7 Mistakes to avoid when running a DTC subscription business

Growth
Karan Chaudhary
Last Updated On:
January 27, 2023
7 Minutes

DTC is not for the faint hearted. Some mistakes can prove costlier than others. Making cancellation difficult, not focussing on retention and offering poor customer service are some of the mistakes that can break your business. And wait, there's more.

If you ask for an honest opinion from those who have been in DTC for a long time, they will tell you that not everything that glitters is gold. They will tell you that running a DTC eCommerce brand involves a lot of heavy lifting. It’s a model not meant for the faint-hearted. (Source)

After researching some of the big DTC brands that went downhill after an initial hockey-stick revenue growth, we were able to find some common patterns that blocked growth for DTC brands.

One of the major reasons was dissatisfied early adopters and brand loyalists who were ignored once the brand scaled. But wait, there’s more to it.

To stop you from going down that road, we’ve compiled 7 common yet not-so common mistakes that you must avoid when running a DTC subscription business.

Mistake #1 - Not focusing on LTV and trying to shorten your payback period

We all know that ad-costs are going up and your investors want you to boost LTV - recurring revenue looks like a solid solution.

So you go all out with your subscriptions and expect your customers to order more and more.

Consequence ⇒ subscriber ends up with too much stock and eventually cancels the subscription.

Solution ⇒ you need to understand your subscriber’s consumption habits and get the frequency right. Instead of pushing orders, let the customer decide what their ideal frequency should be.

And this does not just have to be the standard 30 days or 60 days. It can also be 25 days or 32 days or even 3 months.

Look at your customer data and see what the most common frequency of the highest LTV customers is. And set that as the default on your subscription widget.

A short payback period is sweet but what’s even better is 200-300% LTV.

And that’s only possible when you get the customer frequency right.

One of our brands - CampusProtein has a custom subscription widget powered by Loop where the delivery frequency is 25, 50 & 75 days instead of the typical 30 day cycles.

Furthermore, if your existing subscriber is facing a too much stock or a too less stock situation then you can educate them on frequency.

Just send them an upcoming order email with a quick action URL that directs them to the customer portal from where they can change their delivery frequency.

Mistake #2 - Making cancellations difficult for subscribers

As much as you don’t want your subscribers to leave, making cancellations difficult for them is a really bad idea.

Brands usually hesitate from giving customers too much power in the portal thinking that customers might cancel.

But if somebody has to cancel, they can anyways do it after the delivery and ask for a refund.

Consequence => terrible brand experience and zero chance of reactivating old customers. And this is sad because subscriber reactivation campaigns have the highest ROI!

Solution ⇒ don’t make cancellations difficult. Make them easy and insightful with powerful exit surveys that help you engage with customers before cancellation - as good as calling them to ask why they’re going.

Here’s how it works:

When a customer clicks cancels, brands can engage them with a personal message (you can embed a Tik-Tok, Insta Reel, Gif or YouTube video)

👉 Further it prompts a cancellation survey where you can create your own reasons for cancellation and ask them to your subscribers 

👉You can offer different recommendations against different cancellation reasons

  • Have too much stock ⇒ Delay, Skip or Pause Subscription
  • Not satisfied with product quality ⇒ Offer Product Swap
  • Too expensive to continue ⇒ Offer One-Time Discount
Loop’s Cancellation Flow Live In Action

Mistake #3 - Focusing on just acquiring new customers and not pampering old ones

DTC brands can go all out chasing growth but ironically what becomes a growth blocker is not keeping your old/loyal subscribers happy.

Consequence ⇒ short term growth that tapers off over time as your retention rates drop and growth stalls.

Solution ⇒ subscriptions are all about experience. And pampering your loyal subscribers is the way to go.

Upcoming order email for instance is the most profitable marketing email you send every month. Why not just add another line that says “Hey, congrats on 4th of July, here’s a 10% discount on your next delivery, or here’s a free $10 gift card”.

