November 17, 2015
Subscription services of some type have been prominent in Brazil since the 1970's. They are a convenient tool for consumers with specific expectations and a desire for convenience. In Brazil, they are now online with GlamBox as one that is quickly gaining prominence.
"There are two main approaches to subscription - convenience and experience" says Rodrigo Portela, chief operating and technology officer at GlamBox. "We favor the second approach; particularly considering convenience in Brazil comes at a fairly heavy cost (i.e. logistics is still very expensive). The challenge then becomes to surprise and impress customers on an ongoing basis. We set goals beyond consumer expectations and deliver. It sounds obvious but this involves a continuous effort in the organization."
Marketing Subscription Services
There are four practices that must come into account when marketing subscription services. They include:
- Retention and lifetime value
- Balance and economic efficiency
- Customer satisfaction; and
- Value for the money
GlamBox enjoys a unique opportunity: Health and beauty aids rank a high share of online sales at 16 percent. The trick is to stand out and that happens through the quality of products and services.
"In general, people expect a better value deal when adhering to subscription models," says Portela. "Different businesses have different ways of measuring this but the basic approach involves understanding the costs of opportunity of gauging subscription services versus buying the product individually."
The response is very positive and the consumer market re-discovers these services. "On the demand side, we are actually seeing significant growth this year in our subscriber base - we expect to end the year at close to double our size in December 2015. Our value proposition has proven quite resilient in the current environment," says Portela. "2015 was an intense year in terms of applying lessons learned to enhance our consumer experience."
The Challenge of Operations
Getting Brazilians consumers to buy is often not the difficult part of subscription services. Advertising good customer service and high standards frequently attracts interest. The delivery and operations of these services is where the challenges lie.
"Our greatest pain point involves logistics, where we depend heavily on third parties," says Portela. "Our model is highly susceptible to logistics issues, as our subscribers expect to receive their boxes within very close timeframes - this is an integral part of the experience and key to our ability to generate significant social buzz around each edition."
There are four strategies that can assist with operations:
- Management of resources needs to be a priority from the beginning;
- Delivery approaches also require intense consideration;
- Efficient payment procedures; and
- Reduce fulfillment costs
As the model develops, approaches to fulfillment must be adaptable. Technology expands and has the potential to help manage complications. Resilience is also key as the markets adjust and consumer expectations change.
"The main challenge is our operations - costs have risen across several key components for us, which meant we had to re-think and optimize on several of our fulfillment activities in order to keep our margins healthy without simply passing the cost down to the client," says Portela. "We have taken an approach of crisis as opportunity - these moments always force us to think harder on what we feel we do well, and figure out how to do them even better."
If you are looking at starting or improving your subscription service in Brazil, contact LATAM Founders for support and new ideas.