matter how their lives change. So if a subscriber wants to try multiple products before committing to one, needs to adjust their subscription frequency, or is looking to cut costs by skipping an order or two, you can ensure that your offering meets their needs.
The more your subscription offering is conducive to a changing lifestyle, the more likely you are to retain your subscribers.
Flexible subscription management has also been proven to have a significant impact on revenue in addition to retention. For example, simply adding a ‘pause your subscription’ option caused companies to experience a 3% increase in revenue as a result of subscribers resuming their paused subscriptions.
In addition to increased customer retention, here are other benefits of flexible subscription management:
So what does this look like in practice? For one, it means subscribers should be able to change their subscription settings at any time.
In addition to always having the option to cancel, here are some subscription management options that empower consumers to control their experience:
It’s also important to ensure that subscribers can easily change their subscription settings all in one convenient and easy-to-use customer account portal, which brings us to chapter 6.
Let’s talk about the post-purchase experience.
Unlike one-off transactions, the heart of a thriving subscription offering comes from a subscriber’s experience after they complete their first purchase. And when we talk about increasing your LTV and truly cultivating brand champions, we’re talking about developing an enriching post-purchase journey where you can unlock a real relationship with your subscribers.
The first step to creating this experience is to invest in a strong customer account portal.
A customer account portal can and should be a true brand engagement hub where your subscribers can go for anything related to their subscriptions. It’s also yet another location to display a consistent brand presentation to your audience. A beautifully-branded account portal only strengthens your relationship with your subscribers.
In addition to the basic features of a customer account portal (like flexible subscription management options, viewing order history, tracking upcoming orders, adjusting shipping preferences and payment information, etc), the best customer account portal should be full of touchpoints to encourage engagement. Every subscriber interaction has an impact on both loyalty and customer lifetime value.
Here are some features that make up an engaging customer account portal:
A subscription-led loyalty program allows subscribers to accrue loyalty points with every purchase and empowers them to redeem these points for the products or discounts of their choosing. This choose-your-own-adventure style of loyalty rewards allows subscribers to fully control their own experience and engage with the rewards that they feel are the most valuable.
As we briefly alluded to in Part I, subscriptions afford you an opportunity to encourage word-of-mouth marketing (WOMM) and highly-valuable referrals. Referred customers actually have a 37% higher retention rate and a 16% higher customer lifetime value than average customers.
Leveraging your features together is one of the best ways to create a next-level subscription experience. How do you do this? By offering loyalty points for subscribers who refer their friends — which is a stellar way to incentivize WOMM and bring in more of these high-value new customers. We also recommend sweetening the deal by offering the new subscriber a discount on their first order as well.
One-time add-ons are a great way to enhance the subscription experience and introduce subscribers to new products. You can recommend recently-dropped products, popular products, seasonal products, or even branded merch as a bonus way of encouraging subscribers to rep your brand.
Simply putting the word ‘trending’ in your account portal and associating it with a product automatically fosters a feeling of community by uniting subscribers together over a shared love of a product. But beyond that, there are many ways to get creative with trending upsells.
You can use it to feature a rotating product of the month, an exclusive subscriber-only product, a limited-edition seasonal product, or even take an educational angle on a lesser-known product to take away the need for subscribers to do any research.
Displaying a featured snippet of your brand’s most recent social posts is yet another way to elevate the customer account portal experience. It ensures that your subscribers are connected with your brand’s social presence even if they aren’t that active on social media and gives you another avenue for conveying your brand presentation and overall style.
As we mentioned, the most enticing subscriptions are powered by interconnected features that all simultaneously work to elevate the customer experience. Smartrr offers the strongest customer account portal and suite of tools in the Shopify ecosystem, all in the name of transforming the post-purchase experience and encouraging customer retention for life.
Next up: creating a Shopify tech stack that best supports your subscription offering — because the most successful Shopify subscription brands have a strong and interconnected subscription-led tech stack.
The right tech will reduce customer friction, help anticipate subscribers’ needs across the board, and consistently draw subscribers back into their subscription experience. Whether you’re starting from scratch or consolidating your current technology stack, here are the core categories you need to consider to create a well-rounded tech stack to promote your subscription offering:
We’ll dig further into the importance of subscription analytics in a later chapter, but for now, we’ll mention that tracking analytics is crucial for monitoring the health of your subscription offering and making overall business optimizations. Ensuring you have a strong analytics app will be paramount for growing your brand.
