2023 Trends in Subscription Businesses (and What CX Leaders are Doing to Prepare)
The past few years have brought major changes for subscription-based ecommerce businesses. A global pandemic. Supply chain disruptions. Apple privacy changes. A war in the Ukraine. And more.
Whether you’re selling all-natural snacks, candles, or bespoke clothing, if you’re an ecommerce company relying on a subscription model, you’ve felt the impact.
When shelter-in-place orders were first issued, many consumers tightened their spending. However, as society’s normal routines seemed like they might be upended indefinitely, many consumers found subscription ecommerce solutions to be an incredible convenience. As the pandemic dragged on, an increased focus on things like self-care and mental health also led to a strong desire for small luxuries and things to look forward to. People needed ways to treat themselves.
Despite the macro-challenges, these factors meant many subscription ecommerce businesses saw a surge in growth throughout the COVID pandemic. Recurly’s research showed positive growth rates in subscription ecommerce throughout the bulk of 2020. This trend carried over into the years that followed.
As a new year kicks off, we wondered whether subscription ecommerce businesses should expect to see this wave of growth continue. Given newer challenges—like 2022’s high inflation—would 2023 bring more of the same?
To answer this question, we went to the experts. We asked them questions like:
- What challenges did they see on the horizon in 2023?
- What trends were shaping their strategy?
- How were they responding and preparing their teams?
Our conversations with CX leaders in these subscription ecommerce companies revealed a number of trends that leaders in the space need to take into account to succeed in 2023 (and beyond).
1. Customer loyalty is getting harder to win
The first major trend these experts called out was that 2023 is an interesting time for subscription-based ecommerce businesses. Customer loyalty is important for every brand, but it’s critical when subscriptions are a primary source of revenue.
But what happens to subscriptions during periods of economic uncertainty? Oftentimes, if they’re not seen as essential enough to the consumer, they get canceled.
Morgan Hurley, Manager of B2B and Consumer Experience for Perfect Snacks, suspects that the convenience of subscription models will continue to drive customer loyalty in 2023. “Having one less thing to think about is a big deal,” she summarized. “For many consumers, the convenience of getting a subscription—without having to go to the store or remember to place another order—is primary. I think that will grow in 2023.” At the same time, she recognized that with inflation and shrinking budgets, some customers will opt to cancel their subscriptions and only buy products when they’re really sure they need them.
For Perfect Snacks, the key to navigating this uncertainty is to focus on building more customer connections in order to drive loyalty. “Consumers want to feel like they’re part of the brands they’re buying from,” said Morgan. “That dynamic isn’t going to go away. When brands can find ways to create more of that loyalty—like offering meaningful incentives—it fulfills that desire and it shows that those brands value their customers.”
Take a “both-and” approach where possible. “Selling wholesale to grocery stores is a good example,” she said. “It gives consumers an opportunity to taste your product, which eventually drives them towards becoming subscription customers. And honestly, consumers also just love having multiple options.”
2. Pricing dilemmas
Many brands will face pricing dilemmas in 2023. These dilemmas aren’t necessarily new—because they’re being generated by forces that have been growing for the past few years—but for some brands, 2023 may be an inflection point.
“The price of ingredients and packaging have continued to go up. It started with COVID, but it continued throughout the fall of 2022 without letting up,” said Alison Mooradian, VP of Marketing and Support at Wildgrain. “In 2023, a lot of ecommerce businesses are going to have to decide if it’s time to increase their own pricing or keep absorbing those price increases.”
For subscription businesses, price increases are a tricky topic. There are multiple ways to go about it:
- Increase the subscription price for everyone. This has the quickest impact on your bottom line, but also brings a much higher risk of subscribers churning—a risk which is often difficult to quantify.
- Increase the subscription price for new subscribers, but maintain the old price for existing subscribers. This approach dramatically reduces the risk of subscriber churn, but it usually doesn’t have a noticeable impact on your profit margins in the short-term. It also introduces more complexity, because then you’re stuck managing subscribers at different price points.
Setting a pricing strategy is just the first step. “Think about how to craft the message to your consumers,” says Hannah Steiman, President and Chief Strategy Officer of Peak Support, a CX outsourcing company with a specialty in ecommerce.
“Explain what you’re doing – and, even more importantly, why you have to do it. Customers are often willing to absorb price increases for brands they love, but it helps if they understand the forces behind it.”
