The subscription box market has grown by more than 100% year-over-year in the past five years. The most popular categories in this segment, comprising 55% of total subscriptions, involve companies curating boxes containing apparel, meal kits, tech gadgets, personal care, or toys and delivering them to customers’ doorsteps at regular intervals. Such services seek to surprise and delight customers with new items and highly personalized experiences.
Established retailers such as Sephora, Walmart, Nordstrom, and Target developed their own subscription boxes to compete with notable newcomers like Birchbox and Stitch Fix. For customers, subscription boxes provide an easy, convenient, and consistent way to access a variety of products with little commitment. In addition, they can skip a box or return the box’s products when they wish.
Although such flexibility is attractive, its consequences are concerning for box companies. Customers frequently skip boxes, and even when they do not, they return 60% to 70% of the box’s products. Notably, Nordstrom and Target have since shut down their subscription boxes, and although Sephora continues to offer one, it and other retailers have become concerned about “box fatigue.”
How Involved Should Subscription Box Customers Be?
Hoping to improve their outcomes, box companies have started to involve customers throughout the box process using a series of digital touchpoints. For example, customers are invited to preview an upcoming box digitally, provide feedback about the products in a delivered box, and give reasons for skipping a box. The idea is that, in addition to learning about customers’ tastes, having them actively participate in the box process is engaging, which, in turn, should result in less skipping and more spending.
Participation is indeed engaging, empowering, and entertaining for customers, but it remains to be seen whether customer participation translates into objective outcomes that benefit companies. In a new Journal of Marketing article, we explored this question using secondary data from a national apparel box company that included approximately 30,000 customers’ repeated participation, closed- and open-ended feedback, and box purchase behaviors from 2015 to 2018.
Overall, customer participation in terms of previewing the contents of an upcoming box lowers future box purchases. Had the partner company limited upcoming box participation instead of encouraging it, we find they would have gained 14% in customer lifetime revenue. Furthermore, had the company not encouraged customers to provide concrete and specific reasons for skipping a box, it would have gained 10% in customer lifetime revenue. However, had the company encouraged feedback when the subscription boxes were delivered, it could have boosted customer lifetime revenue by 5.7%. In other words, while providing feedback with the delivered box drives future purchases, participation before and after decreases box opt-in and spending.
Lessons for Managers
We offer these suggestions for companies curating subscription boxes:
- Cautiously promote digital previewing for upcoming boxes by allowing customers to be surprised versus informed. For example, consider providing unique and exclusive items or early releases, enabling previewing for some product categories but not others, or rotating these options to maintain the surprise.
- Focus on the first box, not only from the perspective of products matching customers’ preferences but also from a customer participation perspective. If customers choose to skip the second box, their chance of churning is high, so refrain from soliciting extensive feedback on why they skipped the box. Instead, increase their interest in earning a new surprise.
- Analyze feedback concerning open-ended comments for sentiment, information, and linguistics, and capture word count, punctuation, and other metrics of text engagement.
- Solicit emotional and concrete feedback for delivered boxes, especially for the first box. Ask customers about specific product attributes (concrete feedback) and how they feel about the products (emotional feedback) and ask them to elaborate. For example, ask questions like, “How did you feel about what you saw in the box?” (emotional) or “List the top three things that came to mind when you tried on this product” (concrete).
- Avoid having customers elaborate on why they are skipping a box. Don’t ask customers to explain why they are skipping a box. If anything, use close-ended questions rather than open-ended ones.
We recommend that future researchers consider testing the effects of customer participation in other “pseudo-subscription” settings, such as business models that do not charge styling fees or box companies that merely deliver boxes “on demand” (but with a co-creation element) and offer their customers an opt-in option for regular deliveries. We also see great potential in measuring the effect of upcoming box participation on delivered box participation, the impact of delivered box participation on skipped box participation, and so on. Finally, because our partnering company serves primarily female customers, it would be interesting to determine whether the role played by the surprise element of curated apparel boxes differs by gender.
From: Nita Umashankar, Kihyun Hannah Kim, and Thomas Reutterer, “Understanding Customer Participation Dynamics: The Case of the Subscription Box,” Journal of Marketing.
Go to the Journal of Marketing
Read more Journal of Marketing Scholarly Insights
Nita Umashankar is Associate Professor of Marketing, San Diego State University, USA.
Kihyun Hannah Kim is Assistant Professor of Marketing, Rutgers Business School, Rutgers University.
Thomas Reutterer is Professor of Marketing, Vienna University of Economics and Business, Austria.