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Has The Pandemic Made Subscriptions The New Common Currency? Ask Walmart Or Amazon

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Matt Wujciak
08/18/2020

amazon

The subscription economy

There is a tipping point emerging in modern commerce, one that few analysts or journalists are talking about. It’s a new common currency - the long-term relationship between a business and a customer.  

The emerging subscription economy is aimed at increasing customer loyalty and lifetime value by providing customers with additional products, services, add-on features, or auto-refills in a “set and forget” model. (I’m sure most of you can relate there).

This isn’t new. We know Netflix, HBO, and Amazon have replaced DVD’s. Spotify, Apple Music, Soundcloud have replaced CD’s. What is new, however, is the subscription model or style of commerce becoming more common across brands in different industries, industries you would have thought subscriptions would never apply to just five years ago.

For example, earlier this month, Twitter told investors it’s considering a subscription model as a means of generating additional revenue to support its business. In a new survey, the company asks users to evaluate paid features like “undo send” (an alternative to an edit button), as well as other ideas like custom colors, the ability to publish longer and more high-def videos, support for profile badges, auto responses, additional “social listening” analytics and the ability to run brand surveys about ads, according to TechCrunch

Think about this concept of subscription-based add-ons, rewards, or gamification extending beyond content or entertainment. 

Marketplaces and brands now make it easy to auto-refill everything from paper towels to pet food, skin crèmes to salty snacks, bottled water to baby wipes. Most even offer suggestions for the appropriate replenishment schedule. Because buyers can cancel their subscription at any time, organizations now need to prioritize customer experience and focus on serving rather than selling

“How else can we provide our customers additional value?” is the million dollar question every brand with a budget is asking themselves right now. Many of the brands we know now will look nothing like they did five years prior, as everyone is looking to extend value to consumers and enter new digital markets.

Now, seven in ten organizations are no longer looking at one-time sales or repeat purchases but rather an ongoing relationship that needs to be continually nurtured. After all, acquiring a new customer can cost five times more than retaining an existing customer. Increasing customer retention by 5% can increase profits from 25-95%. Subscription perks and additional service or product values are aimed at tapping into customer retention (and data).

As consumers, once we experience the entire seamless process of a quality customer experience, (specifically, a customer-centric subscription service), and the value it may bring to our daily lives, we start to question (or even convince ourselves) why we might need to purchase it. For many, life without Uber, Amazon, or Zoom is almost unfathomable now, especially Gen Z consumers. The pandemic has expedited this digital shift in the convenience era of the subscription economy. 

For example, if you’ve ordered groceries online during quarantine, you may find it hard to go back to previous shopping habits after quarantine. A good subscription service will do that to you.   

In fact, according to CCW Digital research, when we asked consumers, will you make any of the following changes to your shopping/purchasing habits as a result of COVID-19, even when the pandemic subsides? 49.16% of consumers plan on taking fewer trips to stores (the largest response to the question). “Buying more products online (for delivery), including essentials like groceries” – 48.43% (the second largest response to the question). 

Read More: Emerging Customer Experience Trends And Technologies - Finance And Insurance

Subscription models continue to evolve during the pandemic, aimed at responding to consumer behavior trends such as the digital demands (i.e. online grocery ordering) the pandemic has necessitated. 

As I wrote nearly 3 months ago in a CCW Digital article:

…the pandemic is both highlighting and expediting the process of moving to a customer-centric, digital, subscription style of commerce – and living. A subscription business model is going to be essential across industries you would have never thought. As AI and automation, CX design, and compelling consumer-value-based marketing advances in response to trying times, and the social acceptance of the subscription infrastructure becomes a new norm, the more frequently you will see such offerings across different industries.

Walmart vs Amazon

Now Walmart+, the new retail subscription component of the nation’s largest brick-and-mortar retailer is tapping into the subscription economy. As many brick-and-mortar businesses have struggled during the pandemic to say the least, consumer behavior trends continue to shift in a digital direction. Walmart is now responding, directly going after Amazon.

The Walmart+ subscription will cost $98 per year, more than $20 cheaper than the cost of Amazon Prime, a huge advantage for consumers finding themselves with less spending flexibility than before the pandemic. However, the Walmart+ launch comes at a time when about 150 million people worldwide are already subscribed to Amazon's services.

So, what exactly will the $98 annual fee for Walmart+ reportedly include?

  • Same-day delivery of groceries and general merchandise
  • Reserved delivery slots and open-slot notifications
  • Discounts on fuel at Walmart gas stations
  • Early access to product deals
  • Access to Walmart's new Express two-hour delivery offering
  • A Scan & Go automated checkout service at stores
  • A Walmart+-branded credit card at some time after launch

The battle between Amazon and Walmart will come down to customer experience – price (i.e. over $20 dollars cheaper), value provided to consumers (i.e. two-hour delivery offering), convenience in user experience (i.e. automated checkouts for customers that still shop in store), customer loyalty perks (i.e. early access to products), and many more components. 

Read More: How To Create A 360 Degree Customer View

People who want to take advantage of grocery delivery and gas discounts and who live close to Walmart stores may benefit more from Walmart+, while people who prefer to shop at Whole Foods and take advantage of a large streaming library will likely stick with Amazon Prime, arguably one of Amazon’s most competitive offerings. 

Every aspect of the customer experience design becomes a crucial, competitive advantage (or disadvantage) especially in markets where a brand needs to convince customers to switch over from another brand that they may be content regularly spending money with. For example, if Walmart+ promises same-day delivery and access to two-hour deliveries, the brand must have the technological organization and infrastructure to follow through with reliable services and experiences.  

If they over promise and under deliver, they may not get a second chance at retaining customers in an Amazon-dominated market. They almost certainly won’t get a third chance. According to CCW Digital research, over half (51.8%) of consumers say they will find another brand after just 2 bad customer service experiences. 58.51% of consumers care more about the customer experience when deciding which companies to buy from (as a result of the pandemic).

 Subscription models in commerce are undoubtedly growing as marketing and customer experience departments work together to improve relationships and loyalty programs with consumers. For Walmart+, the experience within the subscription model becomes the customer experience that will win or lose against Amazon’s, but it’s the tip of an iceberg in a new style of commerce. 

This is a time when the world is vulnerable, where every person and organization is adapting to life with a live virus in their midst, where no one is operating from a best-in-class pandemic playbook to survive modern financial Darwinism. Brands, including marketers and customer experience departments must become the very people they’re trying to reach. This means that among innovation, compliance, time and technology, humanity must become the greatest application. 

Read More: The Tipping Point In Online Purchasing Decisions

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For media coverage, lead gen, and digital marketing inquiries, (or to say hi), contact me at matt.wujciak@customermanagementpractice.com, or connect with me on Linkedin at Matt Wujciak.

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