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The Grocer: How next-generation loyalty schemes could make a difference this Christmas

Authors: Miya Knights, Head of Industry Insight, Eagle Eye

Most business would agree that their best customers are responsible for the lion’s share of their sales. So, it seems strange then that subscriptions have only now really begun to come of age.

One subscription management platform that has tracked their rise since 2012 recently found the ‘Subscription Economy’ has grown more that 450% in that time, alongside increased digitisation.

In the UK, for example, this lucrative economy is now worth £323 million, with spending on digital and subscription services increasing 39.4% year-on-year this July, according to Barclaycard research.

Following the lead of Pret a Manger, one in ten retailers launched their first sign-up service during lockdown, with a fifth looking to develop their subscription offering even as restrictions eased.

The catalytic impact of the pandemic has accelerated many technology-driven trends that were already changing consumer habits. The US saw ten year’s ecommerce growth in three months.

So, it’s now easier than ever to build digital connections to customers and to use that connection to thank, understand, and so serve them, better. This used to be the preserve of loyalty schemes.

Developing a proxy for loyalty

While the subscription model isn’t new, when Amazon introduced Prime in 2007 offering unlimited one-day delivery on millions of products, bundled with music, films and more, the game changed.

The industry saw how a subscription membership model could act as a proxy for a loyalty scheme in delivering added value to your best customers. But it had the added benefit of recurring revenue.

The recurring revenue winner has to be Apple. Known for its mobile and PC devices, its App Store, iTunes, Apple Pay and other software ecosystem revenues recently saw its market cap hit $2 trillion.

It took 42 years for Apple to reach $1tn and just two more for it to double that. In the five weeks from March, Netflix doubled its subscribers and 26.8m subscribed to Disney+ at record speed.

Even online fashion retailer Asos caused a stir in 2018, when it abandoned its three-year-old loyalty scheme in favour of a pre-existing subscription delivery service that also helps offset fulfilment costs.

The ability to identify and pay via digital, with the predictability of fast or regular products or services delivery, means even traditional operators can capitalise on subscriptions in their physical locations.

One Eagle Eye client that recognised this was IMO Car Wash, which recently launched its IMO Wash Club subscription service to boost sales, incentivise frequency and enhance customer engagement.

Transformative digital benefits

Now, just as this year has given those who were already winning with digital an unexpected boost, it has galvanised every customer-facing business to redouble their digital transformation efforts.

It has also reinforced that what matters in retail hasn’t changed. What has changed is consumers’ means of access via digital. They still look for value, convenience, expertise and personal service.

Eagle Eye also found value for money still tops the reasons why consumers shop with a retailer or brand. But they also actively seek promotions and want to be recognised for their repeat custom.

Enter Walmart+ in the US and Loblaws’ PC Optimum Insiders in Canada, which aim to not only rival Amazon Prime, but also out-innovate it with the added benefits of their vast store and fuel networks.

Walmart’s omnichannel grocery proposition saw it capture more grocery orders than Amazon at the beginning of lockdown, which gives it a great base from which to grow its subscription membership.

Other grocers have also launched subscription delivery offerings, including the likes of Sobeys with its Voilà online delivery service in Canada, or Woolworths’ ‘Basic Box’ of essentials in Australia.

These developments prove that historical customer data collected from a variety of physical and digital touchpoints can provide invaluable insight on how to grow customer lifetime value (CLV).

These businesses know that a successful subscription model depends not only on new customer acquisition, but also on net retention and CLV growth. It can also reduce customer churn.

When research has found that 70% of subscription revenue on average comes from existing customers, it easy to understand why subscription models are now really gaining traction.

To find out more about how Eagle Eye can help your business access the benefits of subscription services, as it has done for Pret a Manger, IMO Car Wash and Loblaws, please contact us.