How Subscription Models are Redefining Customer Engagement in Retail

Photo by Artificial Photography on Unsplash

Happy Tuesday, y'all! I hope you had a wonderful weekend! While you are thinking about it, please hit the Like button, that will help this issue of Backstage Pass get more exposure on Substack. Thank you!

Did you know that the subscription-model market is absolutely booming? According to a McKinsey study, the e-commerce portion of the subscription-based market was valued at $120 Billion in 2023. Additionally, the global subscription market is projected to hit $1.5 Trillion by next year.

Today, let's look how retail companies are engaging customers via subscription-models, and also focus on how you apply similar concepts to grow your Substack.

The Rise of Subscription Models in Retail

Subscription models are not new. But what has changed is the way brands are leveraging this model to drive customer engagement and loyalty. In traditional retail, customers would purchase items as needed, often without a clear connection to the brand beyond the product itself. Subscription models flip that script by fostering long-term relationships with customers, giving brands consistent access to customer preferences and behaviors.

According to Zuora's Subscription Economy Index, companies with subscription-based models have grown nearly 5 times faster than those using more traditional models, particularly in retail and e-commerce sectors . This accelerated growth is largely due to the value consumers find in convenience, customization, and community—three factors that form the backbone of modern subscription offerings.

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Key Drivers of Customer Engagement in Subscription Models

1. Consistency and Convenience Subscription models ensure that customers receive products or services on a regular basis without the need to reorder, providing an element of convenience that customers can clearly see the value in. We've all had to make a special shopping trip to pick up that ONE item we forgot to get on the previous day's trip. Using a subscription model to purchase products we need regularly absolutely creates value that we can immediately see.

   Example: Dollar Shave Club, a pioneer in subscription-based retail, transformed the grooming industry by offering a convenient, affordable solution. By delivering razors and grooming products on a monthly basis, the brand solved a recurring problem (running out of razors) while simultaneously engaging customers with personalized recommendations. As a result, Dollar Shave Club grew into a billion-dollar company through customer loyalty and engagement . The convenience that DSC created over time resonates with customers, resulting in creating higher levels of trust, and later loyalty. Which also results in more frequent purchases, and at a higher level.

2. Personalization and Customization One of the strongest engagement drivers in subscription models is personalization. By collecting data over time, brands can provide tailored product offerings that evolve with each customer’s preferences and needs. Leveraged correctly, personalized services can make customers feel valued, while also creating another layer of convenience for the customer.

   Example: FabFitFun. This lifestyle subscription box offers members a curated selection of beauty, fitness, fashion, and wellness products, which can be customized based on personal preferences. New members take a quiz that captures their likes, dislikes, and interests, allowing FabFitFun to tailor boxes to each individual’s style. Members can choose some items themselves, while others are picked by FabFitFun based on preferences and purchase history, offering a balance of surprise and customization. This approach keeps customers engaged and excited for their next box, while creating a personal connection between the brand and the customer.

3. Community and Loyalty Subscription models also foster a sense of community among users. Whether it's through members-only perks, exclusive access to products, or brand engagement opportunities like forums and webinars, subscriptions create a deeper bond with customers. When consumers feel like they’re a part of something bigger than themselves, they’re more likely to stay loyal to a brand. And as we've talked about before many times on Backstage Pass, any time you can connect your passionate customers with each other, that's a good thing and one of the top drivers of long-term customer loyalty.

   Example: Blue Apron. Blue Apron effectively leverages community as part of its subscription service by fostering interaction and engagement among its subscribers. Through its Blue Apron Recipe Community, users can share their own culinary creations, exchange cooking tips, and participate in discussions about meal preparations. This platform allows customers to showcase their modifications and creative spins on recipes, which builds a sense of belonging and encourages members to inspire each other. Additionally, Blue Apron promotes engagement through social media, inviting subscribers to tag the brand in their cooking experiences, further enhancing community ties. By creating a space where customers can connect, share, and learn, Blue Apron strengthens customer loyalty and builds a stronger connection with customers.

