The Billion Dollar Subscription Service: How Dollar Shave Club Built a Best in Class Customer Experience
The way customers purchase products has changed. But with slim margins and high churn rates, subscription-based business models mean the customer experience is more important than ever.
From food, fashion, beauty and everything in between, there is no question we are living in the golden age of subscription services. But one company in particular continues to stay ahead of the curve. Dollar Shave Club was one of the first direct-to-consumer subscription boxes to enter the scene in 2011. With their affordable and convenient deliveries of razors coupled with a sleek yet playful brand, it is unsurprising they quickly scored over 3.9 million subscribers and a hefty acquisition check of $1B.
But while growing a customer base is crucial for the subscription business model, research finds that most consumers hit ‘cancel’ well before one year, with the average time being 125 days. The bottom line: a cool concept and cheap products won’t save you from the hairy situation of slim margins and high churn rates. Dollar Shave Club’s success is deeply rooted in their ability to understand their customers’ wants and needs in order to build a best in class experience (CX) to boost loyalty and retention.
Sounds easy doesn’t it? Let’s take a look at three key reasons why we think Dollar Shave Club’s customer experience helps them cut above the rest. And I promise that’s the end of the razor puns; we’ll shave those for later.
1) Overcoming a Fear of Big Data
It’s not unusual for established enterprises to have an entire internal team dedicated to analytics. But with limited cash, tools and manpower, subscriptions are largely limited in their ability to collect and interpret vast volumes of data. What’s more, most can’t afford to be wrong about the business direction they need to go in. A fast and accurate way of knowing exactly where to steer the CX is imperative for reducing the risk of churn.
But Dollar Shave Club isn’t afraid to face their big data, seizing every opportunity to capture more information about their customers. Feedback is collected both proactively (through CSAT surveys) and passively (using reviews, social and customer support). Business Intelligence software like Looker is also used to track customer behaviour. For instance, the company constantly collects data about email promotions, how people react to changes on the website, volumes of people reaching out to customer support, and churn.
2) Connecting the Dots Across the Customer Journey
By their very nature, subscription companies create a lot of data – big data. And we all know what it’s like to slave over an onslaught of Excel spreadsheets. The real challenge comes from the ability to coordinate and manage customer feedback across disparate channels and touchpoints. To make matters worse, insights often become locked in silos across organisations, making it even tougher to paint a single picture of the customer.
As Dollar Shave Club’s VP of Information Systems Amber Hameed recently observed, “DSC has built a strong data architecture to track and capture the details of every consumer interaction. The tech stack is state-of-the-art and consists of multiple applications supporting an event-driven architecture that helps personalize the user experience. This also provides the ability to try new things and immediately measure the results.”
Initially, Dollar Shave Club faced a major bottleneck when it came to their data. Only a few people were granted access and it wasn’t unusual to wait a week to have a question answered. But once they started seeing the benefits of using customer insights to deliver improvements across the CX, it was clear that everyone in the team - from marketing to customer service - should be able to use it. As put by Todd Lehr, senior VP of engineering at Dollar Shave Club, “We found that we’d add a lot more value back to the organization if we gave it to everyone.”
Using a cutting edge tech stack to pool together insights and connect the dots across the entire customer journey, each area of the business is now able to get a 360-degree view of the customer: highlighting both the pains and the gains behind the overall experience.
3) Closing the Feedback Loop
What we’ve learnt from subscriptions over the years is that customers are more likely to cancel than put up with a bad experience. And often it only takes one click. Increasing retention requires you to get in tune with customers and be proactive when it comes to killing off problems before they happen. At the same time, if there’s something that your customers rave about, why not focus on delivering value in those areas to raise the bar against competition?
But getting from insights to action isn’t always easy. It requires companies to remain nimble when it comes to adapting their operations. Fortunately with their small size and low operational costs, subscriptions like Dollar Shave Club are able to continuously leverage customer feedback and insights to make quick and drastic pivots.
By “closing the loop,” Dollar Shave Club are able to put CX at the heart of the company culture: sharing feedback with employees across the entire organisation and empowering teams to take action on the insights provided.
In fact, nearly half of Dollar Shave Club’s workers use their Business Intelligence tools on a daily or weekly basis, turning customer actions into data, data into insights, and insights into key business decisions. Demonstrating the impact of this, they noticed that people buying Shave Butter were far more likely to purchase other products. By simply switching from blanket sampling to Shave Butter customers only, they began to see an impressive 100% ROI on their sampling programme.
The Bottom Line
While Dollar Shave Club’s approach to CX has been nothing but a success to date, finding the right formula to boost retention, satisfaction and referrals isn’t easy. They know that the consequences of ignoring customers are dramatic, and it’s their ability to quickly turn customer data into action that sets them apart from the Gillettes and Schicks of the world. As Dollar Shave Club’s CEO Michael Dubin puts it, “we have taken great pains to develop this brand experience.”
But whether you have mutton chops, a goatee, full beard or moustache, there’s no denying that unlocking insights from customers is the key to building a best in class subscription business.