High acquisition costs. Stagnant average order values. Climbing churn rates.
Such are the unique challenges of subscription brands.
Fortunately, in today’s ever-evolving digital advertising landscape, for every unique challenge, there’s a unique solution. And all signs are pointing to Programmatic advertising.
Much like the subscription industry itself, Programmatic buying has reached a fever pitch in recent years and shows no signs of cooling down anytime soon. With Programmatic spending skyrocketing each year since the introduction of the first banner ad in 1994, it’s expected to officially make up the lionshare of display advertising within the next year or two.
However, the so-called “future of ad buying” has very much already arrived, with nearly 88% of display ads programmatically bought last year in the U.S., translating to a whopping $81 billion in total spend.
While complex and confusing to anyone outside this space, Programmatic is, in simplest terms, the automated buying and selling of online advertising in open and private digital marketplaces. AI and machine learning segment audience data to solidify the placement, auction, and sale of digital ad impressions in real time, which is just a fraction of a second.
By harnessing the power of workflow automation and machine learning algorithms, brands are able to extend their reach far outside the walled gardens of Facebook and Google, into all nooks and crannies of the digital world, including web, mobile, digital audio, and connected TV.
Since subscription-model brands depend on a very unique type of shopper–one who is engaged and loyal enough to commit to your brand month-after-month–Programmatic’s laser-focused targeting capabilities make acquiring and retaining that target subscriber a more attainable and affordable reality.
Programmatic perk #1: Targeting the right shopper
Acquiring customers is challenging and costly for any brand, but it’s a different animal for subscription businesses dependent on recurring purchases. While there are numerous marketing tactics down the line to keep subscribers satisfied enough to stick around, you want to at the very least acquire a shopper interested enough in your product to commit to more than a one-time impulse purchase. Because of the long-term relationship between subscription brands and their customers, it makes sense then that these brands expend more time and resources on acquiring customers than your typical retailer, given the higher return on investment (ROI) and longer length of time to amortize the acquisition costs.
Nevertheless, Programmatic advertising gets the job done faster, better, and cheaper due to the automation of its laser-sharp advanced targeting, which includes custom intent and lookalikes. With such robust targeting capabilities, brands can thus depend less on the budget-depleting “spray and pray” method of typical digital advertising.
Let’s say, for example, your subscription brand is a woman’s beauty curation box. Your target customer is rather specific: A subscription-shopping, young female beauty junkie earning a high-enough household income that affords her the luxury of “chancing it” each month with a box of surprise lipstick shades that may or may not complement her skin tone. She’s so passionate about her makeup collection that she’s willing to experiment for the sake of exclusivity, expert curation, and discovery.
In this example, with Programmatic advertising, you could specifically target top-spending Sephora app sharers, engaged followers of your curation box’s influencers, and even top lifetime value (LTV) lookalike audiences using Recharge app data – all ensuring you acquire the most loyal beauty shoppers out there.
Since customer LTV and average order value (AOV) also hold the keys to your subscription success, your marketing efforts don’t stop at the acquisition level. Whether it’s converting a one-time shopper into a subscriber, upselling a long-standing subscriber, or continuing to delight customers and reduce customer churn, retargeting and retention are critical to your business’ bottom line—both of which will benefit from Programmatic’s superior targeting capabilities.
For instance, in the beauty box example, brands could lean on Programmatic’s retargeting capabilities to weed out one-time shoppers and message them with compelling “Subscribe & Save” promotions so as to convert them and increase LTV. Or better yet, advertisers could use data from the Recharge app to target and message long-standing subscribers with “Bundle and Upsell” opportunities that would interest a more engaged existing customer.
Programmatic perk #2: Delivering the right messaging
Reaching the right customer is half the battle; delivering the right messaging to actually convert them is the other. Programmatic exchanges provide access to robust, real-time data about ad placements and performance, so brands can optimize campaigns quickly and accurately at scale.
With Programmatic advertising, your promotional content dynamically generates in real time to complement the shopping wants and needs of each customer you’ve targeted, meaning not only are you reaching the right customer, but you’re delivering the right messaging at the right place and the right time.
With nearly endless copy, image, video, color, promotional and sku variations available, advertisers can dynamically personalize assets that best speak to any given shopper based on interests, location, shopping behavior, the weather—and any other consumer attributes that could impact the effectiveness of your campaign’s messaging.
This level of personalization not only makes the curation box more attractive for each shopper, but it validates and strengthens the brand overall. These days, customers have grown to expect brands to understand their shopping interests and behavior. In fact, according to an Accenture report, over 40% of consumers switch brands due to lack of personalization! Since retention is the name of the subscription game, personalizing your messaging is a surefire way to capture not just the interest of customers, but brand loyalty.
Programmatic perk #3: Paying the right price
If Programmatic advertising is starting to sound too good to be true, you may be asking, “Well, how much is this going to cost me?”
While the Programmatic payoff has the potential to be massive, the price tag it bears is relatively affordable. For starters, Programmatic advertisers pay only for ads delivered to the relevant audience at the right moment in the customer journey, meaning any dollar spent is essentially a dollar earned.
Then there’s the issue of CPMs (cost per 1,000 impressions). As more and more Apple users opt out of tracking in an iOS 14+ world, Paid Social audience sizes continue to dwindle, and as a result, the real estate for which brands can run ads does along with them. With the increase in competition, especially during heavy shopping periods, CPMs in 2021 consequently shot up north of $8 on average on major Paid Social channels.
However, despite the iOS 14+ rollout, CPMs remained low and steady for Programmatic at just $2.50 (peaking at $4.26 during the busiest holiday promotion period, Black Friday and Cyber Monday).
One MuteSix and Recharge client who benefited from both the advanced targeting capabilities and cost efficiencies of Programmatic in 2021 was Highline Wellness, the subscription-based brand behind elevated CBD gummies. With 77% of their acquisition conversions and 91% of their retargeting conversions attributed to lookalike audiences with a $2.54 CPM, the ROI generated from the subscription-brand’s Programmatic efforts had surpassed all expectations.
The right way to subscribe to programmatic advertising
As subscription business and Programmatic buying continue to boom in popularity, advertisers should pay close attention to how they intersect to solve challenges and win success for brands.
Because of the complexity of the tech stack and the expertise required to use it correctly, we recommend partnering with a digital marketing agency with a dedicated Programmatic team that can strategically introduce Programmatic buying into your Paid Media mix.
MuteSix’s Programmatic team provides an added layer of intelligence with a wealth of experience in performance-based Programmatic across e-commerce verticals for a variety of subscription-based clients.
For a free marketing consultation to learn how Programmatic can exponentially grow your subscription brand, reach out to the MuteSix team of experts today.