Loop introduces Prepaid Subscriptions 2.0

Product Update
Karan Chaudhary
Last Updated On:
January 24, 2023
5 Minutes

Loop is simplifying Prepaid Subscriptions for DTC brands by making them for flexible for subscribers and easier to manage for merchants. Earn an upfront cash-flow while giving subscribers higher discounts.

In Q1 2023, Loop is rolling out a more flexible, customised and easy way to start a prepaid subscriptions program on your store.

Prepaid subscriptions for merchant & customer

With a prepaid subscription, merchants take an upfront payment for several orders and the customer then receives that order regularly based on delivery frequency.

Prepaid subscriptions give merchants a higher cash-flow and certainty of future orders.

A prepaid commitment from customers helps with budgeting and logistics. If 6 months of revenue can be collected upfront, investments in inventory and other fixed costs are less risky. 

Not only do prepaid subscriptions offer business stability and predictable revenue forecasting, but they can increase customer value by 94%.

Issues with existing Prepaid Subscription apps

Current Shopify based prepaid subscription apps create multiple fulfillments at once and not separate orders. This leads to a lot of issues at both customer and merchant level:

1. Lack of flexibility for customers

Once the prepaid subscription starts, there is no option to skip, swap, pause or tweak the subscription. This is a rigid model where customers cannot make product level changes to the subscription and causes a lot of pain for loyal subscribers.

2. Fulfilment issues with 3PL

Issues with 3PL providers result in confusion. For example in a three order prepaid subscription, sometimes the buyer can receive three products at the same time instead of one.

3. No upcoming order notifications 

No order notifications are received for prepaid subscriptions which leads to a poor subscriber experience for both merchant and subscriber

Based on our detailed research and continuous discussion with a wide base of DTC merchants, Loop created an alternative Prepaid Subscription functionality that can widely benefit brands across multiple DTC industries.

Introducing Prepaid Subscription 2.0

Example of Prepaid subscription plans for Coffee Brands

Prepaid Subscriptions 2.0 solves for all of the above stated problems by creating multiple orders instead of fulfillments. This is how it works behind the scenes 

1. Introducing prepaid balance 

Prepaid balance is the money that the subscriber pays in advance and acts like a wallet for that particular subscription. Once your customer purchases the prepaid subscription, it is reflected in their customer portal as a prepaid balance. 

2. Flexibility to make changes to subscription order

Using our new prepaid functionality, both the customer and the merchant can flexibly skip, swap, delay or expedite the order or swap. 

3. Add one–time products

The prepaid balance can also be used to add one-time products. The money gets deducted from the prepaid balance itself.

4. Never miss an order notification

Customers timely receive an order notification whenever a new shipment is upcoming. We solved this by creating multiple orders instead of fulfillments.

5. Seamless fulfillments

Separate orders instead of separate fulfillments solves for any shipping confusion. Orders are always shipped separately.

6. Switch back from prepaid to auto-ship

If the prepaid model doesn’t work for the customer, they can switch back to the regular auto-ship subscription easily.

7. Handle prepaid cancellations seamlessly

If a customer wants to cancel an ongoing prepaid subscription, they will be eligible for a refund. Merchants have the option of either refunding the prepaid subscription or continuing the already billed orders. 

Prepaid 2.0 perfectly fits multiple industries

01. Reducing second order churn with upfront payments

Category: Most DTC industries face 2nd order churn problem

Solution:

It’s an industry wide problem where a lot of customers take advantage of subscription discounts and cancel their subscriptions just after the 1st order. 

By asking for payment of multiple orders upfront (payment of 3 orders instead of one), Prepaid 2.0 reduces second order churn.

02. Increasing average revenue with prescribed courses

Category: Beauty, supplements, fitness can benefit from prepaid courses

Solution:

Brands can improve their subscription retention and average revenue by asking customers to commit to the product with the help of a course. 

Customers often stop using products due to lack of results even before completing the prescribed course period. But with prepaid subscriptions, businesses can start a (say) 7-week course. 

They can even start their own community challenge and incentivise people to share the results of the course or routine on social media.

03. Improving adoption of prepaid with greater flexibility

Category: Coffee, Beverage, Child Care can benefit from improved prepaid flexibility

  1. Loyal customers who like the products but don't want to stick to specific items and want to try different products with every delivery. Coffee and beverage brands benefit from product swapping - Customers can try out different coffee variants.
  1. Customers subscribing for child care needs (milk powder, diapers, toys, puzzles) have a high stickiness but sometimes require flexibility of changing products.

Solution:

Our research shows that the major reason for the lesser adoption of prepaid subscriptions has been due lack of flexibility and the inability to make changes to the subscription once agreeing to a prepaid contract.

Swapping products in an ongoing prepaid subscription solves for both the above issues.

Popular prepaid subscriptions use-cases

01. Course based subscriptions

Category: Supplement and beauty brands

Use-Case: Supplement brands can start a course. Beauty brands can offer skincare routines. In both cases customers pay upfront for the entire duration.

There is a discount incentive attached to the prepaid subscription which incentivises customers.

Win for merchant: Merchant gets the entire payment upfront and confirms (on average) 3 upcoming orders.

Win for customer: While a monthly subscription may cost $10, opting for a 3-month prepaid subscription might cost only $25, and a 6-month prepaid subscription may cost $50 only.

02. Gift subscriptions

Category: Multiple - across beauty, skincare, and beverage industries 

Use-Case: Customers can gift a prepaid subscription to their friends & family where the subscription is paid full in advance and can be configured to auto-expire after a set number of orders.

Win for merchant: When a customer purchases a gift for someone else, they tend to commit to a longer term than they would for themselves. Source

Win for customer: Gift subscriptions are a really popular option during the holiday season.

Want to gain beta access to our Prepaid 2.0? 

Connect with our support team here