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 (and 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 shorten the payback period on ad-spend and 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.
👉 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
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