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How to use auto-replenishment as your next subscription strategy

For many eCommerce professionals, a lot of time and marketing budget is spent on acquiring new customers to increase revenue. Granted, attracting new customers is important for your overall business success, but it’s equally important to convert new customers into repeat business. This channels your marketing efforts and resources into customer retention, which can actually be more profitable for your business.

According to a survey of 1,000 small businesses, more than half of annual revenues were generated from repeat customers. Additionally, those repeat customers were found to spend over two-thirds more than new customers.

Look at it this way: If you spend $25 to acquire a new customer who spends $100 one time, you’ve earned $75, and that customer has a $75 customer lifetime value with your business.

So, you spent $25 to earn $75. But if you spend another $25 to retain that customer, based on the statistics above, their next purchase may be worth $167, meaning their lifetime value has increased to $217.

We can talk all day about why return customers are critical to your business’s success. But first you need to learn how to convert customers into repeat buyers. One such strategy is employing a subscription model with auto-renewal.

What is a subscription model?

An eCommerce subscription model lets customers subscribe to products or services they need on a recurring basis. According to McKinsey & Company, 15% of online buyers have signed up for one or more subscription services, which is a lot considering that 2.14 billion people shop online today.

As a business owner, subscription eCommerce is a brilliant strategy that ensures the stability you need to scale and grow.

What is auto-replenishment?

Auto-replenishment is a type of subscription model that utilizes machine learning to help shoppers predict when they’re due to reorder products. An auto-replenishment model often recommends a timeline for replenishing an item — for example, your toothpaste — and allows the customer to set their subscription to auto-refill in X number of days, weeks, or months.

How does it work?

For consumers, auto-replenishment works as a “set and forget” method to ensure their favorite or most critical items are always well-stocked. When it comes to daily-use items they may need to refill suddenly, auto-replenishment is a great marketing and sales strategy to reduce the number of things your customers has to keep track of.

For a business, auto-replenishment helps you better manage your inventory cycles. This gives you peace of mind knowing you’ll have repeat business with your customer, increasing their lifetime value and your revenue.

Behind the scenes, auto-replenishment relies on a set of algorithms driven by machine learning. The machine captures information about how regularly customers reorder an item and then learns what the average replenishment schedules are. From there, the algorithm can recommend or suggest auto-replenishment timelines based on real-world customer behavior.

Auto-replenishment as a marketing and sales strategy

In today’s busy world, finding ways to differentiate your product that capture consumers’ attention can be challenging. An auto-replenishment model is an excellent way to position your eCommerce business to current and potential customers.

The greatest value proposition of auto-replenishment lies in the recommendations for reordering timelines and the convenience of putting that on autopilot. However, you can sweeten the deal further in your messaging and offers to entice customers to sign up for this subscription type.

Offering subscription-based discounts when you sign up for auto-replenish

When it comes to frequently used products, receiving an ongoing discount can add up to major savings for consumers. Many merchants offer discounts ranging from 15% to 20% for auto-replenishment, which allows customers to save on their preferred products without worrying about running out.

You can set your auto-replenish discount at a flat rate, or you can offer increasing discounts after multiple replenishment dates to further incentivize customers to continue the subscription.

The importance of flexibility in auto-replenishment plans

If you offer an auto-replenishment model to customers, it’s imperative you include flexibility to accommodate individual customer needs. If your data suggests the majority of your customers have to reorder toilet paper every six weeks, you might provide options to schedule auto-replenishment for every four, six, eight, or ten weeks to accommodate both large and small families.

Flexible options for auto-replenishment enable your customers to choose what’s best for them to provide a convenient and customized experience.

Examples of auto-replenishment in retail

Amazon Subscribe & Save

Amazon Subscribe & Save gives customers free standard shipping on auto-deliveries and the option to schedule deliveries while getting a discount. This service is usually for household goods and consumer packaged goods (CPGs). Eligible products can even include greater discounts after reaching a predetermined number of deliveries.

Il Makiage

Il Makiage is a makeup company that offers auto-replenishment on many of its products. Customers can choose to have their orders replenished as often as every month or as infrequently as every six months. When customers subscribe to the auto-replenishment model, they save 10% on their auto-replenish orders and an additional 20% on anything extra they add to their box at each shipment date.

Dollar Shave Club

Dollar Shave Club (DSC) could be hailed as the gold standard in auto-replenishment models for eCommerce businesses. In fact, it’s their entire business model. Like Il Makiage, DSC allows subscribers to save money when they add items to their regular auto-replenishment box, but their discounted price is always available to customers.

Meal plans and food boxes

Food subscription companies like HelloFresh, Chefs Plate, and Good Food have capitalized on the basic need to eat by offering convenient, to-your-door deliveries every week. These auto-send boxes let customers customize their weekly deliveries or cancel by a certain date; otherwise, they have to live with (and eat) the consequences if they forget. These boxes often have discounts for your first box before returning to full price for the remainder of the subscription.

Stitch Fix

Stitch Fix is a clothing subscription company with selections for men, women, and children. Users take a style quiz and sign up for regular clothing shipments based on style, fit, and price range, and shipments are constantly curated based on user feedback.