And let’s be clear that Smartrr offers an advanced analytics tool that will fully help you optimize your subscription programs, but we understand that sometimes you need access to tools that give you a greater understanding of how subscriptions play into your omnichannel strategy.
As such, here are the tools to know:
The Shopify Analytics Tools Smartrr Recommends:
Almost nothing causes a subscriber to churn faster than ineffective customer support. On the flip side, exceptional customer service can greatly strengthen subscriber relationships and even encourage subscribers to spread the word about your brand. In general, about 62% of customers will recommend a brand to a friend if they receive great customer service.
The Shopify Customer Support/Helpdesk Tool Smartrr Recommends:
Both email & SMS are essential marketing tactics for keeping subscribers informed and engaged as well as always bringing them back to their customer account portal experience.
We’ll dive into specific subscription-led marketing and communications tips in the next chapter — for now, here are the tools to know about:
The Shopify Email & SMS Tools Smartrr Recommends:
3PL (third-party logistics) fulfillment means outsourcing your retail order fulfillment process rather than having to fulfill the orders yourself. Between offering subscriber-only free shipping and giving subscribers priority access to inventory, ensuring you have a trustworthy and effective 3PL is a necessary starting point to then further strengthen your subscription offering.
The 3PL Fulfillment Services Smartrr Recommends:
We’ve already discussed the importance of fostering loyalty — and a loyalty program is one of the best ways to do that. On average, customers spend 67% more when they’re part of a loyalty program. Ensuring loyalty rewards are part of your subscription offering is an impactful way to create lifelong customers.
🧠 Smartrr Loyalty: Smartrr is the only subscription app that offers subscription-led loyalty rewards, which are designed to deepen customer relationships, boost customer engagement, and increase customer lifetime value. We have everything you need to develop a loyalty offering to scale your subscriptions, but if you want a more complex loyalty program for one-time purchasers as well —
The Loyalty Solution Smartrr Recommends:
Smartrr integrates with LoyaltyLion, a data-driven engagement platform that grows loyalty at every stage of the customer lifecycle. LoyaltyLion offers loyalty emails, tiers, in-card rewards, and more — and the best part is all LoyaltyLion discount codes work natively with Smartrr, removing the need for any API keys.
Having a way to gather and leverage reviews helps you boost social proof and simultaneously gives you valuable feedback to ensure you’re meeting your audience’s needs. Plus, in general, if subscribers feel like you listen to and respond to their feedback, they’ll feel a stronger connection to your brand.
You can also weave reviews into your subscription experience by offering loyalty points to incentivize subscribers to leave reviews.
The Reviews Tool Smartrr Recommends:
With over 8,000 Shopify apps, we’re only just scratching the surface of the countless ways you can develop a subscription-led tech stack. Having said that, we’d be remiss not to mention a few more key players that truly help elevate your subscribers’ experience:
When we talk about marketing your subscription offering, we’re referring to two different components: marketing to non-subscribers and marketing to current subscribers.
This is where subscription marketing really differs from other forms of marketing. While traditional pay-per-product businesses focus most of their marketing efforts on boosting the number of purchases overall, the best subscription businesses primarily target their current subscribers. That’s because (as we’ve discussed) repeat customers are what fuel subscription brands.
Of course, growing your subscription offering is important too — so we’ll divide this section into two parts: one for marketing to acquire subscribers and one for marketing to engage and retain current subscribers.
Subscription Marketing for Acquisition (To Non-Subscribers)
This is one of the easiest lifts to acquire new subscribers while also engaging current subscribers.
Offer subscribers loyalty points in exchange for referring a friend (and gift the friend a discount for joining). As we previously discussed, referred customers are significantly more valuable than their non-referred counterparts — so any money put into this referral program will be more than worth the investment.
We’ve already mentioned targeted pop-ups on your PDP when we were discussing PDP best practices. They also count as part of your subscription marketing. Target repeat buyers with an engaging blurb about your subscription offering, emphasizing the savings and perks they’d unlock if they joined.
Just as you want to target repeat buyers via pop-ups on your PDP, it’s important to capture this audience in an email flow to try to convert them into subscribers.
Be sure to include reviews to boost social proof and clearly articulate the benefits of subscribing.
