How One of Our Own Portfolio Brands Taught Us When to Use Subscriptions vs Volume Discounts and What It Did to Customer Lifetime Value

Most DTC brands approach average order value and customer lifetime value as separate problems. Increase AOV with volume discounts. Improve CLV with email. Run both in parallel and hope they compound. That is a reasonable starting point but it is not a system. It is a collection of tactics.

One of our own portfolio brands taught us something more useful. It taught us that the mechanism you use to increase AOV has a direct and measurable effect on CLV, and that choosing the wrong mechanism for your product type can quietly cap your growth even when the numbers look fine on the surface.

This article is a full breakdown of how we diagnosed that problem, what we changed, how we structured the solution, and what the numbers looked like after. It is also a practical framework for deciding whether subscriptions or volume discounts are the right move for your specific brand, because the answer is not the same for every product.

44%

CLV Growth in 3 Months

1.5x

Avg Units Before Change

Fast

Implementation

The Volume Discount Logic and Why It Was Not Wrong

Before we get into what we changed, it is important to be clear about something. Volume discounts are not a bad tactic. The reasoning behind running them on this brand was sound.

The product was a consumable in the premium skincare range. It finishes. It needs to be repurchased. The logic was straightforward: if a customer buys more units at once, they have more product in their hands, they are more motivated to use it consistently to get their money's worth, and they are more likely to see results. Better results mean higher satisfaction, higher reviews, and a stronger foundation for repeat purchase.

That logic holds. Volume discounts on consumable products are a legitimate tactic and there are categories where they are the right call. We will come back to that.

The problem was not the tactic. The problem was what the data was telling us when we looked at it honestly.

The Number That Changed Everything

When we analysed the volume discount performance the average number of units per order was 1.5. On a product with buy 2 and buy 3 discount tiers that is a signal worth paying attention to.

It meant most customers were buying one unit. A portion were buying two. Almost nobody was buying three. The volume discount structure was generating a small AOV lift but it was not driving the bulk purchasing behaviour it was designed to create.

More importantly the returning customer rate was sub 1%. Customers were buying, using the product, and not coming back. The volume discount was optimising for the first transaction. It was doing almost nothing for the relationship beyond it.

The question was not whether volume discounts were working. The question was whether we were solving the right problem. AOV on the first order is one metric. Customer lifetime value across multiple orders is a different and more commercially significant metric entirely.

Key Insight

"A tactic that improves AOV on the first transaction can actively work against CLV if it trains customers to buy in bulk once rather than return regularly. These are not the same problem and they require different solutions."

On Making Decisions Quickly When the Risk Is Reversible

Before getting into what we changed it is worth addressing something about how we made the decision because it is relevant to how any operator should think about changes like this.

There was internal resistance. When something is working nobody wants to change it. The default position in most organisations is some version of if it is not broken do not fix it. We actively push against that kind of thinking because it is driven by comfort not logic.

The real question when evaluating any change is not whether it feels risky. The real question is whether the decision is reversible. Removing volume discounts and adding a subscription option is an entirely reversible decision. If it did not work we could put the volume discounts back in 24 hours with zero negative externalities.

Spending significant time deliberating on reversible decisions has a poor return on investment. The cost of getting it wrong is low. The cost of being slow is also real because every week spent deliberating is a week without the potential upside. We made the call quickly, implemented fast, and committed to measuring the result rather than managing the fear.

This is a principle we apply across every brand we operate. Let the data lead. Move fast on reversible decisions. Reserve extended deliberation for decisions that cannot be undone.

Operator Principle

"The time you spend deliberating on a reversible decision should be proportional to the cost of getting it wrong. If the downside is easily undone, decide fast, implement, and measure. Slow decisions on low-risk changes are not caution. They are a waste of operating time."

How We Structured the Subscription Offer

The subscription offer had to do one thing above everything else: make the value of subscribing feel obviously better than buying once. Not marginally better. Obviously better.

Most subscription offers in DTC give customers a discount and call it a value proposition. A 15% discount on a repeat order is not a compelling reason to commit to a subscription for most customers, particularly on a premium priced product where trust in the brand is still being established.

We structured the offer around four components:

1. Free shipping on every subscription order

2. A free gift included with each order worth as much as the core product itself

3. A 10% discount on the subscription price

4. Full flexibility -- customers can skip orders or cancel at any time with no friction

The free gift is the component that made the offer work. It was a complementary product with a low cost of goods but a high perceived value to the customer. From a margin perspective the gift was affordable. From the customer's perspective they were getting two products for the price of one plus a discount plus free shipping. The value gap between subscribing and not subscribing was immediately obvious.

