The Subscription Economy in 2021


 

How has the subscription economy evolved, both from a consumer and a brand perspective?

 


With endless options comes the feeling of being overwhelmed. While having a variety of options can be beneficial to consumers, too many options in a market can backfire. Consumers, especially right now, crave ease and convenience.

Subscription services provide both of these elements, usually with a curated selection of valuable products within an industry (such as coffee packages, pet products, makeup kits, or streaming services) right to someone's door. In the pandemic, this is especially valuable considering travel and in-person shopping isn't always possible or desirable, 

According to a study by susbcription service Zuora, "subscription businesses have grown nearly six times faster than the S&P 500 over the last 9 years," with 78 percent of international adults subscribing to a service.

In addition, the study found that businesses with subscription models or services increased revenue in 2020, stating, "subscription businesses in the SEI (Subscription Economy Index) demonstrated revenue growth at a rate of 11.6 percent, while revenues of its product-based peers declined, changing -1.6 percent."

Denise Karkos, CMO at SiriusXM and Pandora, stated at a 2020 ANA event that ultimately marketers have to build "a 'where will growth come from' strategy," which sums up how the advertising world needs to move forward: by catering to consumer needs and pain points.

Below are resources and trends on subscription services. 


Resources
 

  • The Subscription Economy Index. Zuora, March 2021.
    Subscription businesses have grown nearly six times faster than the S&P 500 over the last 9 years, driven by an increase in consumer demand for the use of subscription services, according to this study, which provides information about subscriptions in a variety of industry verticals, including healthcare (defined as including "healthcare software, health and personal care stores, nursing and residential care facilities, medical equipment, and supplies manufacturing") as well as telecom, manufacturing, business services, media, publishing, and education. Other findings:
    • 78 percent of international adults currently have subscription services (significantly higher than 71 percent in 2018), and 75 percent believe that in the future, people will subscribe to more services and own less physical "stuff."
    • Subscriptions increase brand connection. Nearly two thirds of subscribers (64 percent) feel more connected to companies with whom they have a direct subscription experience versus companies whose products they simply purchase as one-off transactions.
    • Consumers want to pay for what they use. Nearly three quarters of international adults (72 percent) would prefer the ability to pay for what they use, rather than just a flat fee.
    • Convenience, cost savings, and variety are top subscription benefits. Convenience (42 percent) tops the list of benefits for subscribing to a product or service instead of owning it, followed by cost savings (35 percent) and variety (35 percent, up from 32 percent in 2018).
  • Prime, Chewy and Walmart+ Are Top Subscription Services Among Consumers. IRI, March 2021.
    From IRI's Consumer Connect: Loyalty Snapshot report, their survey found these to be the most subscribed to services:

 

  • Creating Consumer and Business Value with Subscriptions. McKinsey, May 2021.
    Subscription businesses — in which consumers periodically pay a predetermined amount for a service or set of goods — have emerged as one way to use data to reimagine retail businesses. Collectively, they grew more than 300 percent from 2012 to 2018, about five times faster than revenues of S&P 500 companies. Not only can the subscription model drive greater average spend, launch a virtuous cycle of using data to better serve consumer needs, and inspire loyalty, it provides value to consumers who appreciate the convenience, novelty, and curated experiences.

  • The Rise of the Subscription Economy. The Drum, May 2021.
    2020 saw huge growth for the subscription economy. Considering this stellar growth, Braze, a leading customer engagement platform, hosted a panel session as part of The Drum's Digital Transformation Festival to debate the rise of direct to consumer brands and the subscription economy. The session embraced issues as varied as dealing with subscriber churn, the vital importance of financial and data transparency, and the need to deliver an almost obsessive level of customer focus combined with both short and long-term brand building.

  • Subscription Commerce Conversion. PYMNTS, April 2021.
    One third of consumers who signed up for subscription services within the past year were just in it for the free trial. In the 2021 Subscription Commerce Conversion Index, PYMNTS surveys 2,022 U.S. consumers and analyzed more than 200 subscription commerce providers to zero in on the key features that turn the "subscription curious" into sticky, long term subscribers. Some findings:
    • 81 percent: Share of consumers who use at least one type of subscription service
    • 48 percent: Portion of consumers who subscribe to services because it is easier than shopping in stores
    • 33 percent: Share of consumers who either cancel subscriptions after their free trials expire or create new accounts to get free services
  • Subscriptions are Reshaping Industries. SUBTA, April 2021.
    Various industries are evolving to improve convenience and meet new customer expectations. The subscription model can increase business predictability and solidify a company's engagement with the community. Establishing a recurring revenue is the next logical step for any business looking to thrive in the years to come. This article looks at examples of companies doing this well across several industries.
  • What's a Subscription Business Model and How Does It Work? HubSpot, December 2020.
    Subscription models are used in nearly every industry, and growing companies like Netflix, Dollar Shave Club, and Microsoft have been using them for years. Subscription business models are beneficial for many organizations because they encourage customer success and improve buyer retention. This post discusses what a subscription business model is, how it works, and the benefits of using this model. It then lists a few examples of subscription models that you can use as inspiration for your business.

  • Subscription Management in 2021 and Beyond. Soft Clouds, October 2020.
    This article provides statistics on the subscription economy overall, as well as details on various types of subscriptions, such as streaming services, boxes, and food. It also discusses the top trends in subscriptions and predictions for the future. Among the charts in a large infographic is this one describing which services are growing and which are not:

  • Scott's Program: Growing Consumption While Digitizing the Lawncare Experience. ANA, April 2021.
    Scotts Miracle-Gro took a personified approach to lawncare to encourage its customers to adopt its online subscription based lawncare service. Through a novel campaign creative strategy, custom bid logic application, and implementation of micro-campaigns "Scott's Program" evolved and optimized over a short window of time. The Scott's Program performance exceeded all expectations and set a strong foundation for expanding DTC lawncare products in future years.

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Source

"The Subscription Economy in 2021." ANA, June 2021.