Latest / The DTC Marketing Podcast with Fexingo: Direct-to-Consumer Brands, Shopify, and E-Commerce Growth / How DTC Brands Use Subscriptions to Lock In Retention
Transcript
- Lucas: So a plant-based protein brand I've been watching — let's call it ProPlant, not their real name — launched in 2022 selling individual tubs of powder on Shopify. First year they did okay, around two million dollars in revenue. But their repeat purchase rate was barely eighteen percent. Luna: Yeah, that's the classic DTC problem. You spend thirty, forty dollars to acquire a customer, they buy a forty-dollar tub, and you basically break even on the first order. Lucas: Exactly. So last year they flipped the model. They introduced three subscription tiers: a monthly refill at full price, a bi-monthly at a ten percent discount, and a quarterly 'bulk' option at twenty percent off. They also made the one-time purchase still available, but they buried it behind a toggle. Luna: Did they A/B test that? I remember Dollar Shave Club did something similar — they found that if you lead with the subscription, conversion drops slightly but lifetime value jumps by a factor of three. Lucas: They did. And their numbers match that pattern. The default option was the monthly subscription at forty-five dollars. The one-time purchase was listed in smaller text below. They saw about a thirty percent opt-in rate for subscription on the first visit, which is actually high for a food brand. And within six months, the subscribers had a sixty percent higher lifetime value than one-time buyers. Luna: Sixty percent. But churn — what was their churn rate on those subscriptions? Lucas: That's the interesting part. Monthly subscribers churned at about twelve percent per month in the first three months. But the bi-monthly cohort churned at only six percent, and the quarterly bulk churned at four percent. The lower-frequency tiers actually retained better, probably because the commitment felt smaller and the discount felt like a reward. Luna: So the people who chose the deepest discount were the most loyal. That makes sense — they're self-selecting as committed users. Lucas: Right. And the brand leaned into that. They sent a different onboarding email sequence to each tier. For the monthly subscribers, the first email was about 'making ProPlant a daily habit.' For the quarterly subscribers, the first email was about 'stocking up for the season' — they even included a recipe ebook for bulk prepping shakes. Luna: I like that. It's not just pricing — they're changing the narrative around why you're buying. Lucas: Exactly. And the activation rate — meaning the percentage of new subscribers who actually consumed the product within the first week — was forty percent for monthly but fifty-eight percent for quarterly. The quarterly buyers felt more invested. They had a larger commitment sitting in their kitchen. Luna: There's a behavioral economics angle there too. The sunk cost fallacy, but in a positive direction. Once you've got three months of powder on your shelf, you're more motivated to use it. Lucas: And that usage drives repurchase. The quarterly subscribers had a ninety-day reorder window, but the brand found that most of them actually reordered around day seventy-five — they didn't want to run out. So the brand started offering an 'early refill' option at day sixty with an extra five percent off. That lifted average order value by another eight percent. Luna: That's a smart micro-intervention. But I want to push back a little. Subscriptions work great until the customer decides they want out. And there's growing data on subscription fatigue. A McKinsey study from late 2025 showed that the average US household now has four active subscriptions — not just streaming, but physical goods. And about a third of those are underutilized. Lucas: That's real. And ProPlant saw it too. Their monthly churn actually spiked to eighteen percent in month four — the 'fatigue bump.' So they introduced a 'skip a month' feature that didn't cancel the subscription, just paused it. That cut churn in that cohort from eighteen to nine percent. Luna: That's a huge improvement. And it's a much better customer experience than forcing someone to email support to cancel. Out of sight, out of mind — but if you let them skip, they stay in the ecosystem. Lucas: Exactly. And the brand actually used that skip data to learn something. They found that most skips happened in December — people had holiday spending, they didn't need the product. So they sent a 'holiday skip reminder' in November, and users who proactively skipped actually had higher retention in January than those who didn't skip. Luna: Because they felt in control. The brand trusted them, so they trusted the brand back. Lucas: That's the thesis. And it shows up in the net promoter score. Subscribers who had ever used the skip feature had an NPS of sixty-two, versus forty-eight for those who never skipped. The ones who felt empowered were more likely to recommend the brand. Luna: So what's the downside? I mean, subscriptions sound great for cash flow — you get predictable revenue, you can forecast