How subscription brands Babbel, BattlBox and ButcherBox are fighting for retention as people tighten their wallets
As economic concerns push people to cut back on unnecessary spending, subscription services are at risk of being included on the chopping block.
This has led executives at companies selling anything from mystery boxes to language learning services to especially think about how to retain existing customers over trying to attract new subscribers. Increased marketing costs have also made the acquisition of new members more pricey. The elevated focus on retention this year quickly emerged as a major theme on the first day of SubSummit, a subscriptions-focused e-commerce and retail conference, which began Wednesday in Dallas.
At the conference, executives at subscription brands told Modern Retail how they’re working to prove the value of their recurring services through new technology or marketing initiatives. Many aren’t new but carry a greater importance to subscription brands than in previous macroeconomic environments.
More pressure on retention
Joe Rohrlich, CEO of Recurly, a subscription management company that works with clients like Cinemark, Paramount+ and Twitch, said “retention is the new growth metric,” adding that investors especially are behind that pressure. “In a lot of ways, this is the whole promise of a subscription business anyway — that it’s bringing you into a longer-term, predictable revenue stream,” Rohrlich told Modern Retail.
Rohrlich said as the economy has slowed down, companies are especially focused on voluntary churn — customers unsubscribing from a service because they don’t see the value in it — rather than involuntary churn, when payments fail. Still, he said it’s possible customers may be more likely to cut an expensive family vacation or a big-ticket purchase over a less financially impactful $10-per-month subscription.
Customers over the past few years may also have become fatigued by the number of subscription services they’re part of — leading them to want to cancel and even turn to third-party services like Rocket Money that now offer to cancel subscriptions on their behalf. “The idea that a consumer would pay a third-party service to help them reduce their subscriptions, it’s just ironic, but it’s happening,” Julie Hansen, chief revenue officer and U.S. CEO of language learning service Babbel, said in an interview.
John Roman, CEO of BattlBox — which offers outdoors and survival gear through subscription boxes and a traditional online shop — said price increases for popular services like Amazon Prime and Netflix have also made it more difficult for customers to justify less essential subscriptions.
While the company still makes the majority of its revenue from subscriptions, it has shifted to focus more on one-time sales. That’s led to a decrease in the share of its revenue that comes from subscriptions from about 90% in 2020 to roughly 78% this year.
“There are edge-case consumers of ours, customers that could argue that we are a need. But the reality is, our subscription offering is a mystery box,” Roman said. “We’ve realized that in order to have sustainable growth, it’s not going to come from the subscription unless we change it exponentially.”
How subscription businesses are fighting churn
In trying to boost retention, executives will often point to how they’re adding new features to their memberships or personalizing marketing initiatives using AI technology that can send targeted messaging to individual users.
“You have more companies wanting to experiment with their subscription offers, like how they present those offers and how they test different packaging, pricing and bundling,” Rohrlich said. “You’re doing less of just the raw acquisition and [more of] growth at all costs.”
At Battlbox, Roman and his team have worked to provide additional value to subscribers such as a member-only part of the site called the BattlVault, which Roman said offers significant discounts on roughly 1,500 SKUs. Roman described it as like an online Costco, enticing members to stay on for the exclusive items. For example, the website says members can save 40% off on Fox Knives or 20% off Gerber outdoor gear.
Babbel’s Hansen said the company has been focused more on sending motivational reminders, customized based on a subscriber’s activity on the language learning app. That could include hints to subscribers about what they may learn in their next lesson.
“We have the basic tenet that engagement will yield retention, and I think that’s right, but we’ve never before thought about [retention] as proactively as we are,” Hansen said. She also said that the company is beginning to explore using AI to analyze data and “understand when people are losing interest or losing motivation, and help to motivate them more.”
Meat- and seafood-delivery service ButcherBox has an entire department dedicated to churn and retention. Its chief commercial officer, Reba Hatcher, said understanding value has been key to continuing to grow its sales this year despite lower consumer sentiment. She declined to share exact sales numbers, though in 2022, ButcherBox said it brought in more than $600 million in revenue.
“For us, it’s about doubling down on the discounts we can give, the loyalty program we can build and the product offerings we have, and doing what we’ve always done but at hyper speed,” Hatcher said in an interview, separate from SubSummit. The company just started its loyalty program, Sizzle Society, late last year. It offers ButcherBox credits and exclusive perks for certain tiers of members, such as a virtual Q&A series with its CEO and other benefits to those at the “executive chef” level.
Like Babbel, ButcherBox factors in individualized information into its messaging, like the kind of products they purchase or where they live, Hatcher said.
“We’ve done a lot of work on transforming from what we used to call our ‘monolith behavior,’ which meant that we would send out every email to every single customer with the same exact offer at the same exact time,” Hatcher said.