One of the most thought-provoking transformations in consumer behavior happening now is perhaps the growing proclivity towards usership over ownership. Consumers all over the globe are embracing engaging experiences, shifting away from imperatives of material possessions that once defined personal fulfillment. It’s a movement from owning, maintaining, and accumulating more and more “stuff” to reimagining goods and services as utilities, fluidic in nature, that can be leveraged whenever and wherever, according to personal preferences.
With Twitter announcing to make SMS-based two-factor authentication a premium feature, part of the Twitter Blue Subscription, and Meta announcing its security subscription service, a lot of discourse around the subscription model has recently resurfaced.
It’s not just social media platforms, software, and entertainment services that have been exploring the limitless potential of the subscription model. Today, consumers are presented with a whole host of goods and services, including cars, food delivery, fitness, and home maintenance, you name it. In fact, subscription business models are estimated to score a spike from a $650 billion market in 2020 to a $1.5 trillion market by 2025. In this era of everything-as-a-service, subscription business models are not only more profitable in most cases, but it’s also a necessity in most industries to stay competitive.
For companies modeled on subscription, recurring revenue presents incredible insights through better customer data and enables them to stay agile even in the face of diminishing ad revenue. These insights can also help improve current offerings and contemplate new ones in line with what customers would like to pay for. Compared to one-and-done purchases, companies can leverage the subscription model to bank on customer loyalty to produce continuing streams of income and better optimize customer acquisition resources.
Besides, a subscription model is one of the most powerful ways to strengthen customer Lifetime Value (LTV). Loyal customers are more likely to try new offerings from the company, meaning a straightforward avenue for the company’s upselling or cross-selling efforts. That said, it’s always a good idea to learn more about your “quick churn” customers, and segmenting your customers by LTV is an efficient way to do that.
Subscription models can also allow users, especially those who wish to stay within a budget, to spend their money wisely as they have the option to pay only for those parts of a service that they want. It also eliminates the feeling of underutilizing and overpaying for a subscription service but instead boosts the customers’ satisfaction of deriving real value for their money. Moreover, having the option to unsubscribe at any point incentivizes them to try out a subscription-based service without having to dive headfirst into commitment and a flat, upfront fee.
Social media conditioning may bring influencers and video creators to the top of our minds when we think of the creator economy- but artists, podcast creators, writers, and other creators have long benefited from platforms like Patreon, Substack, and Medium. Allowing users to subscribe to the content of their choice and sharing profits with the creators of that content seems to work well for many of these services.
Let’s take a moment to consider Meta’s paid subscription bundle, Meta Verified. Those who use Facebook and Instagram to create, share and promote their own (often monetized) content and those who are starting out on their creator journey seem to benefit from this offering. With promised benefits like increased visibility and reach with prominence in some areas of the platform- like search, comments, and recommendations and exclusive features to express yourself in unique ways, the creator economy will see some interesting developments in the near future, which will tell us more about the social media users’ appetite for such paid subscription services.
However, we’re looking at estimated figures of 12 million paying subscribers and $1.7 billion in high-margin revenue for Meta in 2024. The prospect of building revenue streams that comes from users themselves rather than advertisers is indeed intriguing.
Considering the number of subscription-based businesses vying for the consumers’ attention, there is always an impending threat of subscription fatigue. To stay immune from this fatigue, consumers should enjoy freedom from feeling overwhelmed by a chaotic mess of umpteen subscriptions. According to a survey from Chase, two-thirds of consumers have forgotten about at least one recurring payment in the last year. Thanks to a number of apps and subscription trackers available in the market today, customers can now stay on top of their subscriptions and avoid paying for those relegated to oblivion.
There are tools designed to track recurring payments, and some will even negotiate bills on your behalf. As Artificial Intelligence continues to evolve by leaps and bounds, we’re also likely to see AI interventions to make suggestions on a number of things like what’s not being used, what’s more likely to be discontinued, or even what subscriptions to consider adding.
It’s not as formulaic as it sounds, but strategies to build the best experience with the best value, more often than not, create the best consumer results. As happy customers are vital to the longevity of subscriptions, companies need to consistently add value to their services to stay relevant in this incessantly evolving economy.
It goes without saying that merchants should make the most of insights from consumer research, data, and predictive modeling of variables such as churn rates and transaction history to stay in touch with changing demands and expectations, while constantly trying to enhance their subscription offerings. Using feedback mechanisms, AI, and machine learning can enable businesses to personalize offerings and recommendations. It can even aid the development of new offerings to satiate the customers’ desire for variety and newness in experiences.
This includes eliminating any friction in the experience, especially during checkout or recurring payments, as the competition for the consumer dollar continues to grow fierce. Creating frictionless trials, easy-to-cancel access, clear pricing, and value are some of the ways in which merchants can solidify their position in both their consumers’ minds as well as on their list of preferred subscription services.
For businesses looking to go the subscription way, it would be prudent to chart out ample ways to deliver enough value to sustain consumer satisfaction and let their services justify what they charge. The mushrooming of new subscription-based businesses every other day means that forward-thinking, quick-on-their-feet companies will be in a better position to traverse market volatilities, not to mention the Achilles heel of the subscription model- customer churn. Companies can no longer thrive by delivering the bare minimum. Today, meeting customer expectations will get you to the dais, but surpassing their expectations is what will get you applause.
Founded in 2020, Revolv3 is a full stack SaaS payment optimization platform, designing bespoke subscription billing solutions for merchants. The platform utilizes adaptive technology to deliver the industry's highest credit card acceptance rates. Revolv3’s seamless integration enables merchants to instantly achieve transformational revenue growth and superior customer retention, at the lowest cost in the industry. Revolv3 re-architected the payment process, implemented Network Tokens, Dynamic Routing and Machine Learning to achieve the highest first pass approval rates in the market. Companies can highly configure subscription offerings, and grow their top line revenue and scale confidently knowing that their billing platform will grow with them.
