With success stories like Peloton, Harry’s, and Birchbox, the subscription economy has been steadily growing over the past few years, but this growth has dramatically accelerated over the pandemic.
Enforced changes in buying behaviour has seen consumers looking online not only to buy their pre-pandemic brands but also looking at new ways to buy and new brands that can help them buy in better ways.
Short-term trend or lasting growth?
The DMA reported that customers’ interest in subscription-based buying has increased significantly over the past year. Consumers are buying more personal hygiene products (15%), clothes (15%), beauty and cleaning products (14%) and alcohol (13%). 45% of consumers streamed live television at least weekly, up from 20% in 2017, and over a third of consumers have subscribed to a paid next-day delivery service (e.g. Amazon Prime) – 9% more than two years ago.
So, is it a trend that’s going to continue when the pandemic finally comes to an end? Social distancing and lockdowns have undoubtedly led to many turning to online services, in part due to necessity and convenience but also in part to regulate their spending.
While it’s hard to predict precisely how many people will continue to get their coffee, washing tablets, and toilet roll delivered from monthly subscriptions and how many will gradually return to old habits, the shift towards online services looks set to continue across many industries.
More and more our lives are evolving towards digital services, as we demand, simple, flexible, and scalable propositions that enable us to better control where, and how much we want to consume.
What does that mean for the creative, digital and tech industries? It means we need to be on top of the opportunities and challenges around the subscription economy. Whether it’s working with clients who want to move to subscription-based services or making the shift with your own services, you’re ready for action.
Transparency and trust are key
With a subscription model, transparency is key. From the messaging to the data collection, from the initial sign-up to the ongoing communication, it’s a different type of relationship that requires different considerations. Be open and honest with your customers, about what you’re doing with their data, your pricing and what to expect at every stage.
It’s a two-way relationship, not a one-off transaction so every touch point needs to be considered. Subscriptions shouldn’t feel like a weight around their neck but an easy way for customers to control their purchasing. Think about when and how customers might want to amend or pause your services, openness and empowerment can build long-term loyalty.
Play the retention game
Acquiring a customer is only the start, especially if it’s a customer obtained in the pandemic. Truly understanding what they want and need from your service and the experience you provide is vital. And as more companies move to subscription models it’s important to stop heads from being turned, to reward loyalty and keep the user experience and brand interaction fresh and engaging.
Focus on value
The way you communicate your offer needs to go beyond the product or service and beyond just price. It needs to show the real value that you bring, whether that’s ease and accessibility, personalisation, ability to control and pause services, or loyalty bonuses. Focusing on this long-term value rather than one-off low prices is key to sustaining growth.
The combined forces of climate change and the global pandemic have made many re-evaluate habits and lifestyles. The consumer demand for sustainability is a natural partner to the subscription economy and any business looking to shift to a subscription model should connect the two in the product they offer, the way they deliver services, and their future vision.
A model that’s here to stay
Undoubtedly the growth of the subscription economy has been accelerated by the pandemic. But like many we’ve seen over the past 12 months, it’s a shift that was already on the horizon, particularly with younger demographics. It’s a change in consumer culture that presents huge opportunities for the tech community, brands, and businesses across all kinds of sectors. Those that put a focus firmly on developing great experiences and peak moments rather than just great products and services will avoid high churn rates and be well set for growth and profitability.
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