Commerce Conversations Roundup: March 2023

Subscription Loyalty Programs

Subscription models are very profitable – until they’re not. Will consumers keep signing up?

Several DCA members have mentioned subscription loyalty programs to me in conversation lately – a strategic option, a competitive threat, a thing that has to be considered.  The promise of loyal customers and steady, recurring revenue has all sorts of companies asking themselves: should we become like Sam’s Club, Amazon Prime, or Netflix?  Or can we venture into food subscriptions – like Prêt à Manger or local biker-bakers?

People have been doing subscriptions for a long time.  Milk trucks, newspapers, the Columbia House Record Club – which you thought was gone, and it is, but it’s 2023 so the kids are into vinyl subscriptions again . . .

What is Driving the Conversation? 

Subscriptions are a play for the customer’s whole category spend, and they can be a very efficient way to retain customers.  If a program gets enough buzz, it might even be an efficient way to acquire customers through word of mouth.  Then it’s just a matter of ensuring there’s a profit margin.

Some industries have been quietly transformed, sometimes with difficult consequences.  Ski resorts, once fragmented, have rolled up into a handful of big players each with a network of destinations and a strong preference for selling season passes.  (If you’ve heard that lift tickets have become eye-wateringly expensive, it’s because resorts want consumers to buy the season pass instead.)  Turning skiing into a subscription business hasn’t come without problems, as season pass holders can all decide to show up on the same day – and then everyone’s mad.  Selling everything you have all at once feels good in the moment, but companies should be careful.

There’s also the question of whether consumers get enough value to renew, and whether the company will be drawn into building more infrastructure than future subscriptions will support.  Newspapers built some of the 19^th century’s great fortunes, but by the end of the 20^th century they were turning billionaires into millionaires.

Questions DCA Members are Asking

1. What would people really be paying for? (Flexibility, convenience, cost savings, a feeling of belonging, top-customer treatment, unique perks?)
2. Would putting a price on our product/service increase its perceived value?
3. Would a paid membership model generate free media, or a word-of-mouth flywheel?
4. How could we get the first 100,000 subscribers?
5. Is it possible to sell too many subscriptions, or is our fulfillment capability unlimited?
6. Could a competitor harm us by launching a subscription model first?
7. If we launched a subscription model and it failed to get traction, what harm would it do?

Related DCA Resources

1. Commerce Code Episode 101: New Solutions for Loyalty Programs and Consumers
2. Commerce Code Episode 127: Expanding the Spending Power of Loyalty Rewards

Payments, Promotions and the Return of China’s Tourists

China’s tourists spent $277 billion abroad in 2018. DCA’s February Expert Session explores how they will spend their money in 2023 and beyond. 

Before the pandemic, China sent more tourists abroad than any other country.  With its borders open again, there are questions about how long it will take for China’s tourists to resume their travel and spending – but it’s just a matter of time.  The pent-up demand for travel is as powerful in China now as it was in the rest of the world last year, when throngs of tourists clogged the world’s airports and key destinations. 

DCA’s February Expert Session on the return of China’s tourists is an in-depth conversation with Bo Wang, the founder and CEO of YouWorld.  YouWorld is a fintech that makes it easy for Chinese travelers to spend money abroad using their native currency via Alipay or WeChat Pay.  Bo has deep expertise in how to engage with the Chinese traveler, especially in the realms of payments and marketing.  

For a review of the Chinese tourist market before the pandemic, see this report.  For some insights into what it will look like in 2023 and beyond, DCA members can watch the February Expert Session with Bo Wang by either clicking the link in the Commerce Conversation email or by contacting us to receive access.

A Few Questions From the Conversation: 

• Now that China’s “Zero Covid” restrictions are over, where do you think Chinese tourists want to go and what do they want to do when they get there? 
• Credit cards aren’t common in China – WeChat Pay and AliPay are by far the dominant payment methods.  Given that, how do Chinese tourists abroad usually pay for things? 
• Where do promotions and offers fit in here? How does that work with mobile wallets and other smartphone-based methods of payment? 
• Three years is a long time in the technology world.  What will be most different about the Chinese tourism market now as compared to 2019?  And what has changed in terms of how payments will work? 
• What are the biggest opportunities for western brands and retailers as Chinese tourists return? 
• What are the risks for retailers, payments companies and others? 

EPISODE 152: Navigating the Complex Digital World of Social Media Activation  

On Episode 152 of Commerce Code, Dan Currell speaks with Mike Garsin, President of Social Activation at Brand Networks, an Augeo company. Dan and Mike explore the ever-evolving landscape of social media marketing. These experts will delve into the power of social activation – including how to leverage AI-optimized advertising investment, authentic employee advocacy and data-driven brand collaboration to supercharge your social media marketing strategy and presence.

Digital Commerce Alliance members include the largest and most innovative companies in fin-tech, payments, retail, e-commerce and mobile wallets. Members include Microsoft, Rakuten, UBS, RBC, Mastercard, Discover, Valuedynamx, FIS, Sam’s Club, TransUnion, Augeo, Bank of America and many more in 17 countries and 4 continents.

We are bringing their insights from around the world straight to you in an informative podcast called Commerce Code. The podcast features insights, interviews and the latest news from DCA members worldwide. Stay connected and subscribe to DCA’s Commerce Code.