The psychology of subscriptions and how to foster customer loyalty

Customer loyalty is like gold dust in today’s volatile economic landscape. With inflation reaching decades-high levels, customers are adjusting their buying habits and have no qualms about switching to more cost-effective brands to get the deals and benefits that matter to them. 

Price isn’t the only deciding factor for consumers. The ongoing value exchange makes a brand’s relationship with customers unique. If brands can provide meaningful offers, time and time again, that feel relevant and personalized to the individual customer’s needs, customers will reward you with their loyalty.

Inspire joy with every brand interaction

Loyalty programs and subscriptions are two vital tools in customer-centric organizations’ toolkits. Their superpower lies in providing customers with a continuous touchpoint while providing brands with rich data on customers’ buying habits and use of their products or services. 

Over time, as you learn more about your customers’ preferences, you can personalize your offerings to strengthen these existing relationships and use the insights to fine-tune your retention strategies and win the long-term loyalty of newer members or subscribers. 

So, how do subscriptions and loyalty programs create this powerful effect on customer retention? Through the power of affinity, convenience, and (you guessed it!) value. They do 6 things really well:

1. Create emotional connections. You can recognize a customer’s long-standing status as a member or celebrate certain milestones with your brand, creating an environment where customers feel valued and appreciated.
   
2. Foster a sense of community. With subscription programs, your customers don’t just have a relationship with you – they also share a feeling of belonging with other subscribers. You can encourage this communal aspect through rewards programs, events, and contests.
   
3. Prompt usage. Subscriptions help you master the art of keeping your customers’ attention. For example, you can employ triggers to prompt customers to use a product or service, creating habitual behavior. These brand interactions enable you to learn your customers’ “love languages” and tailor communications, offers, and products to their tastes.
   
4. Provide consistency and reliability. Subscriptions provide reliable and regular access to products or services in an “always on” experience, which not only makes them more affordable than a series of one-time payments but also provides convenience. This is why a staggering 8% of the US adult population (~5.8 million people) use Amazon Subscribe & Save to regularly replenish goods such as cleaning and household products.
   
5. Lower friction points. By subscribing to your service or product, customers can overcome common barriers associated with purchasing. This includes physical friction points – spending your gas money to go to a shop and wait at checkout – as well as digital elements. For example, offering a ‘freemium’ service creates an entry point for your consumers to experience your brand’s value proposition and, eventually, upgrade to a paid service.
   
6. Offer choice and customizability. Subscribers can pay for additional value by choosing an upgrade – and similarly, they can flexibly downgrade or pause their subscriptions instead of leaving the brand altogether. Giving customers choice and control over their relationship with you will make retaining their loyalty easier since they will see you meeting their needs. As the ad goes, if you love something, set it free – but try some subscription-based Customer Retention tactics first so they come back!

Recurring value, recurring revenue

Using the psychology of subscriptions to evoke positive emotional responses with your brand will build a strong base of loyal customers and help you lay the foundations for sustainable revenue growth. 

A recurring revenue model does wonders for your cash flow, which is quite simply the best indicator of how your business is performing – whether you’re making or losing money – in today’s volatile economic environment. Delayed or failed payments can lead to the loss of subscribers on an involuntary basis, whereas an inefficient customer retention strategy can cause subscribers to leave your brand willingly. These two types of churn directly affect your cash flow and signal to your customers that their experiences don’t matter. On the flip side, just a 5% increase in customer retention rates can lead to a profit growth of 25% – so you want to make sure to get proactive Churn Management and Customer Retention right!

For a winning strategy, combine theory with practice. With Chargebee and Eagle Eye, you can tap into the compelling psychology of subscriptions and scale your loyalty initiatives easily, providing value to customers at every turn. 

Learn more about the mechanisms of recurring customer value in our new ebook!