3.Relief from lingering supply chain issues
While navigating the right approach to rising costs is challenging, our experts also highlighted some good news for ecommerce companies.
Bennett Byerley, cofounder and COO at Verb Energy, predicted that 2023 will bring some improvements to the lingering supply chain issues caused by COVID. “This is great news for companies,” he said, “especially for those of us in the food and beverage space, because it means significantly less disruption for our customers.”
Pandemic-induced supply chain disruptions have been a major challenge for ecommerce business—and they’re not the kind of thing that anyone can solve overnight. These disruptions have led to hard choices that directly affect revenue, such as how much inventory a company can stock and which products to prioritize.
If 2023 truly does bring a smoother supply chain for everyone, subscription ecommerce businesses everywhere will breathe a major sigh of relief.
4.Investing in technology to streamline operations
When costs go through the roof, companies look to streamline and operate more efficiently. With higher-than-normal inflation as we start 2023, several experts highlighted the need to get strategic with technology and automation.
Antonio King, former Head of Support at Veho, suggested that the key to doing so is investing in the right systems and technology. His tip for organizations investing in new technology or making big changes is to make sure your systems work better than they ever have before making the change. “Otherwise, you create an experience that’s sour for users and really hard to come out of.”
Artificial intelligence is another area of technology that’s likely to be a huge focus in 2023. Generative AI tools like ChatGPT have taken the tech world by storm in the last few months, and it’s already having an impact.
“The advancement of technologies like GPT-3, along with the challenging economic climate, is likely to lead to increased awareness and adoption of AI in improving and scaling customer service in 2023,” said Sharad Khandelwal, CEO and founder of SentiSum.
“I think ChatGPT’s introduction has softened the perspective and reshaped a lot of peoples’ understanding of AI,” said Antionio. “In 2023, I’d expect a lot more companies who aren’t as afraid to try AI as they were before.”
Ebony Hope, CX Team Lead at Honeylove, was also excited about the potential growth of AI in CX throughout 2023. ” I’m excited about the impact AI will have on CX with the emergence of tools like Chat GPT. I can totally see it automating and streamlining some operational processes, reducing handle time and improving efficiency. On the other hand, a large part of support is the human touch. Companies will have to be smart about how they implement AI, making sure it enhances the customer experience rather than causing more friction. Maintaining a delicate balance between customer centricity and increased productivity will be paramount. I think there will definitely be an uptick in applying AI to CX functions. I can’t wait to see the unique and creative ways that this technology manifests and evolves in 2023!”
Automation and AI has been improving for years, but it feels like 2023 will be the year it finally takes center stage across much of the world. CX leaders at subscription ecommerce companies should find ways to embrace the efficiencies it brings, without losing sight of the value of a personalized and human customer experience.
5. Google moving away from cookies
It’s been talked about for years, but it looks like Google may finally be phasing out cookies within Chrome in 2024. This move forces a major pivot for subscription ecommerce businesses, which typically rely heavily on targeted paid advertising to drive growth.
In a nutshell, targeting and advertising cookies are used to gather information on users, which then enable advertisers to show relevant ads across many different websites. Alison from Wildgrain calls out why this is such a big deal for ecommerce subscription businesses:
“Cookies are the way that brands can track which customer acquisition channels are working. Different cookies work differently, but generally speaking they’re the main way ecommerce brands track where new customers are coming from,” she said. “Since Google’s going to remove all that, it means subscription and ecommerce brands need to completely rethink how they attribute which channels new customers are being acquired through.”
Cookies have been the default means of targeting marketing spend for twenty years, and it’s tough to overstate how big of a shift this is. And while the Google change isn’t slated to occur until 2024, 2023 is the time for subscription businesses to experiment and identify their new attribution models. Those who don’t will struggle to grow once the change occurs, and will likely burn significant amounts of their marketing budget with little to show for it.
According to Alison, “It’s a very daunting and complicated problem, and everyone needs to start working on it ASAP.”
One possible strategy: expand affiliate and influencer marketing programs, says Hannah Steiman of Peak Support. “When people think of influencer marketing, they often think of Kim Kardashian. But we’ve worked with a lot of brands who don’t have Kardashian-level budgets, and still see significant ROI from influencer marketing programs,” Hannah said.
