When you’re a small business in a big business world, the challenge of competing with the seemingly infinite resources of larger competitors can seem insurmountable.
Companies like Amazon, Walmart, and Target have long leveraged lower operating costs to deliver on exceedingly high customer expectations. Especially in e-commerce, where shipping costs and delivery times are front and center, companies with gargantuan buying power have set the bar high when it comes to getting products to consumers cost effectively in a matter of hours.
But what if your business, too, could consistently deliver an outstanding customer experience at an affordable cost, both to the customer and to your bottom line?
What if I told you that it didn’t have anything to do with auditing or negotiating your shipping contract (although, of course, that’s always a good idea)? What if it meant that customer expectations were no longer so hard to manage? What if it eliminated volatility in your shipping characteristics? What if you knew what to expect? What if it were theoretically easy?
The Benefits of a Subscription Service
Achieving all of this may be easier than you think if your business implements a subscription service. Subscription services are all the rage because they mitigate some of the supply chain’s biggest challenges. Customers know what to expect, and you know exactly when they expect it. When both on the same page, it’s a lot easier to keep costs under control.
And when you can keep costs under control, you can focus on your core business, which is what is going to create the outstanding customer experience in the first place.
Effective use of subscription services perpetuates customer satisfaction, provided your team’s core focus on vertical incentive alignment is well-targeted. In other words, if you are good at your core business, fulfilling subscriptions is as close as a business can get to auto-pilot.
Operationally, the business is provided certainty in expectations. As customers subscribe, you understand when they expect their product(s) well in advance, allowing you to alleviate some of the cost constraints associated with rising shipping costs or expensive premium carrier services. Better yet, a solid plan can allow you to make good use of your carrier’s cheapest economy services. The only caveat might be the value of your merchandise, which could make the cheapest national carrier services, UPS SurePost and FedEx SmartPost, less ideal. Still, a shift to ground services with either carrier could make costs more affordable in general while still providing end-to-end trackability and maintaining each carrier’s world-class reliability en route to the end customer.
Managing holiday demand is a key paint point for many shippers since day-to-day volatility is compounded by surges in demand. While the holidays are never going to be easy, they would be easier if there were a way to mitigate some of the unpredictability associated with the busy season. A well-oiled subscription service will simply need available bandwidth the handle greater capacity as new subscribers sign up before and during the holidays.
What this will allow a smaller shipper to do is be proactive rather than reactive when it matters most. If you know when the package needs to arrive months in advance, you have much more time to plan accordingly to deliver on customer expectations. The time allotment provides better lead times, more accurate forecasting, and all-around better efficiency, which should drive out costs, or at least optimize them, in other areas of the business as well.
Best of all, subscription services put companies in a relatively strong cash position since transactions often take place in advance of a more traditional point-of-sale transaction.
Amazon, as most of us know, is somewhat of a pioneer in the subscription model, and savvy shippers should look to its customer benefit proposition in order to verify the logic. When shopping on Amazon, many of the products you shop for regularly are discounted further when they are combined with other items in the form of a subscription.
Understanding why isn’t rocket science. Even Amazon could use some help every now and then understanding when their customers expect to run out of toilet paper.
Don’t Overthink It
The concept is simple: If I subscribe to your product, I am agreeing to your parameters. I’ll pay you on X date. In exchange, I will receive the contents of my subscription on Y date. Most likely, I don’t really care what happens in between if my subscription arrives as promised and there aren’t any hidden catches with the pricing (I’m looking at you, cable!)
In other words, we have a mutual understanding and I’m just waiting on you to wow me by providing whatever it is you provide. As a small(er) business, you now actually have an opportunity that large(r) businesses might find more challenging – personalization.
Your product or business should be more niche than giant corporate competitors, so you should have a bit more nuanced insight into what aligns me with your specific product. Additionally, you can begin to develop personas that I fit into that will give you insight into what I might like to try next. This boils down to a fundamental marketing analytics strategy, and the model doesn’t have to be overly sophisticated so long as the result generates a profit for your business.
Subscription-based services don’t need to be the entire business model, but companies – especially smaller ones that are looking to compete against larger competitors with vastly broader resources – are making a mistake if they fail to at least consider this promising new trend.
Smart executives should think critically about the what they offer and leverage the talent within their organizations to find the right fit. If a chunk of your current business – whether 10%, 50%, or all of it – can basically be automated through subscribers, your core team can allocate more of its time and energy to making the overall business even more attractive to current and potential customers.
The exercise can condense your business in a sense, making it more predictable and efficient; two things that are vital to scalability and, more importantly, delivering a memorable customer experience.
Brandon Staton is an MBA candidate at The University of North Carolina Kenan-Flagler Business School and President and CEO of Shipmint, Inc., which helps corporate decision makers quickly connect with the industry’s top shipping consultants to save time and money.
This article originally appeared in the July/August, 2019issue of PARCEL.