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Future Trends: Subscription Economy Surge

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While we all naturally hope for the best for this year, uncertain times require anticipating and planning for multiple scenarios. For this reason, our Future Trends series, would like to inspire you with new ideas to re-think, and maybe even re-plan, the year ahead based on what your customers might be after.

In this first article, part of the DMA’s Customer Engagement campaign – in collaboration with dotdigital and in partnership with Foresight Factory – we will focus on subscriptions, a trend we discussed at the beginning of 2020 that has seen a dramatic increase as a result of the pandemic.

Coronavirus has altered so many aspects of consumers’ behaviour, especially the need for a remote connection to communicate and engage with their favourite brands. Many businesses have been able to pivot their strategies to reach customers in their own home, allowing subscriptions,for both products and services, to expand.

This time of opportunity has also brought increased competition in the market, where established and new brands need to fight for their customers' attention. Communicating a brands’ purpose with clarity and transparency has been fundamental for businesses that have been able to turn this year’s adversities into an occasion to bring value to their customers.

As we saw last year, subscriptions are an increasingly popular model to facilitate consumers both discovering and becoming loyal to their favourite brands while saving money and time in the process of making a purchase.

Subscriptions have also changed consumers’ meanings and expectations related to their needs for ownership. Indeed, this model has enabled consumers to reduce clutter and waste around the home, as brands remain the actual owner of products/services consumers use every day.

Therefore, as brands can become the decision-maker on behalf of their own consumers, it is key for people to have full control on stay and leave terms, with a consequent increased need for brands to establish a reputation of trustworthiness and reliability.

However, transparency is not the only request brands will have to answer in the upcoming years. Now, more than ever, customers demand a meaningful commitment from businesses to act in kindness and care – with their employees and consumers as well as with society and the environment.


The Insights

Subscribtion-based buying

During 2020, the idea of leaving the house and entering a supermarket might have felt like a risk people were unwilling to take. During these difficult times, more consumers might have decided to opt for receiving their shopping directly to their doorstep.

Therefore, it is not surprising that over a third (37%) have subscribed to a paid next-day delivery service (e.g. Amazon Prime) – over 9% more compared to two years ago.

Which of these subscriptions do you personally own? A paid subscription for an unlimited next day delivery service

Customers’ interest in subscription-based buying has also seen an increase compared to a year ago. In particular, customers bought toiletries and personal hygiene products (15%), clothes (15%), beauty and cleaning products (14%) and also alcohol (13%) via a monthly subscription in 2020 – all notable increases on 12 months before.

Which of the following products have you bought via a subscription?

Subscriptions to entertain

As we mentioned in the introduction, the pandemic has boosted several consumer behaviours. Restrictions and the impossibility to physically meet with others have pushed people in reinventing their daily routine and how they entertain themselves. Therefore cinemas, libraries and music stores have turned digital allowing customers to access a vast range of products with just a few clicks.

Lockdowns have also given consumers more time to engage with longer-form content as well as live streaming. Indeed, in 2020, 45% of consumers streamed live television at least weekly, up from 20% in 2017.

Which of these subscriptions do you personally own?

Data reveals that half of consumers (53%) now have a paid media streaming subscription, 6% more than what we registered in 2019. Furthermore, 29% have a paid subscription to a music streaming service (26% in 2019) and 17% have a paid subscription to an online or print newspaper (18% in 2019).

By 2025, Foresight Factory predicts two-thirds (66%) of UK consumers will subscribe to a TV or film streaming platform, with other media subscriptions expected to follow this trend.


The Opportunities


Access vs Ownership

If there is something that 2020 has taught us, it is that the unexpected can happen. Disruptions and unwieldy changes have impacted our personal and professional lives, and brought many to re-think their priorities. A preference for a lighter living has pushed consumers to choose flexible access models, such as subscriptions, over permanent ownership.

This shift towards more fluid and less official brand interactions is driven by the desire of convenience but also to free up space in their lives.

In 2019, 25% of UK consumers felt the need to own more things, rising to 46% among Millennials. Moreover, 60% have tried to reduce the amount of clutter in their house – especially women (67%) and Millennials (66%).

Therefore, it is key for brand’s subscription model being able to demonstrate the many advantages they can offer compared with ownership: less clutter, lower cost, access to the latest items, ability to easily change makes and models, added bonuses and surprises as well as less responsibility.

Despite subscriptions, sharing, renting, pay-as-you-go might be predominantly used in specific sectors, many new formulas have made their appearance in the market.

Many interesting examples can be found in the interior-design market - furniture and furnishings rental, a regular refresh to the home décor or again short-term formulas for special occasions such as cutlery sets for dinner parties.

This will likely appeal to ‘trendy’ consumers as well as those who rent rather than own their home.


Questions

  • How can your brand use subscription models to improve customer loyalty and retention?
  • How can your brand balance the need to cut down on waste with the need to sell more products?
  • How can you build greater flexibility into your brand offerings?
  • Could overhauling a daily routine linked to your sector lead to better quality and more sustainable products?