Send them a thank you gift for just being a subscriber, maybe give them an exclusive offer - a product that’s locked off for everyone else but reserved for you, send out free samples every month!

It never hurts to do good things for your most loyal and profitable customers.

Our powerful feature Loop flows helps you set up subscriber rewards like free gift on 2nd order, 10% discount on 5th order, free product trial on 7th order and so on.

You can also gamify the customer portal to engage your subscribers by showing them how many orders they’re away from getting a reward.

Further you can send what rewards await your subscribers in their upcoming order email/SMS to build up the hype.

Mistake #4 - Not split-testing the subscription widget

Subscriptions sell fast when they look good

Brands that don’t invest time in their widget end up with poor conversion rates.

Consequence ⇒ lost CLTV & recurring subscription revenue

Solution ⇒ one of the easiest split tests for DTC brands is setting the default option as “Subscriber & Save” or one-time purchase on the PDP

Run this split test and see what happens to your conversion rates. If people opt-in to subscribe and save, then see how many same day cancellations you’re getting in.

Are people mistakenly opting in or consciously opting for a subscription? The chances of mistakes are lesser as Shopify does have a double confirmation for recurring purchases.

Even if people mistakenly opt-in, make it easy for them to opt-out instead of forcing them to stay bound to a subscription.

Subscribers have the highest LTV. It becomes wise for brands to split-test their subscription widget and modify its copies, make it customised and attractive. 

Communicate the entire value of your subscription on the product page -> perks, gifts, exclusive discounts, free eBooks, 

The idea is to make your customer feel stupid for not subscribing when they see your subscription widget.

Mistake #5 - Not providing VIP customer service to subscribers

Take a look at how rude this customer service representative from this brand was toward a customer who had lodged a complaint about receiving a melted ice cream. (Source

Ice-Cream should make you happy, not sad.

The way this brand treats its customers is totally opposite to how other DTC brands react to customer complaints and questions.

Consequence ⇒ poor reactivation rates. Less ROI on subscriber reactivation campaigns. High churn rates.

Solution ⇒ while training your agents matters the most, brands can also consider investing in a subscriber portal that automates half the work for you.

Don’t be like this brand. Period.

Loop’s customer portal has helped brands like The Girlfriend Doctor reduce their first-response time by nearly 40%. 

If you are already using Gorgias, we have a native integration to offer live-chat support straight from the customer portal.

Mistake #6  - Not tracking churn rates month-on-month

It costs 5 times more to market to a new customer than an existing customer.  (Source)

While AOV is an important metric for eCommerce brands, Churn Rate is an important metric for subscription businesses.

Brands that have double-digit churn can lose their entire subscriber base in under a year.

Consequence ⇒ unprofitable subscription business. More cash burn on acquisition. 

Solution ⇒ the first step to reducing churn is understanding the reason why your customer is cancelling. 

If the reason is (say) “too much stock” then this means they can’t find the right frequency. This reason will in-turn guide your retention strategy, possible solution being:

  1. Send Delay option in Upcoming Order Email (better than Skip or Pause)
  2. Change the subscription widget’s default frequency
  3. Educate customers on updating their frequency from the customer portal

This is just one example, but the first step is to understand the cancellation reason. Loop Analytics gives you a clear picture of this data every month and over the past 6 months.

Mistake #7 - Investing in outdated subscription software

Brands investing in outdated Shopify apps can face troubles like:

  1. Slow customer support: Hampers quick decision making 
  2. Non-native Shopify checkout: Customers have to make a separate account for subscriptions
  3. Bad customer portal: Customers find it difficult to manage their subscriptions and raise more tickets

Consequence ⇒ subscription management will be a hassle for you as much as for your customers

Solution ⇒ invest in a software that has the most advanced features to reduce churn and gamify subscriptions

Book a free demo to learn why Loop should be your next subscription app.