I have argued many times now that the classical form of acquiring loyalty through coupons and loyalty cards is becoming irrelevant. Convenience is the new currency in retail. The dawn of Big Data and Artificial Intelligence has made it possible to predict what customers may like. Thus, major firms and new entrants have been able of initiating subscription services for their products. Zero priced return has made it possible for customers to accept this new form of shopping by lowering the risk associated to possible deliveries not matching their needs and tastes.
Stitch Fix is probably the poster child of this new form of providing convenience and quality to consumers. The so-called online stylist uses the pool of data provided by its customers and a few more specific information bits provided freely by the user in order to deliver new and exciting boxes filled with clothes, shoes and accessories at specific time intervals. The content of these boxes is not specified by the customer, but by Stitch Fix itself based on the customer’s profile. If the customer doesn’t want some of the items in the box, he or she can return them (for free) or keep them at a discount.
The genie is out of the bottle and bigger retailers are following the same direction. Retail giant GAP introduced subscription services or their baby apparel babyGap a shirt time ago. Results are encouraging and GAP has now launched the sane concept for sleep wear called BedtimeBox.
“We’ve been testing the babyGap Outfit Box for nearly a year, and have been seeing high retention rates and low return rates. And we’ve been able to learn a lot about what our customers are looking for when it comes to outfitting their baby or toddler,” said Margaret Yang, senior director of buying, Gap Kids & Baby Online. “The new BedtimeBox is another way for us to move closer to the customer and fulfill their needs with sleepwear, which is a category we know parents need to restock constantly as their child grows.”
Subscriptions are thus not only an excellent way of using big data to serve customers better, but also a way to retain loyalty through the lifetime of the customer, addressing different needs along different periods of time.
And if you want to delight your customers, just include an extra surprise, something GAP is testing right now.
“We plan to test new ways to engage customers—whether it’s through a new subscription like the BedtimeBox, or offering our members other fun surprises,” Choi said. “In the last babyGap Outfit Box, the free surprise gift was a pair of Disney socks and we’re looking at having our next free gift be an item that hasn’t even hit stores yet.”
Amazon has experimented with subscriptions for a while now, and the Amazon Prime concept, where the customers pay a small yearly or monthly amount in advance in exchange for better prices and faster deliveries is seemingly doing very well.
Right now the combination subscription + special surprises + pre-paid privileges seems to be a winning formula, fueled by Big data and AI. This combination may extend to other markets and industries. Are you prepared?
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