by I talk to many people in this space, and it’s fair to say some brands have found 2024 very tough so far.
This will heavily depend on your niche and your location, but for some brands, things have been more challenging than usual.
I decided to write this post because I want to share my perspective and help people by giving advice about what I would do. (and what we are doing in BusterBox)
Let’s be honest….
For the VAST majority of Subscription Boxes, it was much easier to get traction in the past.
This was down to a couple of different factors.
- The Economic Situation:
A few years ago, the economic climate was more favourable. Consumers had more disposable income and were willing to spend more on non-essential products. – (I will touch on this more in a bit)
2. Lockdown Impact:
A few years ago, the average person was sitting at home with extra cash, randomly buying everything on the internet out of boredom.- This sent online sales through the roof; everybody with a subscription box benefited.
Nowadays, consumer behaviour has started to revert to how it was before the first lockdown, and the economic situation has changed as well.
(Truthfully, for most brands, they are pretty much back at baseline and probably close to where they would be without the lockdown boost)
Inflation has been driving up the cost of everything, though, so consumers have less cash than normal to spend on discretionary products.
(Also, a lot of general business expenses have gone up, including cardboard, raw materials, shipping costs, etc. Which is certainly not helping)
Now, even though Subscription Boxes provide added value and convenience, the vast majority of them would be classed as discretionary as they are not needed for everyday survival – (unless you are sending items that 100% need to be replenished each month)
Now, because of these reasons, some brands are struggling.
If you look into the public markets, you will see that many big direct-to-consumer brands have taken a beat down over the last few years
Seriously…
Many big subscription boxes and direct-to-consumer brands are under immense pressure. – (Some have recently filed for bankruptcy)
I am not naming anybody, but this is all out in the public domain, and if you search, you can see for yourself.
Now, despite all these challenges, do I think the Subscription Box business model is dead or a bad business?
No, far from it…
Many Subscription Boxes are still doing very well, and their owners are making a lot of money.
Like I said earlier in this post, many challenges come down to niche and location.
Some niches and some countries are doing a lot better than others.
(Also, the current economic climate is not unique to subscription boxes. There are many industries which are finding things more challenging at the moment)
If you are struggling, though, please don’t panic.
I promise you that things will get better.
These things come in cycles, and the economic situation already looks like it is drastically improving. Everything should hopefully be back to normal very soon.
For now, though. I am going to share some advice that will help you right away.
- Do the things others won’t do.
This topic deserves its own post and podcast because it’s been so effective for us (and I will do that soon).
We have been picking up the phone and spending a lot of time calling our customers in BusterBox.
The great thing about Subbly and commitment terms is that you are notified when somebody is going to cancel and the exact reason why they are going to cancel.
So you can call your customers who are set to cancel and use this data to save them.
Seriously, you can see the exact reason why somebody is going to cancel.
So once you solve that issue, you have an excellent chance of saving them.
This is a really powerful way of reducing your churn rate.
We have been doing this in BusterBox, and we have saved a lot of people.
Take a look at these potential metrics to see how powerful this is and how much extra profit it can unlock for you.
We are currently putting a team on the phone, but we estimate we can save 400 monthly subscribers.
1. 400 X €27 ARPU (Average revenue per user) = €10,800 in monthly revenue saved.
2. CAC €25 X 400 = €10,000 Saved in replacing 400 customers
The company has potentially unlocked an extra €20,800 in 1 month.
Running it over a few months will compound and make you a lot of extra money.
As I said, this topic deserves its own content, which I will create soon.
The phone can also be used to sell more products, upgrade to more premium subscriptions, and reduce failed payments.
It is a very powerful tool, but barely anybody wants to use it.
I highly recommend changing your opinion on it if this is you.
If you’re willing to do things others won’t, you will get results others will never achieve.
Also, you don’t need to be a big company to test it.
Myself and the two other founders have spent the last month making phone calls perfecting this. (We wanted to do this before wasting time and money hiring people if it did not work)
We know what works now and are in the middle of putting a team on the phone.
You can do the same or use your customer service staff.
Trust me when you do it right. It will make a massive difference.
2. Dunning in place for failed payments.
I have noticed many people mention their failed payments have gone up. This is because consumers have less money in their bank accounts.
