Stephanie Heasman, director of customer success, Feefo examines the growth of the subscription model and how Lifebox Food uses reviews to gain insight into its personalised products.
The following guest article has been written for InternetRetailing by Stephanie Heasman, director of customer success, Feefo. Feefo enables retailers to connect directly with their customers to gather real feedback, meaning real insight and tools to build relationships, improve brand reputation and make informed decisions for the future.
From razors and recipe kits to stationery and self-care, the subscription box phenomenon continues to thrive. Its success has come from a focus on customer experience and the use of technologies that enable it to capitalise on changing consumer behaviour.
In the UK, Royal Mail estimates that the subscription box sector will be worth £1bn by 2022 and that 27% of UK consumers currently receive at least one box. Cool and style-conscious in many cases, these services are most popular with under-35s. The Royal Mail research shows that more than half of 25-35 year-olds subscribe to at least one box service. In the US, meanwhile, the management consultancy giant McKinsey estimates the market for internet-based subscription services, which includes boxes, grew by more than 100% a year over a five-year period to 2018.
Growth shows no signs of stopping, with the Royal Mail research finding that 40% of UK consumers will join more schemes in the future.
What is behind this expansion? Partly, it is related to the changed habits of consumers who no longer browse for the unexpected on the high street. Yet when they go online they are faced with a bewildering amount of choice. Consumers are aware they can spend far too long choosing what to buy and value a selection “curated” by an expert. In the UK, millions of consumers have also become accustomed to subscription services through the growth of online grocery shopping.
Consumers want convenience, but on the other hand, they also want pleasant surprises. Whether in the US or the UK, subscription box services fall broadly into two categories to meet these overlapping sets of demands. Services delivering razors and baby products are fundamentally about replenishment, while a business such as Feefo customer Lifebox, which delivers a monthly box of high-quality health foods not readily available elsewhere, is about discovery and delight.
CUSTOMER EXPERIENCE REDUCES CHURN
High churn rates, however, remain a challenge right across the subscription box industry. McKinsey found that four-in-ten consumers had cancelled their subscriptions. More than a third of consumers who sign up for a subscription service cancel in less than three months, and more than half cancel within six. As McKinsey repeatedly stresses, consumers will only continue to subscribe if they receive superb end-to-end customer experience.
Lifebox is one of the companies at the forefront of the subscription box revolution. It was founded five years ago by Jenny Sleath from a belief in wholesome food and exercise. Managing director Howard Rawlings says understanding customers in order to provide them with a memorable experience is essential. Discovery is a central part of the customer experience, along with meticulous presentation and dependable delivery.
That is not to say that value is a long way behind in customers’ considerations. The cost of a box is less than the combined RRP of the same items bought individually, assuming consumers know where to find them. Customers will often post feedback highlighting how the boxes are excellent value for money.
Rawlings view is: “Customer experience starts when consumers visit our website and goes through to receiving the second box.” The company knows its customers regard receiving a box as something akin to giving themselves a gift so a great deal of attention is paid to presentation. Layering makes the unwrapping and unboxing ritual enjoyable and if a box is a gift it will have a ribbon. The attention to detail extends to the way the tissue paper is folded inside and the provision of a booklet that gives information on the contents and suggests recipes.
These finishing touches add to the ‘self-gifting’ experience and the business goes the extra mile to ensure receiving a Lifebox is an exciting and special moment.
CUSTOMER INSIGHT IS AS VITAL AS CURATION
Knowing what matters to customers and whether the company is delivering on its promise at every step of the way makes feedback crucial to Lifebox. Rawlings says: “In its most basic form, what we do is not difficult; we put products in a box and send them to consumers. What makes us different is the knowledge we have about our consumers’ preferences and how we use that information to keep our boxes fresh and exciting.”
Customers are encouraged to post reviews and these are published for all to see. Rawlings sees these as invaluable saying that it makes the customer realise they are important and that their voice will be listened to. The feedback is critical to both shaping what Lifebox offers and to the resolution of any individual problems or misunderstandings. Secondly, analysis of the reviews highlights broader market trends and responses to products or aspects of the service. It’s here that customer review feedback helps address the substantial challenge of reducing churn, any insight that can help with this is crucial to the business’s growth.
Like many successful subscription box companies, a large part of Lifebox’s success is in anticipating trends. Boxes containing vegan foods are its biggest seller, but the company also addresses gym fitness enthusiasts with high-protein products. Being prepared to offer customers products that are a little off-the-wall is vital.
The crucial decisions about what to put in the boxes are made by a curator who is a nutritionist working closely with international brands so that when a new product is released, Lifebox already knows about it. This is, as Rawlings says, a very important part of the business. The company never repeats items in its boxes, so that the experience is different every month with entirely new content. This is the company’s specific niche where it sees itself as having special expertise and plenty of scope for growth.
“Feedback allows us to keep a customer rather than lose them over some specific misunderstanding but it’s also important for the brands in our boxes,” says Rawlings. “We can give them information about their products, especially when they are new.“ This has special relevance to Lifebox, because, as Rawlings says: “We like to challenge our customers sometimes with products that are new or different, so we’ll get feedback saying ‘I didn’t enjoy everything in the box, but I’m giving you five stars’. If you want to discover new products, you have to expect that you will occasionally discover something that doesn’t suit your tastes.”
Rawlings points out that maintaining competitiveness and reducing churn in the subscription box business can be challenging. The content of boxes has to change constantly without any compromise on quality and any successful new ideas can be adopted by competitors.
It is why it is so important to obtain customer feedback and extract insights from it. “If you don’t know your customers you are sunk,” he says. “There’s a certain amount of anecdotal evidence, which is useful, but you cannot beat having a look at your Feefo feedback over the last six months and seeing which way it is going.”
Looking ahead, the future of subscription boxes lies in greater personalisation. The McKinsey research showed that 28% of subscribers in the US view personalisation as the main reason for continuing to subscribe. This is a difficult nut to crack for any subscription service, but it is one where customer feedback will have a very obvious and highly effective role to play. Gaining real insights from the review feedback of thousands of real customers will be essential to the development of the subscription box industry.