Why auto-replenishment works

It’s easy to look at auto-replenishment and think, “There’s no way it’ll work long-term,” and that’s not totally wrong. Customers will cancel their auto-replenishment subscriptions when the service isn’t great or if they no longer find it useful. But, when done right auto-replenishment works extremely well for several reasons.

Easy for customers to set and forget

Auto-replenishment allows customers to set their preferences, input their desired payment, and then leave it to the algorithm to ensure their products are shipped. “Set and forget” is a value proposition that appeals to busy consumers willing to pay for the convenience of removing another item from their to-do list.

According to McKinsey & Company, as many as 40% of customers who use subscription services will cancel within one year. However, Shopify found that replenishment business models tend to have higher long-term subscription rates — 45% of customers subscribe for at least one year. This is due in part to the nature of the products you typically see in auto-replenishment models (e.g., daily-use items versus curated subscription boxes).

“Set and forget” can also work in your favor if customers simply forget to skip or pause renewals.

You can count on repeat business

Auto-replenishment models mean you can count on repeat business month after month to help you grow your revenue and your business. This rapidly increases the ROI on acquiring those first-time customers who’ve signed up for auto-replenishment, making them more profitable.

Better manage and plan for inventory cycles

Auto-replenishment can help you better understand, manage, and plan for your inventory cycles by giving you advance insight into your upcoming month’s sales volume. Short of having a crystal ball, this is otherwise difficult to achieve.

You may even be able to turn this technology around to help YOU reorder based on your real-world auto-replenishment data so that you, too, can “set and forget.”

How to set up auto-replenishment

If you’re interested in creating an auto-replenishment model, it’s time to get cracking.

First, evaluate your product viability. If your product is oversaturated in the market, it can be difficult to enter said market. Do some research and see if there’s a need for your product and if auto-replenishment makes sense.

How to start a subscription business on Shopify

You can easily create a unique subscription model within Shopify while managing everything within the platform for additional convenience. Decide whether you want to start from scratch, build your own solution, or add a Shopify app to your store.

DIY Solutions

Shopify APIs and tools allow you to build new subscriptions directly within your Shopify Checkout. This is best for savvy merchants or teams with developers who are prepared to build from scratch. Here are some resources that might help:

Shopify Apps

Set up a subscription offering easily by installing one of Shopify’s subscription management apps. Simply install the app, set the necessary parameters, and away you go. Here are just a few of the apps you can choose from:

PayWhirl Recurring Payments. Create, manage, and sell subscriptions through Shopify’s native platform.

Awtomatic Subscriptions. The Awtomatic app (previously Bundle Subscriptions) lets you add subscription options to your products and is fully integrated with Shopify’s native checkout.

Bold Subscriptions. Bold lets you customize, manage, and scale a subscription business for enterprise.

Recharge Subscriptions. Launch and manage subscriptions for your Shopify store quickly and easily.

You can see a full list of Shopify subscription apps by searching “subscription” in the Shopify app store.

Auto-replenishment best practices

With auto-replenishment models, you can easily run the risk of missing out on customer engagement when customers take advantage of the convenient “set and forget” element. To avoid this and other issues, make sure you:

Send out email reminders

Remind customers their auto-replenishment is almost on the way around a week before their scheduled ship date. This helps remind them of their order and provides the opportunity to make any necessary changes.

Use this email as a touch point, a chance to cross/upsell, and a way to let your customers adjust their subscriptions to their preference.

Offer special discounts for add-ons

In your email, highlight any special discount offers you have for add-ons to their regular subscription renewal. For example, Il Makiage and Dollar Shave Club both give customers the opportunity to add extra items to their auto-replenishment orders at reduced rates and free shipping.

Provide options to skip or pause

Life sometimes gets in the way, which means your customers may not need their monthly or quarterly auto-replenishment.

By offering scheduling flexibility, you show your customers you care while avoiding a cancellation when a customer receives an auto-replenishment they didn’t need. Remember, customers want choice. Having the ability to skip a month or pause their subscription for a set amount of time allows them to make your auto-replenishment work for them.

Make it simple to cancel subscriptions too. If your customer finds auto-replenishment isn’t the right fit for them, they shouldn’t have to jump through hoops to stop their subscription.

Thank customers for repeated business

Always demonstrate your gratitude towards your customers. Make sure you say “thank you” at every opportunity — from sign-ups to reminder emails, shipping alert notices, and in the box itself. This helps with brand recall, builds up your buyer experience, and can even inspire social shares of your brand.

Wrapping up — Use auto-replenishment for your next subscription strategy

Surprising and delighting customers with new and exciting subscription boxes and gifts has grown in popularity over the years, but don’t let it overshadow the necessities. By providing auto-replenishment on common household items and CPGs, you can make it convenient for your buyers to continuously use your products without ever running out.

Providing auto-replenishment makes it easy for shoppers, and extends loyalty for brands.

Want to start scheduling auto-replenishments? Check out how MyFBAPrep can help manage your subscription logistics.

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