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Harnessing the Power of Recurring Purchases

July 19, 2016

If you find yourself pondering the relative value of regular vs. occasional cusomters at your business, you are not alone.

In an earlier post, The Critical Value of Knowing Your Best Customers: The Parable of “$5.35 Guy”, we profiled a single repeat customer at a Clover Rewards-powered coffee shop. His daily order totaled $5.35, hence his nickname “$5.35 Guy.” With that simple, recurring-purchase habit, $5.35 Guy drove a staggering amount of business for his favorite coffee shop—$1,337.50 annually, to be precise.

The moral of the story is clear: recurring purchases add up to tremendous revenue and lifetime loyalty—if you can get them to become a regular customer. Just how does one do that, though?

A tactic many small businesses have been employing is using marketing messages and incentives to frame the business as a subscription in the mind of the customer. We call it “recurring-purchase” or simply “subscriber mode,” and it’s remarkably powerful.

When customers see your business as a subscription, a shift in thinking occurs. Once they’ve purchased so many things from you, so often, that they begin to lose count of how many times they’ve visited your store. Your business becomes an entrenched part of their daily routine, so much so that no matter what, they turn to you to keep them supplied with critical goods or services at never-failing regular intervals (daily, weekly, monthly).

Amazon Prime offers an interesting case-in-point. When they increased their price from $79 to $99 per year, howls of protest were heard across the internet from customers who rely heavily on Amazon’s “Subscribe and Save” feature. By signing up for recurring purchases on household items, Prime customers earn a discount for each subscribed product—not to mention eliminating the hassle of picking up laundry detergent or diapers themselves. Once they exceed five product subscriptions, the overall discount bumps up even more.

Amazon “customers” are the folks who pick up a book or CD occasionally and pay shipping costs for every item, ala carte. Amazon “subscribers” shop so frequently via the superstore that it’s a no-brainer to join Prime.

And guess which group is more profitable, customers or subscribers?

Subscribers, by a long shot.

Subscribing has its roots in magazines and newspapers, but any recurring purchase—whether delivered to the customer’s home or not—lends itself to the subscription model. Think about all the products you’d hate to run out of: milk, coffee, razor blades, toilet paper. A subscription service for tampons, Hello Flo made a viral splash a couple years ago with its Camp Gyno campaign.

The Hello Flo “care packages” are timed to the customer’s menstrual cycle and include the customer’s favorite brand of panty liners or tampons, plus candy. Not only does Hello Flo prevent customers from running out of critical supplies, it does something even rarer: makes subscribers feel cared-for.

Here are three questions that’ll help you get your customers into “subscriber” mode:

1.       What products or services do you sell on a recurring basis? This one’s not difficult. Your store’s number-one product is obvious—and it’s #1 precisely because it’s often a recurring purchase.

2.       How are those products embedded in a customer’s rituals? Now take those top-selling products and imagine the ritual that surrounds their purchase. For coffee shops, many customers pick up a weekly supply of beans on a certain day, or grab their daily cup on the way to work. Salons tend to a customer’s monthly haircut or color, perhaps provide a quarterly mani-pedi. Bars regularly cater to happy-hour crowds knocking off early on Friday afternoons or gathering for the big game. Pizza parlors help weekend revelers satisfy their late-night munchies; they’re also key fuel in university towns during finals week. Think about the “why” of that number one recurring purchase—the act or situation that prompts its purchase. That’s the subscriber’s ritual.

3.       What aspects of that ritual can you sweeten in some way? This step requires the most imagination, but also yields the greatest results. Get inside your customer’s head and consider: what emotional benefits do your customers derive from that product and its surrounding ritual? Early morning coffee-shop customers enjoy a shop’s particular ambience and a bit of friendly conversation on the way into work; it starts their day on the right foot. Salons that offer a glass of wine and some soft music make customers feel pampered while they’re getting their service; this pampering provides a hiatus from their hectic, work-a-day life. Bars provide conviviality and friendship; a good time and comradery. Pizza tastes great anytime and reliably keeps you fueled, regardless of the hour.

Once you’ve figured out the emotional benefit of that recurring purchase, you’re ready to turn your loyalty program into a subscriber-driving machine.

Start by rewarding recurring purchases you’ve identified in question 1. The answer to question 2 will help you understand purchase frequency. Then align the recurring purchased product and frequency patterns with question 3’s emotional benefit to choose a reward that’ll complete your customers’ ritual, making them feel understood and appreciated—making that emotional benefit an essential part of the purchase, something they come to expect and look forward to. Also look for ways to use that now-essential emotional benefit part of the ritual to begin to nudge them towards expanding their recurring purchase in some way. Suggest complimentary products or services that factor well into the overall experience.

Once you’ve got your regulars here, they look at your business not as a “nice-to-have” but rather an essential part of their day.

In conclusion, recurring purchasers aren’t bound by contractual obligations. They’re tied to your business by habit, loyalty, and all the intangible good feelings that come with a personal ritual.

Find the “why” of the recurring purchase and cater to the experience it provides, and you’ll have a steady stream of “subscribers” in no time.

[image: Bellemani Nail Salon by Rose Wheeler on flickr]