The flexibility element is also important and often underestimated. One of the primary objections to subscribing is the feeling of being locked in. Removing that objection explicitly in the offer copy, making it clear that skipping and cancelling are easy and frictionless, lowers the psychological barrier to committing significantly.

The AOV Dip and Why We Did Not Panic

When the subscription model launched and the volume discounts were removed, AOV dropped. This is expected and it is the moment where a lot of operators make a mistake.

An AOV drop in month one of a subscription model launch looks like a problem if you are only watching AOV. It is not a problem. It is the natural consequence of shifting from a buy more now model to a come back regularly model. The revenue is not disappearing. It is being redistributed across more transactions over a longer customer relationship.

The AOV impact was also cushioned by the cart upsells and post purchase upsells we had implemented as part of the broader funnel rebuild, which we cover in detail in Part 3 of this series. Those upsells were now working with a subscription base rather than against a volume discount structure, which meant the economics of each transaction were still healthy even with a lower headline AOV.

Within three months CLV had grown 44%. The AOV dip was real and temporary. The CLV growth was real and compounding. Operators who reverse subscription decisions because of a first month AOV drop are solving the wrong problem.

44%

CLV Growth

20%

Returning Customer Rate

2x

Overall CLV vs Before

When Subscriptions Make Sense and When They Do Not

This is where the tutorial element of this article matters most. The subscription model worked for this brand because the product conditions were right for it. Not every product meets those conditions and applying a subscription model to the wrong product type will create churn, frustration, and a worse customer experience.

Subscriptions work best when:

• The product is consumable and finishes within a predictable timeframe

• The customer needs the product periodically to maintain a result or routine

• Repurchase is a natural behaviour rather than a considered decision each time

• The product has enough margin to absorb the cost of a meaningful incentive

Volume discounts work better when:

• The product has a long use cycle and does not need regular repurchasing

• The customer is likely to buy once and use the product for months or years

• The category is one where variety or novelty drives repeat purchase rather than routine

A practical example. If you sell socks, volume discounts make more sense than subscriptions in most cases. A customer buys socks, uses them, and does not need new ones for a long time. They are not going to subscribe for monthly sock deliveries unless you are releasing new designs or limited drops each month, in which case the subscription is actually a product and community model, not a replenishment model. For socks the stronger play is volume discounts on the first purchase combined with strong email marketing to stay top of mind when the customer is eventually ready to buy again.

For a skincare consumable that finishes in four to six weeks and needs to be replenished for the customer to maintain their routine, subscriptions are the natural model. The repurchase behaviour already exists. The subscription just captures and formalises it while adding value to the customer for doing what they would likely do anyway.

The Core Question

"Before choosing between subscriptions and volume discounts ask one question: does my customer naturally need to repurchase this product within a predictable timeframe? If yes, subscriptions are worth testing. If no, volume discounts or strong email retention are likely the better lever."

How to Reduce Subscription Churn

Churn is the metric that determines whether a subscription model compounds or leaks. Customers cancel subscriptions for one primary reason: they stopped finding value. Everything else is downstream of that.

• A rewards ladder with milestone incentives. At month three the customer gets something. At month six they get something more significant. At month twelve they reach a meaningful tier. This gives subscribers a reason to stay beyond the product itself and creates a dynamic that compounds over time

• Email that is genuinely useful, not just promotional. Subscribers who feel educated and supported by the brand are significantly less likely to cancel than subscribers who only hear from the brand when there is something to sell

• Setting expectations correctly from the start. Customers who know exactly what they are getting, when they are getting it, and how to manage their subscription have fewer reasons to cancel out of frustration

• Making cancellation easy. A cancel flow that respects the customer's decision and offers a genuine alternative converts a portion of cancellations into retained subscribers

  
  

What the Numbers Led Us to Do

The most important takeaway from this entire process is not the subscription structure or the free gift or the AOV dip. It is the principle that made all of it possible.

Whatever you do, let the numbers lead your decisions. The volume discounts were not removed because of a theory or a trend or because someone read that subscriptions were the future of DTC. They were removed because the data showed a 1.5 unit average on a three tier discount structure and a sub 1% returning customer rate. The numbers told us the current model had a ceiling. We listened and we acted.