While the second half of 2024 may seem like it’s far away, it’s imperative for subscription ecommerce companies to get to know their customers more than ever in 2023. Now is the time to create or update buyer personas and to invest in customer and audience research—because the more you know your ideal customers, the easier it will be to connect with them in a post-cookie world.
6. A continued need to invest in self-service
Subscription ecommerce businesses often face major seasonality. These peak seasons usually bring a massive upswell in customer support ticket volume, making it a huge challenge to respond to customers quickly.
One example of this is Wildgrain, and that’s why investing in self-service will be a high priority throughout 2023.
“We consistently see members emailing our support team about things they can easily do within their account,” says Alison. “It’s normally not a big issue, but during peak seasons when the support queue gets backed up and response times slow down, it can lead to some big missed opportunities.”
For example, they’ve seen situations where customers email customer support to cancel an order, even though they can quickly do that within their account dashboard. If the order ships before the support team gets to the ticket, Wildgrain then typically has to eat the cost of that order
“Another reason self-service is so important for us is that as a subscription brand, there’s typically a strong correlation between how engaged someone is in managing their account and retention,” says Alison. “We want an engaged customer base that sticks around for a long time.”
As Alison highlights, investing in customer experience and self-service is one key to overcoming the customer loyalty challenges referenced above.
7. Leveraging outsourced help to grow and operate more efficiently
If 2023 had an official label, at this point the obvious choice might be to call it “the year of economic uncertainty.”
The U.S. economy hasn’t experienced this level of uncertainty since 2008, and while we’re all hoping it won’t get that bad, even top economists seem to disagree on what companies should expect.
With uncertainty comes tighter budgets. We’ve seen it in widespread layoffs, hiring freezes, and budget cuts—just check your LinkedIn feed. But cutting customer service budgets can backfire, because when your customer service slips it leads to decreased customer loyalty and increased churn. Outsourcing is a good solution for some subscription ecommerce companies trying to navigate these waters.
Antonio from Veho cited Frontier Airlines’ recent choice to end phone support as an example of the tough choices companies are having to make. “This sometimes brings hard decisions,” he said, “The jury’s still out on whether that ends up working well for them, but it shouldn’t be a surprise if we see other organizations making big shifts like this in 2023.”
“A lot of CX teams have a mandate to maintain service levels, even with budget and staffing cutbacks,” says Hannah from Peak Support. “Outsourcing can help companies continue to thrive, despite economic uncertainty. It’s a cost-effective way to quickly access expert-level talent, ensuring your customers still receive the level of service they expect.”
She would know: Peak Support offers outsourced CX, tech support, marketing, and back-office support, with teams in the U.S., the Philippines, and Colombia.
Many of the subscription ecommerce companies we talked to leverage outsourcing in some capacity, whether it’s to supplement in-house staff or to handle entire functions (like customer service).
8. Creating personalized and engaging experiences
Although it might seem at odds with self-service, the importance of a personalized customer experience in 2023 was a consistent theme from contributors.
“For us, customer experience is more than support or sales—it’s about connecting with our customers in a personal, friendly, and authentic way,” said Bennett at Verb. “It’s like an extension of our products—delivering real energy for people. We think we can energize customers through how we treat and value them as people.”
Perfect Snacks is a family-owned business, originally founded by 13 siblings based on their dad’s original recipe. Nearly twenty years later, that family ethos remains strong throughout the company, shaping how they interact with customers. “We think it’s important to be authentic and empathetic in every interaction,” Morgan described. “That’s why we’re doubling down on creating personal experiences for customers in 2023.”
Wildgrain’s 2023 focus on self-service doesn’t exclude personalization. “As we create resources, we’re planning to tailor them to meet different members’ preferences and learning styles,” shared Alison. “We want to provide written instructions, but we’re also planning to do things like video tutorials that highlight what members can do within their accounts.”
Bennett summed up the rationale for this focus on personalization best: “Customer expectations have evolved. Customers expect a better experience from brands. Take text as an example—it’s no longer cool just to text with customers. Now it has to be a seamless experience that feels like texting with a friend. We’ve seen great customer response to our ability to engage in such a human way, and we’re going to keep leaning into that.”
All of these leaders recognized that technology is vital for scaling their businesses, but they also understood the importance of leveraging technology in ways that creates meaningful and authentic experiences for consumers.
Subscription ecommerce brands that want to grow in 2023 and beyond would do well to emulate their examples.