Subscription Marketing for Engagement and Retention (To Current Subscribers)
When you’re marketing to current subscribers, it’s important to remember that the goal is to not only ensure retention but also boost engagement (and spending, of course) as much as possible.
With that in mind, here are some of our favorite strategies:
This is an important one. Even if your subscribers were aware of your subscription perks when they subscribed, these benefits are likely off their radar if they haven’t been regularly engaging. It’s important to lean into your email marketing and remind them.
Remember, you don’t just want to list your subscriber perks. That tactic really only makes sense for subscriber acquisition. You’re trying to empower consumers to interact with your brand as well as subliminally reminding them that they’re getting special treatment that only subscribers receive.
Here are some email strategies to do that:
When you think about the typical way SMS gets leveraged with subscriptions, you probably think about “we’re about to package your next order” updates or shipment notifications. Those are extremely useful and shouldn’t be overlooked, but we can do better.
When you notify subscribers that they have an upcoming order, you can also:
But perhaps the most creative use of SMS marketing that we’ve seen lies in inviting subscribers to come to you. This strategy is less focused on explicitly marketing your subscription and more focused on improving your relationship with subscribers, which will absolutely impact retention.
Multiple brands have taken the approach of establishing a sort of “hotline” via text and inviting subscribers to reach out with questions related to their product.
For example, Pot Gang, a gardening subscription box, provides gardening support should subscribers have questions about watering, direct sunlight, or other gardening-related topics.
What works so well with this strategy is that you’re able to both encourage engagement and also position yourself as an expert in your field, which strengthens your audience’s opinion of your brand. What’s more, assuming you have permission from the subscriber, you can also share these interactions on social (like Pot Gang does) as a way to boost community and incentivize other subscribers to text your brand.
Plus, this is a great opportunity to recommend relevant products based on your subscribers’ questions. This could come in the form of encouraging them to try your recommendation as a one-time add-on or, if you’re dealing with a loyal subscriber who you’d like to celebrate, you can send them a free gift based on their needs. This is an exceptional strategy to delight your most valuable customers and encourage them to keep interacting with your hotline.
Remember, you’re significantly more likely to sell to a current subscriber than you are to a new customer — so take advantage of that!
Here are some strategies to sell to current subscribers:
Customer churn is the enemy of subscriber retention — and subscribers often cancel because they weren’t aware of the flexibility of your subscription offering. A cancellation survey is your last chance to market the benefits of your subscription.
Provide each subscriber with a personalized retention action based on the reason they say they want to leave. For example, if they complain they have too much product, show them how to change their subscription frequency in their customer account portal or give them the chance to delay or skip their next order.
Remarkably, brands have seen about a 50% increase in retention rates by using this tactic.
We’ll dive deeper into other ways to reduce customer churn in the next chapter.
The final piece of the puzzle when it comes to scaling your subscription business is knowing how to access and leverage the right subscription data.
There are so many different ways to approach optimizing your business with data — so we’ll break down specific strategies based on different metrics you should be measuring.
First, there are many reasons why subscription analytics is important. In addition to providing you with insight into your monthly recurring revenue that lets you accurately plan ahead, here are some other advantages that we’ll explore further:
Now let’s dive deeper into each of these topics and explore some strategies for how you can leverage your data to optimize your business.
Average order value (AOV) refers to the average amount of money customers spend on each order. It’s calculated by dividing a brand’s total revenue by the total number of orders.
As for strategies to boost it, a highly-effective tactic is to lean into product bundling. In general, bundling products and providing meaningful discounts for anyone who buys the bundle is an excellent way to encourage subscribers to buy more even though they feel like they’re spending less.
You can leverage your data to determine which products commonly get purchased together to identify good candidates for your bundle.
Another great way to further increase AOV is to allow subscribers to customize their bundles to ensure they’re getting the exact products they need.
Your subscription data can also give you insight into which products are driving the most revenue. This way, you can select your most popular offerings to then feature as one-time add-ons or trending upsells, which are both excellent ways to boost AOV while simultaneously enriching the post-purchase experience in the customer account portal.
Finally, just as commonly-purchased-together data can inform your product bundling strategies, it can also allow you to provide tailored recommendations whenever a subscriber engages with one of these products. This level of personalization greatly incentivizes subscribers to buy something new.
