The subscription industry has grown by over 100% year after year. From 2011 to 2016, sales increased from $57 million to $2.6 billion…
And the growth only continues today.
If you and your DTC company haven’t hopped on the subscription bandwagon, you’re missing out on the opportunity to enjoy monthly recurring revenue and build customer loyalty.
Subscriptions help keep a customer engaged with your brand each month instead of purchasing once and moving on.
Before you say, “A subscription model won’t work for me,” we want to tell you about three distinct DTC subscription models. We believe at least one of these could be a good fit for your business.
But first, let’s start with the basics.
What Are DTC Brands?
Before we get too far ahead of ourselves, let’s make sure we’re all on the same page about the DTC meaning… because we’re not talking about the Depository Trust Company. We’re talking about direct-to-consumer brands and marketing! (Also sometimes referred to as D2C)
DTC companies sell their goods directly to customers; there is no middleman. That means as a customer, you’re buying a product directly from the company who manufactured it. You’re not going to a traditional retail store to buy the same product from a company that simply hosts the products on their shelves.
Examples of DTC brands include Dollar Shave Club, BarkBox, Netflix, and more.
The Boom of the Direct-to-Consumer Subscriptions
By 2023, 75% of DTC brands will provide subscription services, according to a Subscription Trade Association (SUBTA) report.
In other words, DTC subscriptions are booming! As the pace of life continues to quicken, customers begin valuing convenience and time-saving resources more.
Not to mention, the “treat yourself” mentality is increasing among young adults living in urban settings — the primary demographic for subscription services.
Unexpectedly receiving a box on the doorstep every month triggers the sensation of receiving a gift. It feels exciting and rewarding.
This “reward” of receiving a subscription along with the convenience and time-saving aspect of this model of business are what make subscriptions enticing for customers — and why they’ll be here to stay for the long haul.
3 Direct-to-Consumer Subscription Models
If you think a subscription model won’t or can’t work for your DTC company, think again. There is no one-size-fits-all approach to creating a subscription; There are actually several different models that you can adapt and implement depending on the products or services you’re selling.
DTC subscription models include:
The Replenishment Model
The replenishment subscription model works well for products consumers need to buy frequently and regularly. Think: razors, supplements, contact lenses, toilet paper.
This model allows your customers to auto-replenish necessities — without the need to remember to re-order, spend the time to place the order, and ever completely run out.
Many businesses will also offer discounts when customers sign up for the subscription offer, adding another money-saving benefit to the list.
You’ll find a wide variety of DTC companies using this model, including Dollar Shave Club (razors), Ritual (vitamins), Who Gives a Crap (toilet paper), and Hubble (contact lenses).
For best results, offer several options for how often your customer can receive their package. However, recommend a specific delivery interval based on how long it takes the average consumer to need a refill — and always account for delivery time. The whole idea of this model is not wanting your subscriber to run out of product and to continue usage!
The Curation Model
The curation subscription model is perfect for that person who loves receiving gifts and treating themselves. Curated subscriptions also make great gifts!
The general concept with this business model is to create a grouping of items sourced specifically and uniquely for the consumer.
These types of subscriptions are popular in the beauty and fashion industries — as well as the food and drink industries.
One popular example of this model is Stitch Fix, a company where a personal stylist selects clothing based on the customer’s style and sends them items at regular intervals. Customers can even tell their stylist about big upcoming events and other special clothing needs for a more personalized box!
Other examples in the beauty and fashion category include FabFitFun and BirchBox. All of these brands help subscribers get outside of their comfort zones and explore new products they may not have tried on their own!
Then there’s the food and beverage industry... HelloFresh is one of the most popular curated subscriptions in the food category. They save subscribers time and effort on grocery shopping and cooking by sending recipes and all the ingredients a customer will need to make them. These types of meal kit subscriptions also help add creativity and excitement to meals by exploring different flavors and dishes.
The Access Model
The access model of subscriptions is growing in popularity — exponentially. One of the biggest examples of an access subscription model is none other than Netflix.
By subscribing to Netflix, a customer is able to stream movies and TV shows they wouldn’t be able to without the service.
While Netflix is a popular and well-known example, they’re far from the only business offering exclusive access to subscribers.
ClassPass, a fitness app that allows subscribers to visit a variety of spas and gyms each month without a membership there, gives customers freedom and flexibility to explore different types of exercise and spa treatments without committing to a gym membership.
Even The New York Times uses an access subscription model! By subscribing to the NY Times, subscribers unlock unlimited digital access to all content on their site.
Many blogs and publications are turning to this model to help monetize their website outside of ads.
Oftentimes, brands will offer free content with additional exclusive paid content in addition, versus making the whole website subscription-access only. Having your whole website private to subscribers would make it a lot harder for readers to know whether they’ll like your content or not!
Maintaining Your DTC Customers
Every subscription based business will inevitably experience customer churn every month. This is when customers will actively or unintentionally stop doing business with a company. Whether it is voluntary or involuntary churn, 12% of monthly credit cards for average customers will fail. A proper way to remedy this is a dedicated customer service team. However, having a team of revenue recovery specialists can further help outreach to customers and actively win back payments and return business.
By now, you’ve likely seen DTC marketing for subscription options. If you haven’t gotten on board and started offering access, curated, or replenishment subscriptions for your direct-to-consumer company, now’s the time! Subscriptions are only predicted to grow, with consumers focused on saving time and conveniently shopping.