Increase customer loyalty and optimize your profit with a subscription-based customer club.
Subscription-based customer clubs got their breakthrough as an e-commerce phenomenon. It really to affect when the American online store Amazon introduced its success Amazon Prime in 2005.
Today, customer clubs have become an even more popular initiative. Developed in form of either a new concept or as a development of existing online store businesses.
There are several good reasons to initiate a customer club:
- Very high conversion rates. It is not uncommon that an online store converts 1-2% of their online visitors to paying customers. The customer clubs usually experience that 50% of their visiting members will buy their products.
- The revenue pr. customer is significantly higher for members of a customer club. An example is Amazon Prime. Prime has three times higher revenue per Prime-member compared to non-members.
- Many online stores spend a lot of money when creating “traffic” in their online webshop. Members will normally navigate directly to the online store to shop. By doing this, the store will save costs on “pulling” these customers in.
To create “traffic” in an online webshop can be an expensive activity which probably won’t lead to any repeated sales – and no customer loyalty whatsoever. The customer will most likely disappear after purchasing a product once, and it is quite difficult to get the customer to return.
For the larger online retailers, the issues regarding customer loyalty is quite a concern and have been the main reason for many initiatives throughout the years. One of the most successful initiatives is Amazon Prime. Amazon Prime is an online membership that costs 99 USD a year and provides the customer with free shipping on millions of products. Besides free shipping, Amazon offers a numerous content of free movies, music and online storage room for its Prime members.
Amazon Prime had a massive positive effect on the Amazon brand. It changed the business from being a transactions-based business to become a subscription-based business. According to Morten Suhr from Subscrybe.dk, a Prime customer purchases 3 times more than a regular Amazon customer. Amazon experienced that a subscription-based business model could change consumer behaviour. Their consumers would try to get as many benefits from their subscription as they possibly could.
“Prime makes it easier for the customers to shop online and removes one of the major barriers in e-commerce: Payment for delivery. This will lower the shopping barriers for the customer, who will “reward” Amazon by purchasing even more products.” Morten Suhr – Subscrybe Strategy report, volume 1
Amazon Prime is the pioneer within the development of subscription-based customer clubs. Though locally, in Denmark, we have also witnessed a development within companies that benefit from innovative customer clubs. Winefamly.com is an example. Winefamly aired the 1st of December 2016 with a concept that disrupts the traditional way of purchasing wine. Winefamlys concept revolves around a subscription-based business model, the customer pays a contingent that allows him/her to purchase wine at the cost price. This subscription-based concept resulted in more loyal customers.
For more information, visit www.winefamly.com
CHANTI is an online jewelry store, experienced great positive feedback when they created a subscription-based customer club, CHANTI Premium. The CHANTI Premium membership costs 29 DKK a month and allows the customer to save 15% on purchased jewelry during the first month of the subscription and 25% afterwards. This is actually quite a good deal: If you purchase for more than 1500 DKK jewelry a year, you will benefit from being a Premium customer.
For more information, visit http://www.chanti.dk/p-Smykkeudsalg-CHANTI_Premium.
The CHANTI Premium experienced huge success within a short period of time. Per Søndergaard from CHANTI says:
“During a short test period we gained over 2000 Premium customers and we experienced that surprisingly many of our customers continued to stay as Premium subscribers. We save resources on our Adwords budget and give the cost reduction, the 25%, to the customers that sign up for the Premium subscription. With CHANTI Premium we experience that our customers buy a lot of jewelry. The delivery address is often registered as a company address which indicates that a person at the workplace has a Premium subscription and his/her co-workers also benefit from the 25% discount.”
The outcome is clear, CHANTI experienced an increased customer loyalty when launching a Premium subscription. Their customers were no longer only signing up for the discount but continued as paying customers for a longer period of time, with repeating purchases. An exciting aspect of this initiative is the experience and the knowledge CHANTI gained. They learned that their customers share the benefits of having a subscription with their friends and family. By using the Premium subscription like this, every single subscriber becomes a catalysator for sales with new customers.
Differentiate your concept…
The attentive reader will notice that the three above-mentioned customer clubs are completely different in what they offer their customers. Amazon Prime supplies free shipping, among many other things, CHANTI offers product discounts and Winefamly allows access to wine at wholesale prices. There sure is no “one size fits all” in how a concept is supposed to be shaped.
Even though we know many innovative and very exciting danish subscription-based businesses, as Winefamly and CHANTI. The phenomenon of subscription based customer clubs is still a relatively unexplored area of e-commerce in Denmark. Our assumption is that many well-established online businesses could benefit from more loyal customers if they considered implementing a subscription-based customer club.
At Reepay A/S we have developed a cloud based subscription-service system that handles subscription payments with credit card. This system is not alone cheap but is also a more flexible solution for payment handling.
For more information, visit www.reepay.com
Disclaimer: Reepay has a supplier relationship with all the danish customer cases mentioned above.