How personalized subscription models are changing the game

With personalized subscription models, customers enjoy greater ease, convenience, and flexibility while merchants experience consistent revenue and sustainable growth.
Deidre Olsen
June 25, 2024

In the 1860s, with the rise of industrialization, American families began moving to urban areas, where they had no space for their own cows. To quench their thirst, they turned to local dairy farmers who could deliver the product to their front doors. Thus, the milkman became a staple of daily life.

For more than a century, subscriptions have promised the regular, uninterrupted delivery of goods. In the 19th century, newspapers and magazines started to get dropped off at homes, enabling readers to have constant content to devour.

In exchange for a recurring fee, customers gain greater ease, convenience, and flexibility. For merchants, this offers more sustainable growth, enabling consistent revenue rather than relying on one-off purchases.

Nowadays, subscriptions are everywhere, offering people the ability to purchase everything from meal kits and vitamins to flowers and makeup. And it's not just physical products. People sign up for software memberships, whether to stream movies and series on Netflix or listen to music on Spotify.

Increasingly, consumers are seeking out personalization, meaning the ability to tailor their subscriptions to their specific preferences and usage. To keep up with demand, merchants are starting to offer customizable options, flexible management, and customer-centric add-ons.

From the paperboy to ecommerce: How subscriptions shifted from ownership to access

Subscriptions have been around for a long time, enabling merchants to have steady incomes and consumers to have regular deliveries. The earliest forms included milkmen and paperboys, offering people the ability to receive products on a recurring basis.

In the late 2000s, this commerce model shifted towards access. Rather than fighting over the last copy of the latest movie release at Blockbuster, consumers could stream them instantly on Netflix. Not only this, but people no longer had to house collections of physical copies in their homes. With the immediate availability of content at their fingertips, people flocked to sign up for memberships for on-demand entertainment.

The spirit of instant access has carried over to online shopping. Over the last decade, subscription boxes have exploded in popularity. Every month, or another recurring interval, consumers can try out new products, whether it's a lash-enhancing mascara or a bottle of artisan olive oil. This allows merchants to directly connect with customers rather than rely on a middleman or third party.

Subscriptions enable merchants to stay in touch with customers on an ongoing basis. In turn, this helps build an emotional connection between the two. The most loyal customers are encouraged to keep coming back for more. 

When merchants tap into customer data, they can continuously find new ways to improve the relationship through personalization. No matter if your products and services are physical, digital, or both, the options are endless when offered on a subscription basis.

The modern consumer expects a personal touch 

Let's say you're a regular at a local coffee shop. Every morning, you stop by on your way to work for an oat milk latte. Most days, you interact with the same barista. When they see you enter through the front door, they already know your order. Before you've even spoken, they're making your drink of choice.

It's not just the hot beverage that warms your heart; it's the personal touch. From the moment you walk in until you head out, the experience is completely personalized: the right roast, the right milk, the right temperature. It makes you want to come back over and over again. You're not just paying for great coffee but the overall service.

You're so inspired by the cafe that you decide to try brewing your own coffee at home. The next time you drop by, you express the idea to the barista. They suggest a couple of specific roasts based on your preferences. Since you're just getting started, they offer you a subscription: twice a month, you get the beans delivered directly to your door.

Over the next few months, you try out different roasts and find one you love. You change your subscription. Rather than getting a new roast every two weeks, you stick with one. But whenever you feel like switching it up, you know you can easily update, pause, skip, cancel, or modify your delivery. As time goes by, you receive new perks: discounted and complimentary drinks and products.

At every touchpoint across the customer journey, when people are made to feel special, it builds an emotional connection. Folks feel catered to when the entire experience is personalized. These days, such a scenario is no longer optional; it's essential for establishing brand loyalty. People are turned off by one-size-fits-all interactions.

Merchants are turning towards personalized subscription models for sustainable growth

Merchants are investing substantial time, resources, and energy into customer-centric, data-driven approaches to business. This is about more than bandwagoning onto the subscription trend; it is about making a dedicated effort to meet unmet needs and identify pain points. In turn, merchants are building the groundwork for long-term, sustainable growth.

