Subscription box services have seen explosive growth over the past several years. Boasting a rich assortment of products from clothing to meal kits, tech gadgets, personal care items, and even toys, these boxes are delivered regularly to customers’ homes. The intent is simple – to offer consumers an element of surprise with a mix of unique and personalized items.
However, the subscription box model is not without its challenges. This article aims to delve into these complexities, providing valuable insights for businesses operating in this space.
Subscription Box Market Dynamics
Comprising 55% of all subscriptions, the most popular categories in this space revolve around curated boxes of apparel, meal kits, tech gadgets, personal care items, and toys. These boxes are then delivered to customers’ doorsteps at frequent intervals, providing a convenient and flexible method for consumers to access a wide range of products.
Renowned retailers like Sephora, Walmart, Nordstrom, and Target have ventured into the subscription box market in an attempt to compete with new entrants like Birchbox and Stitch Fix. Despite the convenience and consistency that subscription boxes offer, there are significant challenges that companies face in this sector.
Flexibility: A Double-Edged Sword
While customers appreciate the flexibility of skipping or returning boxes, this flexibility presents a significant concern for subscription box companies. Customers often skip boxes, and even when they don’t, they return 60% to 70% of the products in the box.
This high return rate has led to some established retailers, like Nordstrom and Target, discontinuing their subscription boxes. Even Sephora, a retailer that continues to offer a subscription box, is wary of the phenomenon known as “box fatigue.”
Customer Participation: The New Frontier
In an effort to improve their outcomes, subscription box companies have begun to involve customers in the box process through various digital touchpoints. Customers are invited to preview an upcoming box digitally, provide feedback on the products in a delivered box, and explain why they might skip a box.
The rationale behind this strategy is that active customer participation in the box process could lead to higher engagement, resulting in less skipping and increased spending.
Engagement vs. Outcomes
While customer participation in the box process is indeed engaging and empowering, it is unclear whether such engagement translates into tangible outcomes beneficial to companies. A recent study in the Journal of Marketing explored this question using data from a national apparel box company that included information on about 30,000 customers’ repeated participation, feedback, and box purchase behaviors between 2015 and 2018.
The results were revealing. Customer participation in previewing the contents of an upcoming box actually reduced future box purchases. If the partner company had limited participation in the upcoming box instead of encouraging it, they could have increased customer lifetime revenue by 14%. Furthermore, if they had not encouraged customers to provide specific reasons for skipping a box, they could have increased customer lifetime revenue by 10%.
However, encouraging feedback when the subscription boxes were delivered could have boosted customer lifetime revenue by 5.7%. The data suggests that while feedback after box delivery drives future purchases, participation before and after the delivery decreases box opt-in and spending.
Guidelines for Subscription Box Companies
Based on the findings of the study, the following recommendations were offered for companies operating in the subscription box space:
- Promote Digital Previewing Cautiously: While customers may appreciate getting a sneak peek of their upcoming box, this previewing should be handled carefully. Companies might consider providing exclusive items or early releases, enabling previewing for some product categories but not others, or rotating these options to maintain the element of surprise.
- Prioritize the First Box: The first box is crucial, not just in terms of matching products to customer preferences but also from a customer participation perspective. If a customer decides to skip the second box, their likelihood of churn increases. Therefore, companies should avoid asking for extensive feedback on why the box was skipped and instead work on enhancing the customer’s interest in the next surprise.
- Analyze Feedback: Open-ended comments provide a wealth of information. Companies should analyze this feedback for sentiment, information, and linguistics, and capture metrics such as word count and punctuation to gauge text engagement.
- Encourage Specific and Emotional Feedback: Companies should ask customers to provide feedback on specific product attributes and their emotional response to the products. Asking customers to elaborate on their feedback, such as how they felt about the items in the box or the first few thoughts that came to mind when trying a product, can prove beneficial.
- Avoid Elaboration on Skipped Boxes: Companies should avoid asking customers to explain why they are skipping a box. If necessary, use close-ended questions instead of open-ended ones.
Potential Areas for Further Research
The study highlights several areas that future researchers might consider exploring. These include the effects of customer participation in “pseudo-subscription” settings, such as business models that do not charge styling fees or box companies that deliver boxes “on demand” with a co-creation element.
There is also potential in measuring the effect of participation in an upcoming box on participation in a delivered box, the impact of participation in a delivered box on skipping a box, and so on. It would also be interesting to explore whether the surprise element of curated boxes has different impacts based on gender.
Subscription box services offer unique opportunities and challenges for businesses. While customer participation can enhance engagement, it doesn’t always translate into improved business outcomes. Companies need to carefully manage customer participation and feedback to maximize the benefits while mitigating the risks. By doing so, they can not only enhance their revenues but also create a more engaging and satisfying experience for their customers.
For those interested in delving deeper into this subject, the full article can be found here. The article, titled “Understanding Customer Participation Dynamics: The Case of the Subscription Box”, was published in the Journal of Marketing by Nita Umashankar, Kihyun Hannah Kim, and Thomas Reutterer.