Retailers See Many Benefits From Recurring Revenue Programs

January 17, 2019

Marketing leaders typically spend more on acquisition rather than retention, but the results of a recent Ordergroove survey [download page] of more than 150 retail industry professionals may indicate a growing emphasis on winning repeat business: some 83% of respondents acknowledge that converting “one-and-done” customers to recurring ones is very important.

Of the many benefits gained from recurring revenue programs, the most commonly cited reason (67%) was that it resulted in greater revenue. In fact, the study found that 54% of retailers are expecting significant revenue growth from recurring streams this year, which is not a surprise given that a high proportion of subscription consumers see their services as “absolutely essential”.

Other named benefits of recurring revenue programs are greater profitability (61%), increased customer loyalty (55%) and greater revenue predictability (50%). Fewer than one-quarter (22%) of respondents selected cost saving from more accurate inventory forecasting as one of the benefits.

Gift Boxes Will Likely Increase in 2019

Subscription services for fast-moving consumer goods (FMCG) such as food, pet products, vitamins and shaving products are growing in popularity, with one-fifth of FMCG e-commerce orders now being part of a subscription. This current study found that 65% of retailers are currently offering subscription/auto-replenishment programs, with nearly one-quarter (22%) considering offering them sometime this year.

Gift box subscriptions such as Birchbox, FunFitFab and Ipsy are growing quickly. As a result, retailers are jumping on the bandwagon — while only 49% of the companies surveyed currently offer gift box subscriptions, another 30% are considering offering them in 2019.

Customer Satisfaction Increases with Recurring Revenue Programs

With cited themes such as greater convenience, repeat business, upselling, and better customer ratings, companies that offer subscription programs are also reporting increased levels of customer satisfaction. Almost half (49%) report that their customers are “significantly more satisfied” since implementing a recurring revenue program.

When asked to identify how their customer service improved, 57% claim they had seen an increase in overall net promoter score. The same percentage reported that internal metrics showed customer satisfaction increases, while a smaller percentage (50%) said they had anecdotally seen increased customer satisfaction.

To read more about recurring revenue programs, download the report here.

About the Data: Overgroove’s Retail 2019: The Year of the Recurring Revenue Model is comprised of survey findings from 152 retail industry respondents (C-level executives, Directors and Managers) from a mix of company sizes ranging from $100 million to more than $1 billion.

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