inventory better. But there has to be a catch. Lucas: The biggest catch is inventory bloat. If you're a small DTC brand and a hundred subscribers all skip in the same month, you've got three hundred tubs sitting in a warehouse that you already paid for. That's cash tied up. ProPlant managed it by moving to a made-to-order model for their quarterly bulk tier — they only produced those tubs after the order came in, which reduced inventory holding costs by twenty-two percent. Luna: That's smart, but it only works if you have a flexible supply chain. A lot of DTC brands are still using third-party logistics that require minimum runs. Lucas: True. But ProPlant negotiated with their manufacturer to do smaller, more frequent runs. They went from one big run every quarter to a weekly pull system. That gave them the flexibility to handle the skip variability. Luna: And they probably got better unit economics because they reduced waste. Lucas: Exactly. Their gross margin actually improved by three points after the switch, because they were throwing away less expired product. Before the subscription model, they had a nine percent spoilage rate. After, it dropped to three percent. Luna: So the subscription model didn't just lock in revenue — it made their operations leaner. Lucas: That's the part I think a lot of brands miss. They see subscriptions as a marketing tactic, but it's really an operations strategy. The way you structure your subscription tiers affects your inventory, your cash conversion cycle, your customer service load. Everything is connected. Luna: I want to zoom out for a second. Dollar Shave Club is the classic subscription success story — but they eventually got acquired by Unilever and then struggled with subscription fatigue themselves. Is there a risk that ProPlant hits a ceiling where the subscriber base plateaus? Lucas: There is. And the data shows that after about eighteen months, subscriber growth naturally slows. ProPlant hit that around month twenty. So they launched a referral program specifically for subscribers — if a subscriber referred a friend, they got one month free. That lifted new subscriber acquisition by fifteen percent in the first quarter. Luna: That's interesting because referrals from subscribers tend to have higher retention than other channels. The referred customer already has a social proof point. Lucas: Yep. And the referred customers had a twenty percent higher activation rate than customers from paid ads. So the whole flywheel started feeding itself. Luna: One more thing — pricing. You mentioned the tiers. Did they ever raise prices? Because that's a big fear for subscription brands. Lucas: They did, actually. In early 2026, they raised the monthly price from forty-five to forty-eight dollars. They grandfather-ed existing subscribers for six months, then moved them to the new price. They only lost about four percent of their subscriber base from that change. The remaining subscribers actually had higher lifetime value because the revenue per customer went up. Luna: That's a low churn rate for a price increase. The grandfathering probably helped — people felt like they got a deal for a while. Lucas: Absolutely. And they communicated it transparently — an email from the CEO explaining that ingredient costs had gone up and they wanted to maintain quality. Customers appreciated the honesty. Luna: So what's the one takeaway for a DTC brand thinking about launching a subscription? Is it always worth it? Lucas: I'd say test it with a single tier first, maybe a monthly option. See if your existing customers convert. The brand I studied had a two percent conversion rate from one-time buyers to subscribers when they first launched the option. That's not huge, but those two percent generated forty percent of the revenue in the following twelve months. Luna: That's a pretty compelling argument. And if these marketing conversations have sparked something you've actually used in your own business, that's the kind of thing that keeps this show ad-free and sustainable. Lucas: Yeah, honestly, if today's episode was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. We keep it simple. Luna: It helps us keep bringing you these deep dives without any sponsor interruptions. Lucas: Back to ProPlant — the last data point I'll share is that their overall subscriber churn after two years stabilized at around six percent per month. That's not amazing, but for a food brand, it's solid. And their customer lifetime value for subscribers hit four hundred and twenty dollars, versus a hundred and sixty for one-time buyers. Luna: So the subscription model basically tripled the value of each customer. That's hard to argue with. Lucas: It is. But it requires a deliberate operational shift — not just a pricing page change. The brands that treat it as a product in itself, with its own onboarding, its own skip logic, its own inventory planning, those are the ones that see the numbers work. Luna: And maybe the ones that don't treat their customers like locked-in revenue sources, but like partners in a recurring relationship. Lucas: Exactly. Thanks for listening.