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How Subscription Models Drive Financial Benefits

For brands, the benefits of subscription models extend beyond customer engagement. Subscriptions also provide more predictable and recurring revenue streams. Unlike one-off transactions, a subscription model locks in monthly or yearly payments, providing stability and opportunities to increase customer lifetime value (CLV). Additionally for the company, showing steady and predictable revenue helps attract investors at all levels from startups to publicly-traded companies. It's a bit part of the reason why so many companies are exploring offering subscriptions for their products and services when it makes sense to do so.

Research from McKinsey highlights that subscription models also reduce customer acquisition costs (CAC) in the long run. When customers are consistently engaged, brands spend less on marketing to reacquire them or remind them to return. The ongoing relationship also allows companies to upsell and cross-sell products, boosting revenue without needing to attract new customers constantly. Remember that reducing costs can often be just as important as increasing revenue.

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3 Tips for Substack Writers: How to Apply Subscription Concepts to Grow Your Audience

Now that we've covered how subscription models can work for businesses, let's examine some ways we can leverage these same concepts to grow our Substacks! There's three main areas we can focus on:

1. Offer Tiered Subscription Levels

By employing this strategy, you are offering readers a different experience and a different level of engagement with you. It also gives them different buying options. When I launched my Paid subscriptions, I gave a much bigger discount to yearly subscriptions versus monthly. This was done because I felt that readers could get more value from Backstage Pass if they had 12 months worth of useful content to apply to their own customer engagement and community-building efforts. So far it seems to be working, as all my subscribers have joined at the annual level.

Actionable Tip: Start by offering free content, then eventually launch more in-depth content to paid subscribers. In general, the rule of tell why in the free newsletter and how in the paid is a good one to follow. As for when is the ideal time to launch a paid version of your Substack? That one is a bit trickier, I launched the paid version of Backstage Pass after two months. It seems most writers wait a bit longer than that.

2. Personalize Content Based on Reader Preferences

Personalization and customization works in retail, it also works on Substack. Aggressively track the topics that are resonating with your audience, as well as the larger audience you want to reach. Keep an eye on trends on Substack and see which topics are resonating with others. The Explore tab helps here when reading Notes to not only expose you to new people to follow, but new ideas as well.

Actionable Tip: Figure out which topics are resonating with readers and work those areas into your content. For instance, in studying what's popular on Substack, I noticed two main trends: People here love to read good storytelling, and they love advice on how to grow their Substacks. I've adjusted my content as a result, I try to work in as many examples/stories as possible, and every month I give an update on my progress on Substack. The monthly Substack update posts are often the most popular post I write for the month.

3. Build a Community Around Your Newsletter

This one is easy in that anyone can do it, but few people are willing. A lot of community-building comes down to simply putting in the work. You have to engage directly with the people who are engaging with your content. Whenever I see someone Like or reply to a note or issue of Backstage Pass, I try to thank them, then go and read their content and Like as I can. I want to return the favor, and get a connection started. I think engaging with the people who are already engaging with your content is the best use of your time when it comes to community building.

Actionable Tip: So for Substack, you should always engage with the people who are already engaging with your content. I always say reward the behavior you want to encourage. I want more people to engage with my content, so when someone does, I make a point to acknowledge them and thank them. You can also do private chats just for subscribers, I have experimented a bit with that, and want to do more with it.

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The Future of Subscription Models in Retail (and Substack)

As consumer expectations for convenience and personalization continue to rise, subscription models are poised for further growth in retail and really in all industries where they are currently being used. Brands that build long-term relationships through regular engagement, tailored experiences, and community-building will emerge as the leaders in customer loyalty.

The same principles apply to Substack writers looking to build and monetize their audiences. By offering tiered subscriptions, personalizing content, and creating community-focused experiences, newsletter creators can foster sustained engagement and subscriber growth, as long as they are willing to put in the work.

The subscription model isn't just about transactions—it’s about relationships. Whether you’re selling razors, sneakers, or ideas, building a strong, ongoing connection with your audience is key to long-term success.

BTW if you are wanting more inspiration on growing your Substack, here's three writers who share what has worked for them, David, Veronica and Jana. A wealth of advice and information in each of these posts so please read them and follow each of them.

So that's it for this free issue of Backstage Pass. On Thursday, I'll take a deeper look at Bark Box and the subscription model they are using to drive an insane subscriber retention rate. Then one week from today Marketing and Movies returns with V for Vendetta! See you then, have a great day!

Mack