The modern consumer is more interested in access to experiences than ownership of possessions. That's why, over the last decade, the subscription economy has grown by a staggering 435%, according to The Subscription Economy Index. This growth is expected to continue rapidly, reaching a market size of $1.5 trillion USD by 2025. There's no doubt about it: recurring commerce is here to stay.

Based on research from Subscription Service Statistics and Costs, the average consumer spends $133 USD a month on subscriptions, totaling about $1,600 USD a year. In turn, merchants are changing how they interact with customers, shifting towards more convenient, flexible, and personalized products and services. This change is having a positive impact on revenue streams.

There is no single definition of quality, as it can vary from business to business. For some merchants, it might be important to offer a great value-to-price ratio, while for others, customer service might be integral. With personalized subscription models, merchants can more easily gather valuable data about customer preferences and behaviors. Through data analysis, they can refine offerings, improve customer satisfaction, and increase retention rates.

As a result, personalization not only aligns with changing consumer preferences but also empowers merchants to curate their services for the specific preferences of individual subscribers. Merchants that offer high-quality, personalized subscription models differentiate themselves from their competitors by delivering unique value propositions that resonate with their target audiences.

As subscriptions are a form of recurring revenue, they bring predictability with them. Merchants can look forward to financial stability, enabling improved long-term planning and growth projections. Personalized subscription models offer a tailored experience for customers, making them feel seen, valued, and understood.

According to McKinsey, when merchants include personalization in their marketing efforts, this can reduce customer acquisition costs by upwards of 50%. Not only this, but revenues can be lifted by five to 15%, and marketing return on investment can be increased by 10 to 30%. Merchants with faster growth rates generate 40% more of their revenue from personalization compared to their slower-growing counterparts. Altogether, this improves performance and betters customer outcomes.

How Parfumado is championing the personalized subscription model

In 2017, a brother-sister duo, Martijn and Floor van Rooy, founded Parfumado, a perfume subscription service. The pair believed in the power of scents to evoke emotions and bring memories to life. However, there were few options available to personalize the experience of wearing different scents for different occasions and seasons. 

According to Technavio, the luxury perfume market is set to grow by $5.59 billion USD between 2024 and 2028 due to increased demand from Millennials. With each passing year, the market expands and the range of products diversifies. The Parfumado sample service was created to lower the threshold to access these products while making the perfume shopping experience enjoyable, simple, and personalized.

When customers sign up for a Parfumado subscription, powered by Firmhouse, they receive a new 8ml perfume each month. This bottle is enough for 30 days, or four sprays per day. Subscribers can choose from more than 550 perfumes and build a personalized perfume calendar. It is possible to pause or cancel the subscription at any time. Each bottle of perfume is 100% authentic, purchased from authorized suppliers or directly from the brands.

Customers cannot smell perfumes before they receive them. So, Parfumado committed itself to offering people perfume quizzes and the ability to contact customer service through social media platforms, email, and phone. From start to finish, the entire customer journey is personalized. This dedication has proven to be a winning combination.

Parfumado is now partnered with L’Oréal, Rituals, and LVMH, and recently secured €3.2 million in a pre-Series A funding round led by VC fund Borski Fund and Rabobank, bringing its total raised to €4.5 million. The merchant has set itself apart by championing innovative technology for customer profiling to personalize fragrance recommendations and enhance the customer experience.

We are building the future of personalized subscription models

Operating in a traditional industry, Parfumado initially faced resistance to its recurring commerce business. However, the merchant demonstrated that a subscription-based platform could facilitate sustainable growth, ultimately winning over brands and customers alike. 

In proving the viability of personalized subscription models, Parfumado has emerged as a truly innovative and disruptive player in the fragrance world. When merchants take a customer-centric, data-driven approach to business, the opportunities for success are unparalleled. 

At Firmhouse, we are shifting commerce for good. We love to help our merchants build, launch, and scale recurring commerce models. Together, we are laying the groundwork for a tomorrow in which personalization and growth go hand in hand.

Ready to get started with your own recurring commerce business? Book a personal demo today.

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