Using research to identify the ideal customer for a subscription based business
Is your current customer base the audience with the greatest revenue potential, or the one you find easiest to market to?
That's a challenging question.
A company's customers may not always be the ideal ones. In the case of a subscription-based business, loyal customers tend to be more sustainable compared to customers who generate high-ticket but short-term growth.
FFS is a market leader in the subscription razors sector. Initial research found that the client's customer base consists mainly of
Research is about asking the right questions.
So we asked ourselves this: Is the audience described above the optimal one for the client?
Are customers in their 30s attracted to the company because they use these products more than other age groups?
Or are the sales and marketing channels attracting a certain type of customer, irrespective of age?
Attracting certain customers is important, but not all customers have the same long-term value or opportunities for cross-selling.
For instance, numerous companies view young families as a valuable target audience because becoming parents often results in higher consumer spending. You are purchasing for yourself AND your newborn(s).
The research aimed to identify which age groups are most likely to purchase beauty products on a subscription basis, and which specific products are preferred by different age groups.
The research suggested the likelihood of purchasing razors via subscription declines with age and younger participants report a greater willingness to spend on subscription beauty products.
As seen in the below graph, the group past their mid-thirties has subscription rates 50% less than younger audiences.
Before this research, it was unclear why the client's audience consisted mostly of individuals in their mid-30s.
A quick glance at the above descending bar graphs in red, green and yellow show the current mid-30s customers decreasing their product usage over time.
How can we be sure that the findings were not simply because younger people are more likely to subscribe to healthy beauty products in general (AKA ‘cohort effect’)?
We know this because the subscription rates for other similar products, such as dental care and vitamins, were the same across different age groups – see below.
Younger audiences have a greater lifetime value as they tend to use these products for a longer period. This is likely due to specific marketing channels, messaging, and content that resonate more effectively with this demographic. Even though these customers may not have the highest initial sales value.
With the results of a well-designed survey, the company can now allocate marketing budgets towards audiences that will provide a higher return on investment, as they are more likely to use the products for a longer period of time.
If you put customer needs at the heart of what you do, you won't go far wrong at winning more of them and keep the competition at bay
Divide & Conquer
By recognising the differences between customers you are going to increase their satisfaction and streamline the delivery of your product or service
A new partnership with a client calls for one of our programmes. This is how we work best, getting right under the bonnet from day one. Take a look at our 'Programmes' page to find out what they entail and see which is the best fit for you.
The cost of not doing it.
Past experiences have taught us that when your growth plan isn't built on data, you miss chances, waste resources, and leave your customers unhappy.