eCommerce – The Evolution to Subscription Services
As eCommerce sellers strive for differentiation in an increasingly competitive world, personalisation has become one of the main driving factors that has led to the growth of subscription services. Product purchases are “evolving” from buying to subscribing, and there’s plenty of evidence to suggest that subscription services are now the future of ecommerce – or at least, a very big part of it.
Digital subscription services like Netflix and Spotify are now mainstays of our entertainment consumption, while retail subscription services like Dollar Shave Club and Stitch Fix have become major disruptors in their respective industries.
There are five key traits that have led to the phenomenal growth of subscription services in the current decade: access, selection, price, experience, and personalisation.
A strong user experience is vital to converting customers from the free version of a service to fully paid-up subscribers – a model used by many online subscription services. Spotify is an excellent example of this: its percentage of monthly active users who are paid subscribers has risen from 0% in 2008 (when Spotify first launched) to 45% in 2018.
In other words, even if a company makes its service available for free, if the user experience of the paid version is compelling enough, consumers will be more than willing to invest.
Spotify is also a case study in the effective use of personalisation. Spotify’s personalisation features illustrate how customisation and effectively used data collection can boost customer satisfaction and engagement.
Spotify’s user preferences, which allow users to add whatever songs they like to a “Your Music” section and curate them into playlists, led to a rise in daily engagement with the app, which has gone up from 37% of monthly active users (MAU) in 2014 to 44% of MAU in 2018.
In addition, Spotify’s data-driven “New Releases For You” section, which presents new music releases based on the user’s musical tastes, has led to a rise in unique artist listening, increasing from 68 monthly unique artists listened to per user in 2014 to 112 in 2018.
It’s clear that eCommerce companies need to rise to the personalisation challenge if they’re going to migrate from paid to subscription services in the future.
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