The subscription model was not validated by confidence or conviction. It was validated by a 44% CLV growth in three months. Before that result it was a hypothesis. After it was a system.

Build the framework. Track the right metrics. Let the data tell you what to do next. That is the operating model.

Want to Build a Subscription Model That Actually Works?

We deploy the same subscription and retention frameworks we use inside our own portfolio brands on a limited number of partner brands. Book a free consultation and we will tell you whether subscriptions are the right move for your brand and how to structure the offer.

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Frequently Asked Questions

Do subscriptions work for every DTC product?

No. Subscriptions work best for consumable products that finish within a predictable timeframe and where the customer has a natural repurchase need. For products with long use cycles or low repurchase frequency, volume discounts or strong email retention are usually the better lever. The deciding question is whether your customer naturally needs to repurchase within a predictable window.

Will removing volume discounts hurt AOV?

In the short term, yes. AOV will likely dip in the first month after removing volume discounts. This is expected and temporary. The relevant metric to watch is not AOV in month one but CLV across months two through twelve. A lower AOV per transaction across more transactions over a longer relationship is almost always more commercially valuable than a higher AOV on a single transaction that does not repeat.

How do you decide what to offer as a free gift in a subscription?

The free gift should meet two criteria. First it should have a low cost of goods relative to its perceived value to the customer. Second it should be complementary to the core product so it seeds the next purchase rather than sitting in isolation. A gift that the customer actually wants to use alongside the product they are already subscribing for does two jobs at once: it increases the perceived value of the subscription and it introduces the customer to another product in your range.

How important is flexibility in a subscription offer?

Extremely important. One of the primary reasons customers do not subscribe is the fear of being locked in. Making it explicitly clear in the offer that skipping, pausing, and cancelling are easy and frictionless removes that objection before it becomes a reason not to convert. A subscription model that respects customer autonomy will always outperform one that tries to trap subscribers through friction.

What is a healthy subscription churn rate for a DTC brand?

Churn rates vary by category and price point but as a general benchmark anything below 10% monthly churn is manageable for most DTC subscription models. Below 5% is strong. Above 15% is a signal that either the product is not meeting expectations, the subscription cadence does not match the customer's actual usage rate, or the perceived value of staying subscribed is not high enough relative to the perceived value of cancelling.

How do rewards ladders reduce churn?

Rewards ladders reduce churn by giving subscribers a reason to stay beyond the product itself. When a customer knows they are approaching a meaningful milestone, the cost of cancelling is no longer just losing the product. It is also losing the progress toward the reward. This creates a retention dynamic that compounds over time and is significantly more effective than discount-based retention which trains customers to expect price reductions rather than value additions.

Should the subscription discount be the main incentive?

No. A discount alone is a weak subscription incentive, particularly on premium priced products. The discount should be one component of a broader value stack that includes free shipping, a meaningful free gift, and flexibility. When the total perceived value of subscribing is obviously greater than buying one time, conversion rates on the subscription option improve significantly. Leading with discount as the primary incentive commoditises the product and attracts price sensitive subscribers who are more likely to churn when a cheaper alternative appears.

How do you handle customers who want to cancel their subscription?

Make it easy and offer a genuine alternative before they go. A cancel flow that presents a skip or pause option converts a meaningful percentage of would-be cancellations into temporary pauses. The key is not to make cancellation deliberately difficult. The goal is to surface alternatives that the customer may not have considered and let them make an informed choice. Customers who cancel on good terms are more likely to resubscribe than customers who cancel after a frustrating experience.

Can you run subscriptions and volume discounts at the same time?

Yes, and in some cases it makes sense. If your product range includes both consumables and non-consumables, subscriptions can sit on the consumable side while volume discounts apply to one-time purchase products. The risk of running both on the same product is that you create a confusing value proposition. If the subscription offer is strong enough, a one-time buyer should feel the pull toward subscribing naturally. Volume discounts available alongside a subscription can make the one-time purchase feel like a better deal than committing, which undermines the retention model you are trying to build.

How quickly should you expect to see CLV improvement after launching a subscription model?

In our experience meaningful CLV improvement is visible within 60 to 90 days of a well-structured subscription launch, assuming the product has sufficient existing demand and the offer is compelling. The first month will often show a revenue dip due to lower AOV per transaction. By month two and three the compounding effect of retained subscribers begins to show in the CLV numbers. If CLV has not moved meaningfully by month three the offer structure, the product fit for subscriptions, or the post-purchase experience needs to be reviewed.