It seems everyone is a subscriber, even if they don’t see themselves as part of a generation that enjoys a curated box of make-up or five different streaming channels, subscriptions are quickly becoming ubiquitous. Cars, donations, insurance and more — many businesses that want to stay relevant are scaling their sales models to include subscription programs. And it can be a smart choice in a consumer market increasingly disinterested in ownership, yet motivated by personalized convenience.
Subscriptions By The Numbers
Subscriptions look like they are here to stay. The numbers are growing and not just overall, but sliced and diced by market sector. Even if your business isn’t using a subscription model, your competitors likely are or are planning to. A competitor’s successful subscription model can impact how your customer’s perceive their relationship with your brand, now and in the future.
Some convincing facts about subscriptions:
- The subscription business has grown by more than 100% per year. Sales in 2016 were $2.6 billion, a massive leap from 2011 when sales were $57 million.
- According to global research and advisory company Gartner, by 2023 “75% of organizations selling direct to consumers will offer subscription services. And in its Digital Commerce State of the Union survey, Gartner found that 70% of organizations have deployed, or are considering the deployment of, subscription services.”
- When it comes to entertainment, streaming subscriptions are dominant. 55% of U.S. homes are spending a combined $2.1 billion a month on streaming services.
- Netflix has more than 139 million subscribers, adding 9 million new paying subscribers in 2018 Q4. Hulu also added more than 8 million subscribers in 2018 and Apple TV has now officially launched its streaming service.
- Music streaming services like Spotify now account for 75% of U.S. music revenues.
- Separate from streaming subscriptions, ecommerce offerings, like subscription boxes including Dollar Shave Club, Blue Apron and Ipsy, capture the attention of 5.7 million shoppers. These kinds of services, primarily consumables that are received on a regular schedule, are the most popular subscriptions, with more than 3,500 currently on the market.
- Walmart, Amazon, Target and other major brick-and-mortar retailers are testing out various kinds of subscription models, including boxes or discount offerings. Major corporations are also securing their subscription market shares through acquisition, notably Unilever’s $1 billion pick-up of Dollar Shave Club and Albertson’s $300 million for Plated.
Ownership Isn’t The Destination For Many Subscribers
“Millennials care about doing and having experiences, rather than owning,” says BabyQuip CEO Fran Maier. “We’re taking advantage of that.” The growth of many subscriptions is about meeting a need, rather than helping a consumer acquire a product. Millennials aren’t as interested as prior generations in owning cars, furniture, baby gear or other items that consumers previously considered either marks of success or inevitable.
40% of online retail revenue in the U.S. comes from returning or repeat purchases, meaning that successful subscription business models with loyal users can be a successful revenue source for businesses who are able to effectively drive renewals. Brands implementing subscription services must build in incentives that encourage subscribers to re-up their memberships or alternately spend money elsewhere with the brand. This is a complex undertaking that often requires a number of different approaches to be successful, including user experience, retail incentives and marketing.
Customization And Discovery Appeals To Many Subscription Shoppers
The popularity of subscription boxes can also be attributed to curation and customization, with customers often craving personalization. Many brands, like Stitch Fix – which saw a 25% revenue climb and 25% growth in customer acquisition in 2018 Q4 – have their customers go through detailed questionnaires and lifestyle quizzes prior to signing up. This first step is useful for creating a sense of belonging for the customer and encouraging relationships between brands and consumers. Ideally, special attention also leads to more customer satisfaction and offers the feeling of discovery that 52% of women seek out when enrolling in subscription box services. With so much of subscription marketing rooted in customer retention, product satisfaction is critical.
Although streaming services don’t often engage as directly with customers as curated boxes, Netflix and other streaming services are able to make personalized suggestions based on prior watching and listening habits. The constant addition of new content to streaming services also provides the sense of discovery many users desire, which may encourage renewals. Other subscription services can create personalization through different payment, packaging and renewal options.
Subscriptions Aren’t Really Trends — But Their Power To Innovate Is
Many subscriptions are bill-paying with a fancy name. Consumers have always “subscribed” to cable, leased cars and made regular donations to their alma maters. But in this age of the subscription model, these tasks have cleverly been positioned as a new market trend. The diversity of products and seemingly boundless iterations in subscriptions are really what is setting subscription marketing apart from your grandmother’s monthly bill-paying session. If a customer can conceive of a need, it can likely be met with a renewable, scalable subscription. And those innovations are limitless.