Box Nation: Better Subscription Business Marketing with AI

Box Nation: Better Subscription Business Marketing with AI

People's lives are increasingly being simplified by a convenient box that just appears on their doorstep every month. That convenience is underscored by the fact that digital subscription services like Blue Apron, Dollar Shave Club, and Birchbox continue to grow at a rapid pace — 890 percent over the past five years. This growth is not surprising. After all, the appeal of having everything from the perfect fall wardrobe to a week's worth of groceries show-up at your doorstep every month is appealing to many consumers with busy schedules and limited time.

But revenues and customers aren't the only things skyrocketing for subscription services. The amount of data available for better targeting customers is a growing — and at times an untapped — resource.

Whether they know it or not, the massive data flow generated by the subscription-based business model gives sellers a huge advantage when it comes to knowing what their customers want. Most companies would also benefit from using machine learning technology to help them get the most out of that data.

“Machine learning is a key to personalized recommendations and improves cross-selling and up-selling opportunities,"explains data science consultant Arthur Haponik. “Machine learning algorithms significantly improve your offer personalization," he says. "Thanks to data-driven recommendations, customers will get the right offers at the right time, and, therefore, purchase more products."

Where machine learning can have a significant impact is in helping companies make better use of sales data to reduce the time and effort it takes to minimize customer churn, increase customer retention via targeted up-selling and cross-selling, and attract more customers based on product offerings. Subscription businesses can combine the benefits of massive customer data flow with AI and machine learning to create customer demand that results in yet another box to be delivered to their doorstep. And the best part is that you don't need to be a data scientist to use it.

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Avoiding Customer Churn

Motivating people to sign-up for a subscription-based service is only one part of the equation. Companies that rely on subscriptions need to do everything they can to minimize the loss of customers — also known as customer churn — in order to increase their recurring monthly revenue.

“Using AI, subscription-based businesses can predict customer turnover by assessing their propensity of risk to churn," says Gene Eun, product marketing lead at middle-office automation platform Apttus. “With machine learning, they can analyze in real-time, the factors associated with customer attrition such as service underutilization or customer satisfaction issues."

Companies also now offer more dynamic usage-based services that analyze the ebbs and flows of customer usage patterns to provide even better insights. A food delivery service like Blue Apron, for example, might use AI to analyze which customers are most likely to defect based on how many meals they have delivered regularly so that the company can focus their churn prevention efforts on the right segment.

By pinpointing a small, targeted list of potential defectors, subscription-based services can focus on retention marketing efforts, like email promotions and social media engagement. These tools not only help to reduce churn, they help reduce marketing costs. Some AI software — like Ki, can predict which customers are likely to cancel their subscriptions. That knowledge can help companies can more proactively address churn — before it happens.

Creating More Box People

“It's a simple equation: more customers = more revenue," observes Patrick Campbell, founder and CEO of subscription service pricing software company Profitwell. “Once you've improved your acquisition numbers, you can better offset the percentage of customers you lose to churn."

And what subscription-based businesses are now realizing is that the path towards increasing acquisition and minimizing churn can be accomplished by implementing AI software.

An example of companies using AI technologies to keep and gain new customers is the subscription-based meal service Plated, one of the leaders in using AI to grow their customer base with different product offerings. Plated currently employs a team of data scientists and AI experts to determine which recipes, ingredients, and delivery intervals are most likely to increase retention and growth based on the feedback they receive when they adjust their offers.

Because of AI tools today, data scientists aren't required to gain the same level of insights about customer likes and dislikes as they once did. Plated customers don't just get the whole enchilada, AI helps deliver them the perfect enchilada!

Give 'em More of What They Want

Another essential way that subscription-based companies can grow a company's recurring revenue is by helping it sell additional products and services to existing customers. A service like Birchbox, for example, offers a plethora of subscription beauty products from hair and makeup to skin and fragrance. Based on data analysis of current customers' product usage and digital footprint, AI can help determine which additional products are most likely to interest existing customers.

Using data analysis of current customer preferences, such as product usage and digital footprint, AI can identify patterns and produce insights into what additional products specific customers are most likely to buy, and how to target the marketing of those products.

Better understanding of data can benefit both marketing efforts and customer service teams. If a Birchbox customer calls for help with their makeup kit, for example, AI can be used to advise a service representative to up-sell a hair care subscription that will resonate with the buyer, too.

“Similarly, AI can be incorporated into digital commerce portals to increase cross-sell and up-sell benefits to maximize customers' self-service buying experience," adds Eun from Apttus.

Subscription-based sales model are growing thanks to the convenience and personalization they offer consumers. The amount of data generated by subscribers presents a huge opportunity. Companies can use AI to understand how to act on that data — reducing subscriber churn, growing their customer base, and increasing the amount of revenue per person with targeted offerings.

The morale of the story: Don't just give customers any old box. Use AI to help deliver the perfect box — over and over.

To learn more about how you can adopt AI into your strategies and supercharge your analysis, download the 4 Step Automation Digital Brochure.

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