What subscription consumers want (and don’t want) now

The subscription industry may be bigger than you think. Globally, this is approximately $3 trillion, according to the Subscription Trade Association (SUBTA). Only six countries in the world have a larger economy.

Most of them fall into three categories: streaming (e.g. Netflix
Netflix
and Spotify), retail memberships (such as Prime and Costco), and digital subscriptions (Masterclass, New York Times
New York Times
Wall Street Journal and of course Forbes).

Because subscriptions are such a huge business, some of the smaller parts of it, such as subscription e-commerce products, cost more than $300 billion.

And it’s still growing. Globally, SUBTA expects business to grow by 50% in 2024¹ . This doesn’t necessarily mean that all subscription businesses are selling 50% more this year. Growth is more likely as more companies sell through subscriptions.

Why do consumers subscribe?

The three most important reasons given by consumers are:

• Free trials that encouraged them to subscribe
• Price
• It’s more convenient

And that explains the things you see like Amazon
Amazon
“try before you buy” program and other conveniences and clever ways that companies use to encourage consumer action.

However, once they subscribe, the convenience factor may become more important than price, or consumers may like the product enough to order more varieties. This is especially true in the beauty and personal care sector, where the average order value of subscription companies has increased by 12% year over year, well outpacing inflation.

According to the SUBTA report, consumers now overwhelmingly want “bundling,” where they can buy and pay for multiple subscription services for one fee.

A challenging organization for brands should lead to synergies and an increase in the number of strategic mergers of subscription companies. We’re already seeing this in the streaming market, with Disney+, Hulu and Max offering a combined package starting this summer.

If a consumer is under 45, the best way for a subscription brand to reach them is through social media advertising. Not surprisingly, beyond this age, television and email are much more effective.

However, seniors are not resistant to subscriptions, in fact they benefit from automatic prescription drug refills and are much more likely to fill their prescriptions when they are delivered via subscription.

Canceling your subscription

Paradoxically, one of the most important ways to attract consumers to a subscription is to make it easier for them to exit. If consumers feel it’s easy to leave, they’re much more likely to resubscribe. Because former customers are often the best prospects and the cheapest to sell, easy-to-abandon strategies are a great tool for re-acquiring customers.

Paul Chambers, SUBTA’s chief executive, says resubscribing “may not be worth it for some customers.” Chambers believes the answer is “technology that can transform this experience into a seamless process.”

While consumers who like a subscription may buy more after purchasing it, it also works the other way around. Two of the top three reasons for unsubscribing are to cut down on spending and the price being too high.

A survey by SUBTA shows that 72% of consumers know the exact number of companies they subscribe to. This means that more than a quarter are not aware of all the subscriptions they have, and when they do find out, they are likely to be a candidate for unsubscription.

There is a real need for regular communication with consumers to keep them informed about what they are paying for and why it is of value. This is also an opportunity for subscription manager services such as Rocket Money, Mastercard Smart Subscriptions and Visa
Visa
Subscription Manager.

Consumers seem more fluid than ever before in their subscription behavior. For the second year in a row, streaming services were both the most popular and most canceled subscriptions.

What’s not in the data

Every day, more and more categories and products are sold via subscription. When you think about it, most things you buy at the supermarket that don’t contain produce or protein can be purchased on a subscription basis (e.g. spices, household items, breakfast items and other complementary products).

Most retailers deserve at least some of their business to be subscription-based. It’s only a matter of time before the subscription channel covers almost every type of product available.

The reasons for the subscription increase are simple. It’s convenient, it’s profitable and consumers want it. When these things are true, nothing else matters.

¹ _{An annual report on the subscription commerce industry outlook for 2024 from SUBTA, which will be published at the annual summit on June 17.}