From Netflix to craft gin, there are subscription services available for almost anything these days, and it’s easy to see why. The subscription approach is a win-win for customers and brands, creating consistent revenue streams for businesses in return for special treatment or exclusive discounts for subscribers, and building deeper brand relationships that benefit both parties.
Despite its success in other industries, the subscriptions model is yet to be widely adopted by hospitality businesses. However, as Covid-19 has spurred operators to look at new ways to diversify, subscriptions have shown themselves a promising new avenue revenue stream for restaurants, pubs and coffee shops.
What is it that makes subscriptions so popular? How can hospitality businesses successfully introduce them as a new source of revenue?
Why do customers love subscriptions?
Customers love convenience
We all know how easy it is to feel worn down by decision fatigue and endless to-do lists. One of the benefits of subscription services is their ability to remove admin from our daily lives by automating purchases and decision-making. Meal kit subscriptions such as Gousto or Hello Fresh are a perfect example of this, replacing the effort of the weekly meal plan and supermarket shop with simply receiving a box of ingredients on your doorstep. The popularity of subscriptions such as Amazon Prime and Deliveroo Premium also show how customers are happy to commit to one brand in return for added convenience.
Customers want routine and novelty
During these strange and uncertain times, one major emotional appeal of subscriptions is their ability to provide routine while also creating space for novelty. Even in the most tumultuous periods of lockdown, subscribers to Oddbox, Ipsy or Barkbox can rely on the periodic arrival of their vegetables, makeup products or pet accessories, with the excitement of not knowing exactly what their package will contain. This is what makes subscriptions such a relationship-based affair: customers are investing in a brand that they trust, sometimes without even knowing what that investment will provide.
Customers want better value
The savvy 21st century customer is spoilt for choice and always keeping their eye out for a great deal. Subscriptions can be a great way to deliver exclusive savings to customers in return for their commitment to your brand. When Pret a Manger launched their unlimited coffee subscription for just £20 a month, this was the deal they made – choose Pret every time, and you’ll get a great price for your daily cup of coffee.
Customers seek brand affinity
The way that we buy is changing. Increasingly, price and quality considerations are taking a backseat to another priority – brand loyalty. In a study by Feed It Back & DataHawks, 33% of consumers’ reported loyalty from previous visits as their top priority when choosing a venue for a special occasion, with only 0.1% driven by price. Subscriptions are a great way to build those deeper relationships with your customers, fostering a stronger sense of mutual support and connection than is possible from occasional one-off visits.
The benefits of subscriptions for hospitality operators
The advantages of subscription services are clear but how can these translate into hospitality? We have already seen some of the benefits that subscriptions can deliver in our collaboration with leading QSR brand, Leon.
Unlocking the benefits of recurring revenue
At a time when so much is uncertain, hospitality businesses can really benefit from a recurring source of revenue. At the right price point, a subscription can be generous to the customer and profitable for your business. The certainty that subscription fees will be hit the bank account each month allows operators to better manage their cash flow and make clearer financial decisions. As the sunk cost of a subscription will keep customers engaged with your brand, they are likely to spend more elsewhere in your business, too. For example, customers with a coffee subscription will be more likely to buy a pastry to go with their morning cappuccino. This kind of incremental revenue can make subscriptions profitable for your business, even if the subscription offering itself is offered at nearly cost-price.
Understanding your customer through subscriptions
As well as a source of revenue, a subscription can be a great way to get to know your customer and build your customer database. In September 2020, Leon was looking for a way to build engagement with their customers via the Leon Club. They also wanted to increase adoption of their Click & Collect platform, to improve capacity management and collect more customer and basket-level order data. Vita Mojocollaborated with Leon to understand their needs and enabled the pilot of Leon’s ‘unlimited’ coffee subscription in September 2020:, offering customers the chance to pay £15 a month for up to 75 cups of coffee. The scheme was hugely successful, resulting not only in increased sales of coffee but also in the creation of over 6000 new Leon Club members in its first month.
Drive repeat footfall and build brand loyalty with subscriptions
By tapping into your customer’s desire for convenience, exclusivity and inclusion, operators can use subscriptions to, build loyalty and drive repeat visits. With a subscription offering, you can drive return custom month-to-month, getting customers to return coming back through your doors and spending money with your brand, while also driving customer retention. In this way, subscriptions are superior to one-off discounts which are great for initially attracting customers, but far less effective at driving repeat visits. Operators can get creative with how they use subscriptions – they aren’t just for coffee! Following the success of their coffee subscription Leon launched their Vegan subscription in Veganuary 2021, offering Leon customers the chance to pay £30 a month to join the #Vegang and get 30% of all plant based dishes. This is a great example of aligning with current trends as Veganism continues to boom, especially among the younger generations.
Seeking the Win-win-win: Vita Mojo, Leon and Chargebee
At Vita Mojo we are committed to providing best-in-class solutions for hospitality challenges. This means focusing on what we do best and seeking out leading partners to integrate with. We initially launched Leon’s coffee subscription using our existing discounts functionality. Following the success of Leon’s subscription pilot, we developed a long term solution, integrating with Chargebee, who are experts in the area. Thanks to this partnership, rolling out new subscriptions on the Vita Mojo platform is now quick and pain-free. Customers can check out seamlessly with subscriptions automatically linked to their account, and all of the sales data feeds directly into the Vita Mojo platform.
Time to consider subscriptions?
As hospitality businesses continue to pivot and evolve for the ‘new normal’, subscriptions can be a real opportunity for brands to offer something different, grow their database and build a customer base who will keep coming back. When implemented with creativity and awareness of customer needs, subscriptions can generate loyal brand-evangelists for operators, boosting word-of-mouth and social media marketing efforts. The subscription model also creates a revenue stream that operators can periodically rely on, helping with cash flow during these uncertain times.
For any hospitality business looking at new ways to create value for their brand, subscriptions are definitely an avenue worth exploring.
Interested in how subscriptions can work for your business?