How to maximize revenue in a volatile market
David Cross |
2023 isn’t off to a great start for eCommerce brands.
Inflation is driving consumers to leave brands they love for better deals, and sky-high customer acquisition costs (CAC) are eating away at profit margins.
To survive in a competitive market, emerging and established brands need multiple revenue sources. Below, we’ve gathered proven strategies and tactics that will help you maximize revenue from both new and existing customers.
1. Launch a subscription experience
Subscriptions are one of the most powerful revenue drivers. With subscriptions, consumers enroll to have your product delivered to them on a regularly basis, usually monthly. In other words, you’ve unlocked recurring revenue.
In addition to bringing in ongoing revenue, subscriptions make your business more stable in uncertain economic conditions. Think of it this way: with subscriptions, you can better predict how much product you need on hand, decreasing the likelihood of overstocking.
But how valuable are subscribers actually? Ordergroove’s internal data shows that subscribers have three to four times the customer lifetime value (LTV) of one-time purchasers on average.
Pay-as-you-go subscriptions are the most common type of subscription experience brands offer. In exchange for enrolling, consumers receive a discount ranging from 5% to 20% off. Brands are comfortable offering a discount because they know they’ll recoup the cost down the line.
Other types of subscriptions can drive as much or more revenue.
Prepaid subscriptions maximize upfront subscription revenue. They typically offer customers a steeper discount than pay-as-you-go subscriptions in exchange for committing to a longer term.
For instance, Elysium, a health and wellness brand, offers 33% off for an annual subscription, 25% off for a six-month subscription, and 17% off for a monthly subscription.
What makes prepaid subscriptions so valuable to brands is that they deliver higher customer lifetime value. Our data shows that, on average, prepaid subscriptions generate eight times the LTV of pay-as-you-go subscriptions.
Memberships are another type of subscription experience. Instead of paying for recurring shipments of a product or group of products, consumers pay for access to those products. Brands love them because a membership experience gives them access to two revenue sources: products and membership fees.
For memberships to generate significant revenue, the products must be unique enough to drive the necessary demand. Ideally, consumers would also need to replenish the products regularly.
Take GNC as an example. For an annual fee, GNC PRO ACCESS members get two boxes filled with gifts, samples, and coupons each year. They also get points redeemable for cash. GNC’s exclusive nutrition supplements are one revenue stream, while the $39.99 annual membership fee is another.
2. Offer a premium loyalty program
Premium or paid loyalty programs are similar to memberships. They maximize revenue by asking for a fee or minimum spend to unlock special benefits.
For this revenue stream to be worthwhile, members must find enough value in the loyalty benefits to sign up and remain enrolled. According to a 2022 report from ebbo, 77% of consumers would sign up for a premium loyalty program if a preferred brand offered one and the rewards had enough value.
Many brands offer free loyalty programs alongside premium ones to show current customers what they’re missing by not spending a little more. Take Vitamin Shoppe’s tiered loyalty program.
Free loyalty program members still earn points with each purchase, which they can redeem on other products. But only by spending more can they access exclusive VIP events, special savings, and points that are worth more. Also, note that your customer base will quickly abandon a loyalty program that makes it challenging to check point totals and redeem them.
Another essential piece of data to consider when evaluating if a loyalty program is right for your brand is how it interacts with your subscriptions (if you have them). We found that 67% of subscribers also want a loyalty or membership experience.
3. Use physical retail for events and services
During the pandemic, many brick-and-mortar retail stores opened eCommerce channels to maximize revenue. Today, native eCommerce brands like Otherland are opening physical stores to let customers sample products. They could also use their new space for new revenue streams like events and services.
Beauty brand Sephora uses its stores as salons, where shoppers can get a false lash application and other services. Guests pay for these services, opening up a new revenue stream for Sephora.
eCommerce brands that don’t want to open physical stores can still take advantage of events. They could open a pop-up retail store or host an event at a hotel or event center.
Suppose Bespoke Post wanted to celebrate the small businesses it works with by hosting an “outdoor market” in a city where many of its customers live. To maximize revenue for everyone who makes the event a success, Bespoke could:
- Share revenue from ticket sales with each food, beverage, and music vendor.
- Ensure that event partners leverage the audiences to promote the event.
- Create tiers where attendees get more benefits for a higher ticket price, similar to a loyalty program.
Events at physical stores are a great way to build relationships, not just with first-time customers but also with your best ones. If you have subscribers living in the area, send them an invitation with preferred ticket pricing.
And while we’re on the topic, offering omnichannel subscriptions is a great way to boost subscription enrollment.
4. Lean on the audiences of influencers and affiliates
According to Insider Intelligence, businesses spent $5 billion on influencer marketing alone in 2022, up from almost $4 billion in 2021. Why the continued spend in this sales channel? Because Pew Research learned in 2022 that 30% of U.S. social media users made a purchase after seeing posts from an influencer or a content creator online.
You’ll need to compensate affiliates and influencers with a portion of the sales, a flat rate, or product trade. But if you work with the right partners for your brand, you’ll see positive ROI from a flow of new customers. How to know if a partner is right for you? They should have:
- An audience with significant follower engagement, as a huge audience of unengaged followers is less likely to result in a successful campaign
- On-brand tone and content style
- An audience that roughly matches yours
- A track record of success with partner brands that are similar to yours
Energy drink brand G FUEL screens candidates for their ambassador program before entering into an agreement with them. The brand pays a 10% commission as well as giving free swag, products, and invitations to events.
Partner-management software platforms like Refersion help you find affiliates and influencers, as well as onboard and pay them when the partnership is up and running.
5. Diversify your product offerings
As a retailer, your primary revenue stream is your line of products. When sales of a core product decline, one solution is to expand your inventory with complementary products.
Launching a new product takes time. You’ll need to conduct market research, vet manufacturers, and create a product launch plan. But the boost in revenue can make the effort worth it.
It’s best to launch products similar to your current items so consumers have more confidence buying them. Shinesty started out selling loud, colorful suits. Realizing that consumers don’t wear crazy suits that often, they launched equally fun products consumers would use more often. Soon underwear became the lodestone of their business.
Maximize revenue with Ordergroove subscriptions
Compared to launching a product, Ordergroove subscriptions are relatively simple to set up. With our development and onboarding teams’ help, you can enjoy a new recurring revenue stream in a matter of weeks.
To learn more about how Ordergroove can boost your revenue, click here to arrange a free product demo.