We all know that the way we shop is becoming increasingly diverse. Sure, most of us still go to the grocery store once a week to purchase food, but more and more people are replacing traditional shopping habits with online and other innovative ways of purchasing. In the past year, businesses that use the “subscription” model have become increasingly popular. That is, a customer receives a product or service every year, month, week, etc. by putting a credit card number on file. There are the big digital players like Netflix, Pandora, Spotify, etc., and recently the “subscription box” model, which is used to sell tangible items, has been on the rise (companies like Fabletics, Dollar Shave Club, and Graze, for example).
So why are subscription businesses becoming so popular? What, if anything, makes them better than shopping in-store or online? As a Millennial, and someone who spends too much money on subscription products/services, this is what I know:
- It’s convenient. What’s more convenient than being able to instantly stream thousands of my favorite TV shows and movies every month? Not having to leave my couch to do it. Subscription businesses provide consumers with convenience and ease of purchase. I don’t need to get in my car and drive to a Redbox to watch a new movie, and I don’t have to re-purchase the streaming service by going to a physical location, online, or calling each month. Subscription businesses pull money from the user’s account automatically, leaving them to enjoy the service month after month without having to do a single thing.
- It’s low-commitment. We all want to indulge, but without having to spend a ton of money or commit to anything. Subscription businesses allow consumers to receive new products and services on a regular basis with the ability to stop at any time. This is valuable because once you feel you’ve spent enough money on something, don’t like it as much anymore, or are simply running low on cash that month, you can cancel the subscription. Simple as that. (Be aware: some companies require customers to subscribe to a minimum amount of months, so be sure to read the fine print before signing up for anything).
- It’s fun! I personally subscribe to Ipsy, a company that sends its customers sample-sized beauty products to try out each month. Whenever I open my mailbox and see the bright pink envelope, I immediately get excited and rush inside to see what came in my “glam bag” that month. Everyone likes receiving new stuff, especially when there is an element of surprise to it. Maybe it’s just that I need a hobby, but receiving my subscription box every month makes me, well…happy.
- It’s personalized. In a world of endless media and content, we (especially us Millennials) desire personalization. We value individualism, so it makes sense that we want products and services that are customized to our personalities and interests. Subscription businesses are able to track the things you like and dislike through online data, review options, etc. over time, and then tweak what or how the product reaches you. For example, Netflix tracks what you watch and then offers a “Recommended for You” category with shows and movies you might enjoy. A clothing subscription company may allow you to rate the products you receive every month, and then use that information when they send you the following month’s items. Because you’re buying month after month, companies are able to specifically tailor the product to you personally and improve the overall experience.
- It’s cost-effective. Sometimes the money you pay for the products in a subscription is less than what you would pay if you just bought the product(s) outright. For example, the pre-made meal business is extremely popular right now. Many companies offer meals at a discounted rate if you subscribe and have them delivered every week, rather than just buying them singularly. Spotify is another good (and pretty obvious) example. It’s cheaper to pay $10 a month and get access to almost every song you could ever want rather than buy single songs through iTunes or other providers.
The subscription business model has really taken off in the past few years, which means, to us, one key thing: if it has business implications, it has marketing implications. Subscription businesses need to be marketed, and maybe in a way that is different from businesses that run on traditional models. Furthermore, subscription businesses are becoming media channels themselves for advertisers. Pandora, Hulu, and other online subscriptions have become effective (and expensive) ways to advertise other products.
As of yet, Transformation hasn’t had the opportunity to work with a subscription-based company, but we’re looking forward to the day we do. Because the subscription model is relatively new, it surely brings new challenges to marketers in the way it must be approached. Will the subscription model continue to prove successful in the future, or is it just a fad? Who’s to say? For now, we’ll enjoy our favorite Netflix originals and monthly shipment of crazy socks and continue to study its effects on marketing.