Customer lifetime value (LTV) is a crucial metric for subscription businesses to understand. It measures the total income that a brand expects to earn from any given customer over the entire course of the customer’s relationship with the brand. A higher LTV typically means better customer retention, higher AOV, or both.
Customer acquisition cost (CAC), on the other hand, refers to the average cost of acquiring a new customer.
Measuring your LTV:CAC ratio is a numerical way of ensuring you’re generating more revenue long-term than you’re spending to acquire new customers, the goal obviously being for your LTV to be greater than your CAC without being so much higher so as to suggest you could invest further in acquisition.
With customer acquisition costs at an all-time high for a variety of reasons, improving your LTV:CAC ratio by increasing customer lifetime value has become more important than ever. And one of the best ways to approach this is to focus your efforts on customer retention.
Going back to your revenue-driving data — you can utilize your most popular products to create an engaging loyalty program that will actually incentivize subscribers to save up. This way, you’re promoting retention while also encouraging subscribers to spend more, which are the two surefire ways to increase LTV.
Another method to improve your LTV:CAC ratio is to have your current subscribers acquire customers for you via referral rewards. Offer loyalty points as a reward for subscribers who refer their friends, and to sweeten the deal, you can use your data to test different point amounts and discover the most optimal reward for encouraging referrals. This is one of the most cost-effective ways to acquire new subscribers and also boost engagement for your current audience.
Remember, increasing engagement across the post-purchase experience can help you drive up customer lifetime value, and the AOV-boosting strategies above will also contribute to a higher lifetime value.
There is so much data to support the importance of personalization for improving the customer experience and boosting revenue. For one, customers are 80% more likely to buy something if they’re offered a personalized experience.
As we mentioned, tracking items that frequently get bought together is an easy way to use data to offer tailored recommendations to your subscribers.
You can also proactively collect data. In fact, 83% of consumers are willing to share information in exchange for a more personalized experience. Use this!
Send a fun quiz after gaining a new subscriber to ask them for information that can inform future product recommendations. This is especially great for skincare products, hair products, and anything edible that comes in a range of flavors. Basically, if your audience might have a variety of tastes or needs, being able to categorize them for improved marketing is highly impactful.
As promised, we’ve returned to customer churn. Since repeat buyers are the bread and butter of subscription businesses, doing everything you can to reduce customer churn will ultimately help your bottom line.
Even though we know it’s a part of your business that you probably hate looking at, it’s so important to consider your churn in order to optimize your business as a whole.
It’s helpful to consider why subscribers churn in the first place. While each subscriber’s experience is unique, there are some overarching commonalities — which can be broken down into voluntary and involuntary churn.
Here are some reasons for voluntary churn (meaning subscribers meant to cancel):
As for involuntary churn (where a consumer’s subscription is terminated without their realizing), that tends to happen if a credit card expires, the consumer’s card gets lost or stolen so they cancel it, a billing address is wrong, or the consumer had insufficient funds in their account.
Involuntary churn can actually account for a significant percentage of churn (almost half, believe it or not!) — and one of the easiest ways to prevent it is to set up failed payment notifications. That way, your subscribers can find out instantly if their payment didn’t go through.
As for voluntary churn, like we’ve mentioned, utilizing cancellation reasons is an excellent way to reduce churn — and not just on an individual subscriber level but also for your whole business, if you know how to analyze the overarching patterns in your data. Because any patterns that you do find can help you proactively retain and delight subscribers.
Here are some questions to ask and actions to take:
There you have it — the ultimate guide to Shopify subscriptions in 2023. Whether you are just considering launching subscriptions or looking to take your offering to the next level, it’s important to create a flexible subscription offering that can meet the needs of each individual subscriber, always prioritizes the end consumer’s experience, and comes with an enriching post-purchase journey. Following these strategies will enable you to acquire, engage, and keep your customers for the rest of your life.
And of course, the best way to approach growth is the acquire the strongest partner in the Shopify ecosystem. Smartrr gives your brand a full suite of tools to enable you to elevate your subscription offering and customer experience, backed by a committed team capable of giving you the blueprint to success.
If you’re using another Shopify subscription app, we understand you might be wary of a migration. They can be scary and are a big investment, but switching to Smartrr is always a worthwhile decision to unlock the full potential of your loyal customers. Smartrr seamlessly handles migrations and provides support every step of the way to ensure a smooth transition.
Interested in learning how we can transform your brand? Let’s talk.