Takeaways

The pandemic will be remembered as a global tragedy that has taken many lives and affected many people financially, physically, and psychologically.

Foresight Factory’s data shows that, in November, when the UK entered a second wave of infections, overall consumer confidence fell but people have remained more optimistic about their own finances.

However, in the event of a prolonged economic downturn, brands looking to engage consumers into long-term relationships will need to ensure valuable benefits to compete with the consumers’ need for convenience. With price comparison tools at their fingertips, consumers will be equipped and encouraged to shop around and switch on a different service. Offering maximum flexibility and the option to easily access/exit from subscriptions and contracts will be key to success.

But there is more you can do to get to your customers’ heart. As we discussed in our latest How to Win Trust and Loyalty report, consumers are calling for compassion from their favourite brands – both on a personal level (52%) and, more broadly, towards key societal issues (58%). Therefore, ethics and a brand’s credentials are becoming an important part of the consideration phase for many consumers.

Control and reassurance

While subscriptions can reduce stress around taking care of and managing stuff, there are new anxieties created by the presence of the several contracts pending on customers’ bank accounts which can be overwhelming for some. Therefore, caution is needed to ensure they do not exacerbate consumers’ subscription fatigue. Avoiding subscription fatigue is key as is demonstrating how a subscriptions delivers value and compares favourably with competitors’ offerings.

Not owning doesn’t mean that consumers do not look for control. In many cases, subscribers are at the mercy of providers who could decide to retire a particular brand, series or model.

Especially in the media and entertainment sector, where customers still feel a sense of ownership over content, warning customers when removing or replacing shows, it is fundamental to avoid disappointments and frustrations.

Personalisation and co-creation involving consumers in the content decision-making process can be effective strategies to keep the customer engaged with your brand and offering.


Meaningful commitment

Words are not enough and consumers have clearly put forward their request for brands’ meaningful commitment – penalty a backlash and being called hypocrite publicly and on social media. In recent years, the need for empathy and emotional intelligence has become a must-have for brands, especially during a pandemic where a collective crisis showed the power of collective action.

From philanthropic initiatives to random acts of kindness, brands are encouraged to spread messages of positivity and boost public morale by dialling up kindness. There are numerous ways to spread thoughtfulness and compassion, and they should focus on all the actors involved – customers, employees, society and the environment.

A great first step is acknowledging that not all consumers are the same and at the same time demonstrating understanding and flexibility in reflecting individuals' needs and tastes.

Inclusion must be a principle that consumers should be able to read on every page of your brand story.


Case Studies

Here are a few examples of brands’ subscriptions that have embraced consumers’ new behaviours and interests and created new brilliant market opportunities.

Sixt: Switch cars monthly for a fixed fee

In September 2020, Sixt announced the launch of the Sixt+ car subscription service which allows customers to rent vehicles for a monthly fee starting at £399. Users can book a car and collect it the following day – the service can be cancelled at any time. This offers greater flexibility than normal financing agreements. Drivers can choose from a selection of different vehicles and the final cost depends on model, mileage and protection package.


On: Swap for a new pair of recyclable running shoes

Own the run, not the shoe. For the end of 2021, running brand On announced the launch of a subscription service for The Cyclon, its fully recyclable shoe. For a monthly spend of £25.00, customers can access a pair of the sneakers and swap them for new ones as often as they wish. The Cyclon are made from recycled castor beans and will only be available in white, to avoid chemical dyes. Thanks to this subscription, On hopes to create a closed-loop and to make the system environmentally viable, it needs a minimum of 5,000 subscribers.


Floe: A greener home dental care

In August 2020, Floe launched its oral care subscription service aimed at bettering dental habits and simultaneously make oral care more eco-friendly. By delivering a box every 12 weeks, Floe encourages users to follow a routine built around its products for £7.99 per month. Each box contains: two tubes of toothpaste (housed in sugarcane packaging), a toothbrush with gentle bristles, and biodegradable floss. After 12 weeks Floe delivers a new set of products and customers are invited to return their used ones to the company for re- and upcycling.



Pret A Manger: Five coffees per day for £20 a month

In September 2020, Pret A Manger launched its YourPret Barista, a subscription service that offers customers the ability to collect their favourite coffee (up to five per day) for £20 per month. Through the app, subscribers can grab any type of coffee and it must be ordered 30 minutes apart to ensure they are for personal consumption only. With this new formula, the brand would like to draw consumers back into its shops which have seen a significant dip in visitors’ numbers during the pandemic.




Methodology

‘Future Trends: Subscription Economy Surge’ is an initiative undertaken by the DMA in collaboration with dotdigital and partnership with Foresight Factory.

The report partially reviews data from the ‘Customer Engagement: How to Win Trust and Loyalty’. In addition, the DMA Insight department conducted desk research on industry trends, including the use of Foresight Factory’s FFonline platform.

If you have any questions about the insights or methodology used, you can contact the DMA’s Insight team via email: research@dma.org.uk.

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