One of the key indicators of the quality of customer experience is loyalty. Today’s consumers who auto-replenish with subscriptions demand flexibility; in a Zuora study, 48% cite ease of opting out as a key factor. And in its research, the Subscribed Institute found “companies that allow customers to make more changes to subscriptions grow faster.”
For e-commerce companies, notably technology-driven retailers, the subscription model as applied to consumer packaged goods (CPG), in which the retailer sends an agreed-on quantity of a product at agreed-on intervals, has helped build and retain loyal customers — but it brings its own set of challenges. Many of these could be overcome with personalization and customization enabled by the Internet of Things (IoT). As the following figure illustrates, the subscription model grew markedly during the COVID-19 pandemic — and will continue to do so.
We believe that IoT will soon play a pivotal role in driving retail engagement with the end customer by enabling an enhanced subscription model. Armed with live data collected from customers via connected devices, the e-commerce industry will improve its ability to address issues related to inventory management and delivery.
As noted, the subscription model has been a boon to many retailers, but it is far from perfect; under this model, challenges that have long faced retailers still exist:
Interventions supported by IoT and predictive capabilities that can address subscription-model challenges include:
Because the application of IoT to the subscription model is a nascent evolution, when exploring the concept with clients we find it helpful to apply lessons learned in implementing predictive maintenance solutions. We worked with a US-based chain that found it difficult to manage its inventory of point-of-sale and billing systems, kitchen equipment and other items due to unpredictable service issues and failures.
We helped the client develop a process to better maintain store equipment inventory and improve service efficiency, mapping equipment inventory to historical data of individual stores’ problems to develop a failure-likelihood pattern.
This predictive model supported an improved customer experience by reducing store downtime, and the increased visibility into equipment performance and service needs helped implement preemptive capacity management.
We believe that a similar model can improve the customer experience in the CPG subscription arena.
Enabling subscription orders to be fulfilled based on real-time data captured through smart devices elevates the experience for customers and retail companies alike. We’ve dubbed this hypothetical solution to monitoring consumption at the source the “connected kitchen shelf.”
It would ensure that inventory was managed more effectively by using live data to keep tabs on the products being stored, their weight (that is, the quantity remaining) and customer usage patterns.
The connected kitchen shelf could be integrated into smart home solutions and devices to place orders based on customer usage. A sensor-enabled system could offer the following features:
Smart devices could be operated through an app that can allow the user to monitor and control various parameters, such as refrigerator temperature, product usage and their current subscription levels and frequency.
Collected usage data could be analyzed by vendors to identify patterns and anticipate customer expectations to support product or service recommendations.
A connected app could be further extended to brands and e-commerce providers to extend promotional offers.
We’re seeing IoT progress on a few fronts, such as the rise of “smart caps” for prescription medication bottles. With smart caps, Bluetooth-enabled caps let users program reminders, and the bottle records usage based on whether the cap has been removed. Clearly, one of their primary benefits is the ability to proactively order refills so that users — notably the elderly or those who cannot or should not leave home — never run out of critical meds.
In addition to offering an enhanced customer experience, peripheral benefits that emerge from connected devices include:
As the smart-caps example demonstrates, IoT is playing an increasingly pivotal role in driving engagement with customers. In one study, subjects were 13% more likely to adhere to their medication schedules when they used the devices.
We believe that IoT will improve the CPG subscription model through greater personalization and flexibility, thus increasing customer loyalty for forward-looking retailers. The challenge will be to develop IoT devices and systems that appeal to customers and can be easily integrated into their already smart home ecosystems in a secure and non-intrusive format.