The increasing prevalence of online shopping and inflationary pressure impact both consumers and CPG companies in 2024. As the marketplace continues to evolve, Consumer Packaged Goods (CPG) manufacturers seek innovative strategies to stay competitive and engage with customers. One strategy that has become an increasingly popular option is the use of subscription models. As the value added in the CPG industry is expected to reach US$3.18tn this year, we’ll showcase the benefits of subscription plans for CPG brands.
Inflation, Online Shopping, and CPG Subscription Models
For consumers, rising prices of food, beverages, clothing, cosmetics, toilet paper, and other household items mean they may be inclined to spend more effectively. CPG brands’ subscription plans often have discounts or fixed prices, providing buyers with a sense of stability and potentially helping them reduce the effects of inflation on their household budgets. In the US, inflation has driven digital grocery growth for the past two years, but digital grocery sales will increase by 17.4% in 2024.
Inflation can increase input costs for CPG companies, and by implementing subscription plans for their customers, they can secure a more predictable revenue stream. This can help them offset increasing costs and maintain profitability. By offering products on a recurring basis, your CPG brand can enhance customer relationships, drive revenue, and foster long-term growth.
As eCommerce and online shopping continue to grow in popularity, more and more CPG companies are adopting subscription models. They align well with online shopping trends, providing consumers with a seamless and hassle-free way to purchase CPG products regularly. Subscription models are cost-effective and adaptable, and allow you to capitalize on the convenience and accessibility of online shopping.
Benefits of Subscription Models for CPG Brands
CPG companies can benefit significantly from implementing subscription models. If your Consumer Packaged Goods brand doesn’t offer subscription plans to customers, here are the top five reasons to consider adding them to your strategy.
Predictable Revenue Streams
Subscription models provide CPG brands with a steady and predictable revenue stream. Unlike one-time purchases, which can fluctuate due to seasonality or economic conditions, subscription plans offer a reliable source of income through recurring payments. This allows subscription-based companies to allocate resources effectively and plan for future growth initiatives.
Customer Loyalty and Retention
By establishing ongoing relationships with customers, subscription models promote loyalty and retention. When consumers subscribe to receive CPG products regularly, they become more deeply engaged with the brand and less likely to switch to competitors. This increases customer lifetime value and reduces customer acquisition costs, as retaining existing buyers is often more cost-effective than acquiring new ones.
One great real-life example of this is Dollar Shave Club. The brand changed the razor industry by offering a subscription-based model for men's grooming products, primarily razors and shaving accessories. Subscribers to Dollar Shave Club enjoy the convenience of regular deliveries of high-quality grooming products at affordable prices and with a 30-day money-back guarantee. This approach fosters customer loyalty and reduces the likelihood of subscribers switching to competing brands.
Data Insights and Personalization
CPG subscription models generate valuable data about customers' preferences, purchase behavior, and consumption habits. Your brand can leverage this data to gain insights into the target audience and personalize offerings. By tailoring product recommendations, marketing messages, and promotions to individual subscribers, you can create a more relevant and compelling experience that resonates with consumers on a deeper level.
Cost Efficiency and Operational Optimization
CPG companies can optimize operations and streamline supply chain processes using subscription models. With predictable product demand, you can better manage inventory levels, reduce excess stock, and minimize wastage. This efficiency lowers operational costs and improves overall profitability, allowing brands to reinvest resources into customer acquisition or other initiatives.
Adaptation to Changing Consumer Behavior
Subscription models offer CPG brands a flexible and adaptive approach to meeting their customers’ needs. As more consumers embrace online shopping, subscription plans provide a convenient way to replenish essential products regularly. A great example of this trend is a program offered by the Amazon platform, called Amazon Subscribe and Save. It allows shoppers to subscribe to regular deliveries of everyday essentials such as coffee, pet food, toilet paper, and cleaning products, and save up to 15%.
Subscribers can set up automatic deliveries based on their preferences and consumption needs, and unlock discounts on eligible products. CPG brands participating in the Amazon Subscribe & Save program can benefit from a reliable source of revenue and market reach. By listing your products on Amazon and offering subscription options, you can tap into Amazon's vast customer base and reach new audiences.
These were the top reasons to adopt a subscription model for your CPG brand. With the right subscription plans, you can drive steady revenue, build customer loyalty, and get ahead of your competitors in the CPG industry.
Blue Wheel is an experienced agency offering tailor-made CPG marketing services. Visit our CPG marketing page today to learn more about how we can help your brand and get in touch with our team.
.png)
.png)