Inflation often triggers consumers to assess their budgets and rethink essential spending and lifestyle changes. Included in this evaluation are subscription choices. New research, Subscription Economy: a Transformed World, from FT Strategies, Savanta, and Minna Technologies’ identifies the impact of current marketplace conditions on consumer attitudes toward subscriptions.
This research surveyed over 1,000 consumers in the U.S. and the UK, 20 financial services, fintech, and media leaders, and 50 subscription business executives across different content verticals.
The report shows that 25 to 34-year-olds have the most subscriptions, with only 12% reporting no subscription services. The research also indicates that approximately one-third of consumers in the 25 to 54 years old bracket have six or more subscriptions. While 73% of consumers pay for the services they use, 23% pay for some of their services while also using password sharing of accounts paid for by family and friends.
Notably, nine in 10 respondents (93%) report greater awareness of subscription spending than 12 months ago. Nearly half of the consumers state that they know their exact spending on subscriptions and said they are spending more than they did a year ago.
Discretionary spending decisions
Consumers also report that non-discretionary spending (including broadband, utilities, and financial services) on entertainment-based services ‒ TV and film streaming services are the most common subscription-based spending across all age groups. However, entertainment-based subscription offerings are the most likely to be canceled.
In terms of churn, 20% of consumers say they would first cancel TV and film services, followed by music-related consumer services (11%), TV channels (8%), and magazines (7%). Interestingly, younger consumers, ages 18-34, are the least likely to cancel TV and film services first.
Media business leaders identify the ‘watch and go’ mentality of consumers as a critical problem for video streaming services. Half of the executives note that their churn rate is higher this year than last year and are worried about a global rise in subscription cancellations.
Customer focus and retention
Consumers believe subscription services should deliver exceptional user experience, choice, and customer support. Business leaders interviewed by FT Strategies agree and think that subscription businesses must understand their customers’ functional and emotional needs to deliver a first-class customer journey. Further, as consumers understand that their data is part of the value exchange for services, they expect this information to inform a better user experience and advanced personalization.
Managing spending and managing subscriptions is a delicate balance. Consumers desire both “flexibility and control.” Nearly three-quarters of consumers (74%) say they are interested in a single app to manage all subscriptions in one place.
Subscription market forecast
- Consumer interest in bundled offerings where several providers make their services available within a single, shared platform will grow. Consumers want to make their money go further, and bundling services may help, i.e., Disney’s exploring how to bundle its theme park benefits alongside its Disney+ content subscription service.
- Consumers are also looking for trusted sources of information and thought leadership. This will lead to more subscription offerings incorporating experiential-like events and one-to-one interaction with specific influencers.
- Subscriptions and personalization will expand into new business verticals, especially among financial products that offer more control and convenience over consumer financial needs.
The report concludes with retention strategies to create a meaningful and ongoing customer relationship. Subscription businesses must invest in personalization and deliver a positive user experience to meet consumer expectations. If they do not, consumers will easily switch to other services. The customer experience should include pricing sensitivity and choices – i.e., offering a subscription pause option instead of only canceling. Subscription businesses need to identify the right mix of choices and provide a positive value exchange to drive subscriber loyalty and retention.