Subscription models were traditionally seen in only a few areas of our everyday lives, such as gym memberships and magazines. However, the last few years have seen rapid growth and innovation in the use of subscriptions, from meal delivery services such as HelloFresh to media content from the likes of Netflix.
Dollar Shave Club, an online business owned by Unilever, even uses the subscription approach with razor blades and personal grooming products. It sends subscribers a monthly package of pre-ordered blades and other items in return for a fixed fee.
Subscriptions work for customers when they have predictable demand and are happy to be loyal to a particular retailer or service. Although there are now many subscription models, Amazon Prime set the benchmark in retail, which is now the world’s most popular subscription program.
Amazon Prime has 150 million members globally, paying a monthly or annual fee for access to services ranging from free delivery of products to digital media content. Prime’s customer proposition is one of the critical ingredients in Amazon’s success. As Amazon’s Founder, Jeff Bezos, once said: “We want Prime to be such good value, you’d be irresponsible not to be a member.”
Many omnichannel retailers have now introduced their own subscription programs. Walmart+ members, for example, will pay slightly lower subscription fees than Prime to receive free delivery, a discount on fuel and other benefits such as access to Walmart’s scan and go app in-store. In Australia, both Coles and Woolworths have launched subscription programs linked to their e-commerce businesses.
What’s striking about most retail subscription services, including Walmart+, is how they follow Amazon’s lead by placing free delivery of online products at the heart of their proposition, rather than the value delivered to customers shopping in their stores. Online shoppers receive the lion’s share of value in Walmart+, for example.
Pret a Manger’s Game-Changing New Approach
UK coffee shop chain Pret a Manger recently launched “YourPret Barista,” offering up to five drinks a day for £20 a month (or around $36 in Australia). It hit the headlines because of its fantastic customer value at a time when store retailers are looking for ways to win back customers. Pret manages the potential for gaming the scheme by buying coffees for all your friends with the condition that each drink must be purchased at least 30 minutes apart.
Pret’s offer sets a new benchmark for a store retailer subscription program. So, why have so few store retailers introduced compelling subscription programs? Many brick-and-mortar retailers are held back by their legacy systems. In particular, point-of-sale (POS) systems lack the flexibility to handle the real-time redemption and personalisation needed to manage subscriptions. Pret, however, has invested in customer connection technology that can verify subscription status and process the appropriate discount automatically at checkout, immediately with no delay to the customer.
Most retailers can’t deliver a subscription program to customers shopping in physical stores because they don’t have the tools to build a personalised digital connection with customers. If they wanted to run a one-to-one subscription service, like the YourPret Barista program, most would find their existing technology won’t allow them to deliver it at the checkout.
Working with marketing technology partner Eagle Eye Solutions, Pret a Manger has created the ability to tie sales analysis to a view of where and who its most frequent customers are. That will allow Pret to launch insight-led customer propositions more quickly and at scale. As Pret a Manger Global Head of Digital Product, Ciara Chellun put it:
“Working with Eagle Eye has helped us accelerate our customer loyalty strategy, and their integration with Oracle Simphony enables us to bring together in-shop customer and transactional data. We now have the building blocks to establish Pret as a digitally-led, multichannel business, and YourPret Barista is the first big launch we’re able to deliver through our new digital technology platform.”
A one-to-one digital connection to the customer at the checkout puts Pret in a strong position because it can target individual consumers with personalised digital offers. As more retailers invest in a digital connection with customers shopping in stores, I predict we’ll see many new subscription models emerge.
For example, new parents might be invited to join a baby club and receive lower prices on categories like nappies, formula, wipes, and related products. Or customers who show loyalty to a particular FMCG brand might be offered reduced pricing or bonus products for shopping the brand across several categories in store.
The secret for bricks-and-mortar retailers lies in investing in the digital marketing technologies that Amazon and the ecommerce pure-plays take for granted.
Jonathan Reeve is general manager for Asia Pacific at Eagle Eye.