Growth In Subscriptions: 8 Reasons for the Explosion

By Ray SchneebergerAugust 20, 2019

The subscription market has grown by more than 300% over the past seven years, according to data published by subscription technology provider Zuora, and it’s estimated U.S. consumers now spend $2 billion each month on subscription services. A long list of changes to how consumers shop and digest content have contributed to this development.

  1. Americans access the internet via mobile devices more than ever. In fact, as of this year, time spent on mobile devices surpassed time spent watching TV. To accommodate needs to be online, our smartphones are always right beside us. That makes shopping from our desks or our armchairs easier, too.
  2. Technology has reduced barriers to entry in many markets. As a result, it’s much easier for small- to medium-sized businesses to compete head on with large market leaders, thereby disrupting the old model that offered limited consumer choice and higher average price points.
  3. Whatever the need, there seems to be a subscription to placate it. From cars to luxury travel and from books to puzzles, there are subscriptions to satisfy just about every one of our desires. Some subscription products – like razors – rack up a long list of brands competing, while other subscription services (like Arby’s branded winter wear) carve out and own their niche markets.
  4. Subscription programs help brands collect robust first-party data. Especially in a world of changing search and social algorithms, first-party data is marketing gold. In addition to helping marketers better understand, segment and connect with their customers, first-party data lets brands control their conversations. With robust subscriber lists, brands can communicate with their customers on their own schedules via messaging channels like email and SMS.
  5. Subscriptions help consumers budget. It’s no secret Americans are in debt. According to a May report from Experian, on average, we have credit card balances of $6,506. And 23% of Americans are using credit cards to pay for necessities, like rent, utilities and food. With subscription programs, payments are typically small and monthly, helping consumers budget and reducing our need to save up for big purchases.
  6. Subscriptions are innovative. New generations like to do things their own ways, and subscriptions are allowing heritage brands to reinvent themselves for younger shoppers. Rather than starting from scratch with new brands, many companies are relaunching products and services as part of subscription offerings that better appeal to today’s mindset. They’re turning the old into something new again.
  7. Shopping has transitioned away from ownership. In the past, ownership was the depiction of success. But attitudes regarding ownership have shifted, and experiences trump long-term possession. Whether renting cars, clothes or condos, we seem to prefer temporary, immediate rights to delayed, permanent ownership.
  8. Subscriptions represent simplicity — for both consumers and brands. Subscriptions give customers the convenience of products delivered to our doors at regular intervals. Meanwhile, for brands, subscriptions offer long-term, predictable revenue.

The intersection of mobile usage, ecommerce and shifting consumer purchase behavior has created a meaningful expansion in the subscription market. But that’s not to say everything is roses in the world of subscriptions. As the subscription market matures, subscription models come and go. Curated boxes, for example, once dominated by entrepreneurs, are now most frequently operated by large CPG and retail brands. Car subscriptions, as another example, have tested a variety of models, and it is not clear yet what type of car subscription will appeal to the masses.

For subscription marketers, success means being “always on” and continuously creating reasons for customers to stay, versus following the old model of relying on making it hard for customers to leave. Subscription success is rarely the result of an innovation thrown quickly to market. Meticulous audience and competitive research, financial modeling and market feasibility should precede any subscription go-to-market efforts.

Gartner predicts that, by 2023, 75% of organizations selling direct to consumers will offer subscription services. With careful planning of a clear and easy-to-understand value proposition and diligent, retention-focused promotions, subscription marketing can help brands leverage shifts in consumer habits to secure loyal subscribers and brand advocates, capturing their shares of the growing subscription economy.

To hear more from Ray in person, be sure to join us for Connect to Convert at the Westin Boston Waterfront, September 25-27, where Ray will be speaking on Subscription Marketing. Register Here!

 

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