We have noticed the same in BusterBox, but with a proper dunning sequence in place and multiple retries, the majority eventually end up paying (Because they get paid again and have money in their account)
You may think somebody is trying to “Rob you”, but this isn’t the case in most cases.
They don’t have any money in their bank account, but will renew and pay you when they get paid again.
The secret, though, is having effective dunning to capture as many failed payments as possible.
You also need to make it really easy for your customers to update their card information if they have to.
I have stated this before but if your dunning requires the customer to log in with a password and navigate to the update card screen you are going to end up losing a lot of customers as people won’t be bothered to do this.
There are tools out there like Churn Buster & Stunning, which make it very easy for your customers to update their cards.
Also, if you use Subbly, customers can update their cards with one click, which makes a massive difference.
You paste the update card reminder code into the failed payment emails, and customers can do this.
We do this ourselves in BusterBox, and it has helped a lot.
As I mentioned earlier, a phone call can also help massively; the same can be said with SMS.
The only thing about SMS is that you must keep a tight eye on it because it can be costly if your customers don’t take action, as you must pay for each message.
The bottom line is that in times like this, you should take your dunning process seriously.
Do not just go with your default platform settings. If you go with this approach, you will probably end up losing a lot more customers to failed payments than you should.
3. Be accommodating to your customers.
There are plenty of great customers out there who are having a tough time at the minute.
As I mentioned above, not everybody is trying to scam or rob your company when their renewal fails.
I advise you to empathise with these people and try your best to accommodate their current situation.
This means you make it as easy as possible for your customers to pause or change frequency if needed.
Don’t lock anybody into anything.
If you do this, you will force their hand, and they will either try to cancel or go directly to the bank and stop the subscription.
You can’t get blood out of a stone.
If somebody doesn’t have the money, they don’t have it.
Let them pause and continue in the future.
This is much better than the alternative where they cancel.
Also, customer experience these days is more critical than ever.
People want to do business with companies they like and have a connection with.
If you have a good relationship with your customers, they are less likely to have you on the chopping block when looking to do cutbacks.
People have multiple subscriptions these days, so you are likely in competition with other subscription boxes when it comes to cutbacks.
Your entire support team should be aware of this.
They should go above and beyond with every interaction so your service blows away all your customers.
This goes a long way these days.
4. Make more money from your affluent customers.
No matter what niche you are in, there will be segments of your customer base that are not affected by the current climate at all.
You should focus on these people to sell more products and make more money.
You may think that sounds great, but how do you identify these people?
The easiest way to identify these people is by looking at your subscription cohorts and LTV data.
You can filter by the people who have been with you the longest and have given you the most money.
Once you have identified these customers, you must figure out what else to sell them.
A more premium subscription is the easiest and most profitable thing to sell them.
One-time products can also work, but a more premium subscription will probably make you more money over time.
For us, a premium subscription includes extra treats and premium toys.
This is very popular, and a lot of people go for it.
I recommend sitting down and brainstorming what you can offer.
No matter your niche, you can always offer something to make your subscription more premium.
More than likely, it is just more of what you are already sending them.
Other things that sell well are mystery boxes and jumbo mystery boxes.
They are also brilliant for clearing stock.
Let me explain if you don’t know what a jumbo mystery box is.
It’s just a regular mystery box with more products so that you can charge more.
If you are struggling with this, I highly recommend surveying your more affluent customers and asking them what else they buy.
Then give it to them…
Also, going back to my first point.
The phone is a very powerful way of getting existing customers to upgrade their subscriptions.
Call them up and ask for feedback about the last few boxes.
Then, at the end of the call, mention the premium subscription and upsell them.
(This is a great way of driving up your ARPU – Average revenue per user and making more money)
I hope you found this article helpful. I have way more suggestions, so I will likely write a follow-up article.
There is still a lot of opportunity out there, and I know many boxes are still doing very well, but things have certainly been more challenging for some niches.
If things are hard, please don’t panic. Everything is temporary, and these things go in cycles.
The Subscription Box Business Model is still a fantastic business; when you get it right, it can change your life.
I promise things will get better again soon.
Please let me know if you have any questions about this. I am more than happy to help. Have a great day.
