Is the subscription model the key to growth marketing?
Over the last few years, we’ve seen many brands develop with a growth marketing mindset, often to huge success. Look at the likes of HelloFresh, for example, Pact Coffee, Uber, Chef’s Plate. The idea is that the business quickly learns how to attract new customers and also increase their Lifetime Value. Put simply, they can attract more customers, and retain them for longer – a win-win in marketing.
At Silverbean, we work with several subscription brands and fast-growing companies. For these companies, if they don’t get marketing right and adapt, they risk falling short of their critical business targets. Growth marketing companies rely on hitting short term revenue targets in order to raise funding for their next growth stage.
Affiliate marketing offers growth companies the ability to test and learn new marketing tactics on a CPA method, which reduces risk, but also enables them to scale based on successes. For subscription brands the affiliate channel can drive over 30% of new business (retail for example is 15%).
What are the objectives of subscription marketing?
When looking at subscription and growth marketing, there are two objectives:
- Increase new customers
- Increase the lifetime value (LTV) of those customers.
The ultimate goal for a business is to decrease the cost to acquire a new customer whilst also increasing the customer’s lifetime value. Affiliate managers are managing a see-saw, trying to find the balance between spend and LTV. Here’s how we do it.
Leveraging partner channels to attract new customers
When we look at publishers within affiliate marketing, we want to do so in alignment with the customer journey:
For example, traditional affiliate management is highly effective for evaluation, selection and purchase stages. Voucher code, cashback, employee benefit, reward and closed user group publishers are key revenue drivers within this space. Staying ahead of the competition is key within these areas, however. Silverbean uses a competitor analysis tool that identifies vouchers, cashback rates etc. across the market in order to inform our clients of the best approach.
When we look at motive development, research and evaluation, the utilisation of influencers, content partners and comparison sites are key to raising awareness. Finally, the likes of loyalty, referral and ambassador programs are of use post purchase.
The trick is to work with the key publishers within each vertical, developing a sustainable, balanced affiliate program. However, further optimisation and strategies are key to attract new customers and to align with other digital marketing channels. For example, utilising comparison sites helps to promote a brand’s USPs when users are doing their research, the key is to work closely with these publishers in order for them to align with paid search teams. By doing so, a publisher can appear at the top of a lower funnel search term more relevant with their content. Working with these types of publishers helps to determine value to the user and therefore increases the LTV.
Optimising key channels
It is important to review the density of new customers in a certain region. For example, a brand might have a heavy dominance within key cities like London, Manchester, or Edinburgh, however they may not have growth in certain cities or towns. Using regional content publishers, we can look to increase the volume of sales in these areas and therefore increase market share. The likes of the Reach Group are great to support here due to the high volume of regional publications. Taking a granular approach to selecting the right content or influencer partners is crucial.
Influencer or ambassador activation is often key for high growth brands, and combining social media and positive word of mouth will support brands and drive high sales volumes. Working strategically with influencers and content creators, brands can reach new audiences while also repurposing content created through other channels, such as paid social and email marketing. Within influencer campaigns we prefer to work on a long term basis with publishers, the benefit of this is that an influencer can elevate brand loyalty if they are shown to be a consistent subscriber themselves.
Finally, brand partnerships are attractive for subscription brands. The ability to work with a brand that shares the same values or has a very similar audience will help to scale brand awareness and conversions. Our learnings from brand partnership work within the sector can support with both post-purchase activation (monetisation) and referrals (new customer acquisition).
Partner channel tactics to increase lifetime value
Subscription brands not only want to attract new customers, but they also want those users to stay with them for as long as possible. In the case of natural deodorant brand, Wild, for example they not only want the user to buy their first box, they then want to replenish their stock each month. If the user stays with the brand for just eight months, that decreases the cost of acquisition. The longer the consumer stays with the brand, the more beneficial the original acquisition is. A loyal customer has a lot of value in regards to referrals, word of mouth and, of course, spend.
When it comes to how the affiliate and partner channel can help with improving LTV, the first thing to look at is offer mechanics.
We already know that up to 30% of new sales for subscription brands can be from the affiliate channel, and some key publishers are voucher, community and niche sites. If we use various promotional mechanics at the point of sale, we can then learn what promotion will drive a higher LTV. It’s crucial to A/B test thoroughly across multiple channels, across key partners, and in varying times of seasonality, to better understand the most beneficial offer mechanics. It’s key when working with incentive based partners that the testing of offers is done in tandem with the testing of the customer incentive (i.e. flexing a cashback rate higher to draw in a first purchase so keeping the offer % lower but longer i.e. across much more boxes). Some example promotions are:
- Buy one box, get one free
- Save 50% on your first box and then 33% on the second and third
- 50% off for your first purchase and then the third is free.
There are numerous things to consider when looking at offer mechanics, and no one rule can be applied across brands. It’s a case of looking into your average lapse rate and, crucially, the “aha” moment of value to the consumer. Charlotte Davies, Senior Affiliate Marketing Manage, said: “a brand does not necessarily always have to discount their own product to create value or differentiate themselves from the competition, by utilising brand partnerships they can create value by offering an incentive or gift card for an alternate retailer.”
The importance of testing and learning
One benefit of the affiliate channel is that we can test and learn across multiple publisher types. Over time, we can then understand what promotional mechanics drive the best results across key publishers. We also want to align the above data around promotions and LTV at a publisher level.
This enables us to address where we invest moving forwards. We naturally want to create a program with a high rate of new customers and also a high LTV, and by making changes to CPAs and tenancy investment we can then improve the overall CPA. This tactic can be shared across multiple industries, for example travel, transport, retail etc. Leveraging a SaaS partner will also help to unlock bespoke commission rules based on product and LTV, and help you to collate the data better to make informed decisions.
Hope Walker, Senior Affiliate Marketing Manager said: “It is crucial to have a methodology for measuring LTV at a partner level, whether this is setup to report in your core tracking (using SaaS platform capabilities) or if this is done through the tailoring of uniquely identifying voucher codes per partner, which can be traced through the history of a customer account. Without a view on LTV metrics at a partner level, there is now way to truly optimise the work you do in the channel to drive up this KPI.”
Earlier, we mentioned considering a local strategy to generate new customers. This can combine with the strategy to encourage a higher LTV. If we look at offer mechanics based on geo-targeting we can review demographics and target campaigns based on audience segmentation. For example, a more affluent customer may convert higher for a premium membership or longer subscription model.
Finally, affiliates and partners are aimed towards a conversion of the brand’s choice, though this is generally targeting a sale. However, the affiliate channel can work with publishers to drive users towards other calls to action like apps. Business data showcases that a user who converts who then interacts with the app might then have a higher AOV or higher LTV. Therefore, using publishers to drive users towards a certain device or browser will increase overall KPIs.
Over the last few years, we have seen some phenomenal growth from our clients within the subscription vertical. We are seeing a growth of traditional retail brands now adding subscription offers onsite too. Subscription brands tend to take a growth marketing mindset in order to scale rapidly, increasing new customers but also showcasing successes to attain additional investment. For us, the affiliate and partner channel is a vital marketing tool to support the expansion of a high growth business when done right.
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