The servitization of products is something that we cover regularly on diginomica, particularly as it relates to future Internet-of-Things business models. Enviroscent, a company that sells fragrance products for homeowners and businesses, is one such company pursuing recurring revenues by wrapping a service around its traditional products.
Enviroscent started out selling scented ornaments that hang from fake Christmas trees to give them a ‘real tree’ smell, but has since expanded to broader fragrance products in the home and in businesses. However, its focus is shifting to a new scent machine – which is driving revenue on its website – whereby customers can choose different subscription models for what fragrance they want and how often it gets delivered.
Jeremie Baker, director of operations and technology at Enviroscent, was speaking at SuiteWorld this week in Las Vegas, where he explained that whilst the subscription model is still a small part of the company’s overall business, it is growing and the primary focus for web revenues.
However, whilst Enviroscent uses NetSuite on the back-end, the vendor’s Commerce platform doesn’t currently work with its billing platform to support subscription/recurring revenue purchases. As a result, Enviroscent has build out its own custom capability to take advantage of the new services it is offering.
Over the last five years we have had upwards of 58% growth, we believe in our product and it’s got a natural platform – there’s more fragrance in the product, it will last longer, it’s better for you, it’s natural.
Our web driving revenue product is a scent machine. We have a parent company that builds a bigger model, it’s more industrial, for hotel lobbies etc. We sell the residential version of that, which you can buy for your home and scent for your house. We also have retailers that buy it.
This is what our subscription model was written on and designed for. It’s a machine and a cartridge, which is refillable. We wanted to figure out how to drive recurring revenue through the website and support the machine.
So we have created an easy solution for those that love the product, want the product, can receive their refill when they need it. We want to get a base of fans, grow that, sustain that and provide support for the fragrance machine. Secure that recurring revenue.
Enviroscent currently offers two different subscription models for its customers. It has a ‘fragrance of the month club’, where Enviroscent selects 12 different fragrances for subscribers each year and ships them out to customers on the first of the month, with a 20% discount off the retail price. Then there’s the standard subscription service, which allows customers to pick any fragrance they choose and get it delivered on either a monthly or quarterly basis.
Customers have the ability on their account to go and manage their own subscription, which means that they can cancel at anytime, increase or decrease the quantity, and change it from monthly to quarterly (or vice versa).
Initially this service had been managed by NetSuite’s copy-order function. However, this created problems because it kept all of the data and the data wasn’t updated or easily managed by someone in a customer care role. For a customer care agent to make a change they would have to go and find the original order and manage it in that way.
However, with the new custom script that has been built by Enviroscent, customers are now able to manage the subscriptions themselves on the back-end. Baker said:
So what happens, when someone places an order on our website, in the back-end we are creating a custom record that is managing the line item on that sales order that was flagged as a subscription product. And then we have all of the details for that order that can be managed by a user on the back-end.
We’ve got the customer, the item, how many is in the subscription, the location we are shipping from, how it’s being shipped, if we are charging shipping charges on the order, the next ship date. On the monthly basis we have a script that will go out and grab every one of these records that are supposed to ship today and then generate a sales order for the warehouse to go pick, pack and ship that next bundle of orders.
We also take this in group, anybody that has multiple subscriptions, we group that into one sales order, as opposed to four sales orders. So there’s logic in the back-end to grab them and combine them into one.
However, there’s still more work to be done. He added:
It’s a scheduled script to run every month and we have so many records and subscriptions now, that the script can’t run long enough – it airs out. So there’s some work that we are going to do with our partner to fix that script. Right now we just schedule on two or three times a day, to run those and so that it goes back and picks up the ones that were missed the first time.
Whilst this is still a relatively small business for Enviroscent within the context of its smaller business, Baker said that it is the biggest driver of its online revenues and is a quickly growing business.
Also, the nice thing about a subscription business, providing you are providing your customers a good service, the revenues just keep rolling every month. Baker said:
The growth of the revenue year over year – in 2016 our subscription only business was about $254,000, versus 2015 of $165,000. You may not think that that’s a lot for web revenue, but that’s 4% of our total revenue. We don’t market our website very much, it’s the subscription business for the machine and cartridge that really drives that number.”
It’s a quick and basic subscription model that’s sitting there in our website and is sitting in our website generating some good revenue for us, we don’t have to do a whole lot.
Image credit - Image sourced via Enviroscent website.
Disclosure - NetSuite is a diginomica premier partner at time of writing.