Why more companies could benefit from a subscription-based model

As more consumers embrace subscriptions, businesses have an opportunity to tap into a predictable source of revenue.

 

4 minute read

Key Takeaways

  • Today’s consumers are subscription-minded, purchasing everything from Rover’s food to razor blades
  • This steady revenue stream smooths cash flow and increases customer loyalty and engagement
  • A key challenge is customer retention past the end of trials and discounts

Subscriptions are not for magazines and newspapers anymore. Netflix, HBO Max, Apple Music, Spotify and countless other outlets — especially in the pandemic era — have introduced both consumers and retailers to a new way of doing business. This new model boosts bottom lines and elevates customer satisfaction, and it is fast becoming ubiquitous and undeniable. 

 

The subscription economy is booming, too. A 2021 study showed a six-time increase — an astounding 500% — over the preceding nine years. That growth was five to eight times faster than traditional businesses.1

“We’re entering a whole new retail environment. Today’s consumers care less about ownership and more about services.”

Wally Mlynarski | Head of Products, Merchant Services at Bank of America

Although an exciting landscape, it is not entirely based on a rock-solid foundation. Churn is real, and whether it is voluntary or involuntary — customers drifting away because of perceived declining value or expired credit cards halting recurring payments — successful companies must develop strategies to retain their customers and attract new ones. 

Despite the hurdles, the benefits for businesses adopting a subscription program are many, and increased engagement with customers leads the charge. Anthony Hauck, vice president and merchant integration officer, says subscription services can establish predictable revenue for merchants, and there are strategies to employ to keep revenue streams flowing, including automatic refreshment of payment cards.

 

Customer engagement drives two other interrelated benefits: increased customer loyalty and richer customer data. Loyalty is baked into the subscription model because it’s based on consistent customer engagement, and the more you engage, the more you’ll learn about your customer’s habits and behaviors. That information can become a key driver of growth.

 

Are you ready to ride this new wave? Would you like to understand what has shifted the consumer mindset from ownership to access? How can you curate a customer experience that is dynamic and sustainable?

 

Download our full report and read more insights.

¹ Emarsys: The Rise of the Subscription and On-Demand Economies, July 2021.

² Lloyd's Banking Group; PYMNTS.com "Subscription Commerce Tracker," May 2022.

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