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Subscription services are attracting new types of shoppers–here's who they are and how to reach them

Allan Stormon
Senior Content Marketing Manager

Subscription services have cemented their positions in the retail sector, offering consumers a new way to try and buy goods on a regular basis. No corner of the market has been spared, as these services cater to a wide range of categories including toiletries and baby goods, food and fashion, even pet food and supplies.

Led by venture-backed brands such as Blue Apron, Birchbox, Dollar Shave Club, and Ipsy, subscription services have disrupted the traditional retail model and, in doing so, have created a new breed of shopper. And contrary to popular belief, these buyers aren’t just millennials. In fact, they’re a highly diverse set of consumers.

Subscription box services offer a wide range of products and services. Source: eMarketer

In this post, we’ll take a deep dive into the subscription services industry, explore who these new shoppers are, and reveal what marketers need to know about them. Using data from a dozen confidential brands in the subscription services industry, we’ll describe five clusters of audiences and share recommendations on how to reach each segment.

Subscription services 101: Market size, categories, challenges

The first big splash in the e-commerce subscription services industry came with the launch of Birchbox in 2010. Since then, the sector has experienced rapid growth as consumer adoption has increased. McKinsey & Company reveals that between 2013 and 2018, the subscription services market grew 100 percent every year, and sales for the largest retailers grew from $57 million in 2011 to $2.6 billion in 2016.

There are three general types of subscriptions that the majority of these brands fall into:

  1. Replenishment: The consumer value here is to save time and money by receiving the same or similar products on a regular basis to replenish items already used. Most notable brands: Dollar Shave Club, Amazon Subscribe & Save.

  2. Curation: Curation subscription boxes aim to surprise consumers with product variety and introduce them to new product lines. Most notable brands: Birchbox, Blue Apron.

  3. Access: These subscription services provide exclusive access to their members, with additional perks and deals. Most notable brands: JustFab, NatureBox.

Despite rapid growth, there are significant challenges facing subscription services brands. High marketing costs needed to drive awareness and new customer acquisitions in an increasingly competitive environment are par for the course, as is the ongoing need to address customer churn. And with competition heating up, these challenges will continue to be a force for new and incumbent brands.

For brands looking to solidify their positions in the market or increase their market share, a deeper understanding of the ideal subscription box customer is paramount. Below, we’ll explore the different types of people who sign up for and buy subscription services.

 

Who’s signing up for subscription services: A deep dive into audience segments and clusters

Oracle Data Cloud works with several major subscription retail brands and has access to exclusive data that allows us to accurately segment audiences and identify the unique traits of these new shoppers.

 

Methodology: Creating the subscription services audience clusters

Due to confidentiality concerns, we can’t reveal the subscription retail brands we work with, but for transparency purposes, we can reveal the process of how these audience clusters were made.

Clustering and segmenting subscription-based audiences follows this four-step process:

  1. Select a dozen subscription services brands.

  2. Use clustering on demographic variables to distribute the households into segments that have similar attributes.

  3. Define segments by their demographic attributes, online behaviors, and purchase behaviors.

  4. Describe each segment by evaluating observable spending behaviors within the subscription industry.

A combination of 1st party purchase data, 3rd party purchase data, demographics, and online behaviors enables a comprehensive view of the subscription box shopper. The details for each dataset used are listed below:

 

1st party purchase data:

Subscription services customers making a purchase within a rolling two-year window. Includes:

  • 6.5 million households

  • 14.6 million orders/transactions

  • $719 million in total sales

  • 2.3 orders per household (signifying the high rate of customer trials in subscription services and low retention)

  • $111 average spend per household

  • $49 average order value

 

3rd party purchase data:

  • Offline purchase activity from 1,500+ retailers appended

  • Retail and CPG purchase behavior appended

  • Share of wallet

  • Propensity to spend

 

Demographics:

Over 400+ demo and geographic data used, including: 

  • Age

  • Affluence

  • Family dimension

  • Location

Online behaviors:

Multiple online signals used, including:

  • Cookie recency

  • Website visits

  • Online card purchases

 

Subscription services and the new shopper: Who’s buying and how to reach them

Overall, the audience has an above-average net worth, with the exception of millennials, who are working their way out of debt and are living in the suburbs and major metro areas. The moms are typically making the buying decisions in the household. These buyers are socially and environmentally conscious and are heavy online shoppers.

