The Role Subscription Marketing Will Play In Personalization

Steve Olenski on Nov 19, 2018 in Marketing Strategy

Marketers may not be familiar with the concept of the uncanny valley, but they should be: The personalization movement sits at its trough, and consumers are clamoring for them to pull it out.

Proposed in 1970 by Japanese roboticist Masahiro Mori, the uncanny valley concept was first applied to humanoid robots. When an entity appears almost — but not quite — human, it evokes in people a sense of unease.

As it turns out, however, “almost human” designs can give users the willies without a face or even a physical form. Although an Epsilon survey released earlier this year found 80 percent of consumers prefer brands that offer personalized experiences, an almost-as-large 75 percent of them told customer experience company InMoment that they find many forms of personalization creepy.

Most marketers know consumers have a penchant for personalization; what they don’t know is how to get it over the almost-human hump.

Unsatisfied and Under-equipped

Ninety-eight percent of marketers believe personalization has a role in advancing customer relationships, according to an April 2018 Everage study, and 74 percent of them say its impact on advertising will be “strong” or “extreme.” It also found, however, that just 12 percent of marketers are “very” or “extremely” satisfied with their present personalization efforts. Not even one in three agreed that the industry is “getting personalization right.”

Why can’t marketers seem to perfect personalization? Evergage found that 55 percent cited insufficient consumer data, while a separate RevJet study pinned the blame on tools and organizational priorities. Thirty-one percent of surveyed marketers told RevJet that technology is a top barrier, while 24 percent said company goals were.

Most marketers have little sway over their company’s priorities, data collection habits, or technology investments. But what they can do is suggest a new model for marketing and sales: one that’s not only more profitable than one-time orders, but also capable of pushing the company past personalization’s zone of discomfort.

Subscription Marketing’s Surprise Role

Executives may struggle to see a link between better personalization and profits, but they’re unlikely to feel the same way about subscriptions. Subscription-based firms grow revenues 5.5 times faster than S&P 500 companies, largely because they lead customers to place around three times more orders than do non-subscription retailers.

Because subscription models triple the average customer’s lifetime value, they cause executives to shift their focus from soliciting new customers to retaining existing ones.
Not only do retention-based business strategies make personalization possible, but they also make it more powerful.

“The most successful businesses build relationships with their customers by creating product experiences that fill a unique role in their life,” explains Matt Nowen, director of customer experience at House of Kaizen, a New York City-based agency that specializes in subscriber growth through the customer experience. “Because of their recurring nature, subscription businesses have a unique opportunity to build this relationship over an extended time.”

Beyond making personalization’s business value clear, subscription marketing also lowers its data barriers. When companies prioritize one-time sales, they often create a self-fulfilling prophecy: Leaders see little reason to get to know one-and-done buyers, which in turn makes customers feel unvalued, causing them to go elsewhere for future purchases. Acquisition-minded marketing makes it neither profitable nor possible to collect a meaningful amount of customer data, while subscription marketing gives companies both the incentive and opportunity to do so.

Ben Sears, founder of subscription-based servicebot.io and a consultant for VMWare, argues the data stream that subscription marketers enjoy is the one that allows them to tailor their marketing assets and products to customers’ wishes. “One of the best things about selling subscriptions is the amount of data you can utilize to make decisions,” Sears wrote on Medium. “You can accurately gauge marketing efforts immediate[ly] through the number of subscribers gained as well as how your decisions impact the services you provide by looking at the churn rate.”

But how can subscription marketing bust down technological blocks, which RevJet claims is the greatest reason marketers are struggling with personalization? Unlike personalization systems — which can cost around £250,000 ($320,000 USD) for software, not counting implementation — both product- and service-based firms can test a subscription model with relatively little investment.

Some Tweaking Required 

For digital companies, the switch to subscriptions is merely a matter of tweaking their pricing structure and software’s code. Product companies, believe it or not, can pilot the model in a similarly low-cost way through Amazon’s Subscribe & Save program. Although Amazon keeps a tight leash on data generated through sales on its platform, the e-commerce giant provides sellers with some personalization opportunities, primarily around the product itself, such as text and image customization and product configuration.

Plus, companies that are successful enough with Amazon’s tools to offer subscriptions from their own site can personalize it using the e-commerce giant’s suggestion algorithm. Amazon has been giving companies and researchers access to the code behind its renowned recommendation engine since 2016, though firms that don’t want to build their own can always turn to prebuilt solutions.

Subscriptions and personalization might seem like two unrelated trends, but they’re more intertwined than many marketers realize. Those who can’t convince their leaders to invest in class-leading personalization can turn to subscriptions as a helpful Trojan Horse, opening the gates to long-term customer relationships, new data streams, and low-cost delivery technologies. Without them, almost-there personalization programs will never make it the final mile.