In the dynamic landscape of ecommerce, businesses are always seeking innovative ways to increase customer lifetime value. Two popular strategies that have gained traction in recent years are replenishment flows and subscription models. Both approaches capitalize on the concept of recurring purchases, offering a [nearly] sure-fire way for businesses to establish a reliable revenue stream from brand fans.
Replenishment Flows: A Seamless Reordering Experience
Replenishment flows focus on providing a seamless and hassle-free reordering process for customers. This model is particularly effective for businesses offering consumable products such as skincare items, vitamins, or cleaning supplies. Replenishment flows are a reminder to customers to re-order. They are not automated and require the customer to confirm the purchase. For replenishment flows, Ometria found an average open rate between 50-60%, average click-through rate between 40-50%, and an average conversion rate between 10-15%. That’s double the average open rate for standard marketing sends and 3-5x the average conversion rate. The key features of replenishment flows include:
Personalized Recommendations
Based on past purchases and customer on-site research, algorithms analyze customer behavior and preferences to offer personalized product recommendations. This enhances the customer experience and encourages them to add more items to their replenishment list.
Flexibility in Frequency
Replenishment flows allow the brand to customize the frequency of the orders. This flexibility accommodates variations in usage patterns and ensures that customers receive products exactly when they need them.
Subscription Models: Building Long-Term Revenue Streams
Subscription models (often ‘subscribe and save’ models) go beyond simple reordering and focus on building long-term purchase cycles with customers. This approach is suitable for businesses offering a range of consumable products, where customers are automatically delivered a product on a selected cadence, often with a discount applied. Key elements of subscription models include:
Predictable Revenue
Subscription models provide ecommerce businesses with a predictable and steady revenue stream. This financial stability allows for better planning and strategic decision-making, as businesses can anticipate their income over the long term.
Continuous Engagement
Subscribers remain actively engaged with the brand through regular interactions. Businesses can leverage this engagement to gather feedback, conduct surveys, and continuously improve their offerings based on subscriber preferences.
Finding the Right Balance
While both replenishment flows and subscription models offer unique advantages, finding the right balance is essential for customer engagement, revenue and retention. Some businesses may benefit from incorporating elements of both strategies to cater to a diverse customer base. Further, one model can support the other through cross sell. Here are some considerations:
Hybrid Approaches
Explore hybrid approaches that combine replenishment for certain products with subscription models for others. This allows businesses to cater to different customer preferences within a single platform.
Customer Education
Clearly communicate the benefits of subscription models to customers who are in a replenishment flow. Educate customers about the advantages of automated reordering benefits, which include tangible percentages off and intangible peace of mind of never running out of a consumable essential item.
Data Analytics
Leverage data analytics to understand customer behavior and preferences. By analyzing purchase patterns, businesses can fine-tune their replenishment flows and subscription offerings (cadence, percentages off) to better meet customer needs.
One, neither or both? What works for your ecomm business?
In the world of ecommerce, the choice between replenishment flows and subscription models is not a binary decision. Businesses can strategically implement both approaches to create a diversified revenue stream while catering to the varying needs of their customer base. Whether it’s the seamless convenience of replenishment flows or the long-term relationships fostered by subscription models, the key lies in understanding the unique dynamics of the business and its customers. By finding the right balance, businesses can unlock the full potential of recurring revenue and thrive in the competitive ecommerce landscape.
At LimeLight Marketing, we’re experts at consulting businesses on the strategies needed to support business growth and reach revenue goals. Our experience with both subscription and replenishment flows makes us a strategic partner for DTC businesses wanting to maximize lifetime value. Get in touch with us today.