Below are the five audience clusters that reveal who signs up and buys subscription services today, and what you need to know about each customer group to reach them in your next campaign. 

 

Millennials No Kids – 30% of subscription users and 29% of total sales

Who are they?

  • Heads of household in their 30s

  • No children present in the household

  • Living in cities

  • Negative net worth

How do you reach consumers like them?

We recommend a custom segment including the following audiences: 

  • Buy styles: Organic

  • Business travelers

  • Young and hip lifestyle

  • Heavy online restaurant ordering

  • Fashionistas

  • First-time homeowners

  • New movers + living in apartments

And plan your campaign around these content interests:

Finance and Credit, Exercise and Fitness, Food and Drink, Predicts Segment for Breweries and Distilleries, Fashion, Coffee and Tea, Nightlife

 

Empty Nesters – 24% of subscription users and 22% of total sales

Who are they?

  • Heads of household in their 60s

  • No children present in the household

  • Living in cities and suburbs

  • Household income: $150K–$200K

How do you reach consumers like them?

We recommend a custom segment including the following audiences: 

  • Foodies

  • Heavy purchasers of Dining

  • New movers

  • Shopping enthusiasts

  • ODC buyer score: Heavy buyers

And plan your campaign around these content interests: 

Health, Food and Cuisine, Charity and Philanthropy, Arts, Cruise Travel

 

Younger Families – 23% of subscription users and 21% of total sales

Who are they?

  • Heads of household in their late 30s

  • Parents of preschool and grade-school kids

  • Living in cities and suburbs

  • Net worth: $150K–$750K

How do you reach consumers like them?

We recommend a custom segment including the following audiences:

  • Big-city moms

  • Fit moms

  • New parents

  • Soccer moms

  • Heavy TV watchers; watches cartoons and kids’ shows

  • Buys children’s cereals and foods

And plan your campaign around these content interests:

Arts and Crafts, Local Activities, Family Holiday content, Summer Fun, Holiday content, Holiday Travel

 

Established Families – 12% of subscription users and 12% of total sales

Who are they?

  • Heads of household in their late 40s

  • Parents of high school kids

  • Living in cities and suburbs

  • Household Income: $250K–$500K

How do you reach consumers like them?

We recommend a custom segment including the following audiences: 

  • Trendy moms

  • Moms of high school kids

  • Green moms

  • Fresh and healthy

And plan your campaign around these content interests:

Back to School, Sports and Athletics, Movies, Education, Family Travel, Video Games

 

Affluent – 10% of subscription users and 17% of total sales

Who are they?

  • Heads of household in their 40s and 50s

  • No children present in the household

  • Living in the suburbs

  • Household income: $300K+

How do you reach consumers like them?

We recommend a custom segment including the following audiences: 

  • Discretionary-income shoppers

  • Corporate executives

  • Green consumers

  • Home entertainers

  • ODC buyer score: Super buyers

  • High fashion and luxury shoppers

  • Drivers of luxury sedans

And plan your campaign around these content interests:

Travel, Politics, Business and Economics, Golf

 

Precision, personalization, and creativity are key to reaching subscription shoppers

As this market and its audience continue to mature, the need for personalization will become increasingly important. Growth is still expected, with more retailers and verticals exploring direct-to-consumer subscription services of their own. But standing out in such a crowded space won’t be easy. Marketers will need to be precise with their audience strategies and continually raise the bar creatively to identify and reach their ideal buyers.

The aforementioned audience clusters and personas put you in the driver’s seat for your next campaign—with some of the best, most accurate insights on these new breeds of shoppers and how you can reach them. Use these audiences in your next campaign, and let us know how they perform by leaving a comment below.

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