Vantiv

Why Millennials Love Subscriptions

Recurly Breaks Down Subscriptions

When it comes to buying subscriptions, there is something of a generation gap emerging — at least when it comes to products, according to the latest data out from Vantiv.

Services and digital goods — video streaming, newspapers, music — have broadly intergenerational appeal. Millennials lead the category — with 89 percent holding some kind of services subscription — but Gen-Xers, baby boomers and retirees all make strong showings north of 65 percent.

When it comes to product subscriptions, on the other hand, the data gets very lopsided. The youngest generations — the so-called digital natives — are tapping into recurring deliveries overwhelmingly, with 70 percent reporting having at least one product subscription. That number falls sharply when one moves up an age category to Gen X, which holds product subscriptions at a 44 percent rate, right before dropping off a cliff entirely for baby boomers and retirees, who hold product subscriptions at 19 percent and 17 percent rates, respectively.

So what gives?

Karen Webster took a closer look at the data and what it means with Vantiv Head of Market Insights Sharon Brant, who noted that millennials’ love of product subscriptions has one obvious explanation: convenience.

“They really enjoy convenience in the form of being able to pre-order and have their goods delivered to them on a regular basis — particularly for things they can predict their usage of. That also allows for a chance to budget more efficiently.”

But more than subscriptions being convenient, she noted, is that millennials have a relationship with them that is somewhat unique. Younger consumers don’t just tap into recurring product deliveries to get items they know they want already — they also tend to use them as discovery tools to further broaden the set of things they like.

Surprise and Delight

Merchants that use subscriptions correctly have an opportunity to not just sell consistently to their customers monthly, but also to build a sense of buzz around each sale. Brant noted that there are all sorts of examples that abound in the market for this — meal boxes that send consumers a different meal lineup each month, fashion sites that send clothes, tea purveyors that offer consumers 52 weeks of new teas a year and dog toy suppliers that promise a monthly variety of pleasant surprises for one’s favorite canine companion.

“The possibilities are endless — and often tap into items the consumer might be interested in trying out on a trial basis without having to make a full investment in it. If you look at meal boxes, a lot of millennial customers don’t have cars — so it is much easier to [have] the food shipped to them. Also, people like the fact that they are going to get to try a new recipe, but they don’t need to buy a huge amount of spices or ingredients that they use once for one dish. I mean, how often does anyone really use champagne vinegar?”

The act of surprise and delight, Brant said, is not a business strategy without risk — as brands need to hit both sides of that equation. If consumers are merely surprised, but not delighted, churn is a real risk.

“The relationship is customer service–based. Every month the consumer gets that box is a chance to evaluate and cancel the subscription.”

So how do merchants avoid those cancellations — and perhaps attract those hold-out consumers who aren’t tapping into the subscription economy?

Building Stickier Services

When one digs down into the product data, the items that are the most common recurring purchases for consumers are things that speak to a need — medication, medical supplies, baby goods, toiletries — things customers most don’t want to run out of and that they are most keen to have delivered on time, every time.

The flip side of that, Brant noted, is making sure that the backend is configured so that product shipments are never interrupted — because missing out on a needed object when it is expected is a major fear — and a hindrance to some types of consumers signing on.

“The simple example is consumers don’t want to revalidate all their card information. Customers just do not want to deal with having to change a card number due to a breach or even with an expiration date change — so having those things set to automatically update removes a huge friction point.”

What customers do want to deal with directly — and want to be able to set and control — are their preferences for delivery, their orders or even the ability to cancel the service. Retailers, Brant said, can’t rely on customers who want to set it and forget it — so instead they need to make sure the customer can always interact easily within the system.

“Making the service hard to cancel or to pause because you are going on vacation and don’t need a fruit shipment for a few weeks — those are very specifically what customers want to be able to do. Being able to change delivery schedules and interact with the merchant are what makes the subscription model much, much harder than just setting up a checkout cart. These are the things they need to really think through before launching.”

Finally, Brant noted, the opportunities in subscription are just starting to be fully explored — and there are always ways to make both product and service subscriptions more relevant to consumers. That can range from ordering dietary products that are unusual or exotic to finding ways to make scheduling specialized beauty services — like haircuts and manicures — easier to one-stop-shop schedule and pay on a recurring basis.

There is also growing opportunities among nonprofits, which, instead of pushing for massive amounts of funding once a year and making extravagant promises about tote bags, can ask their supporters to sign on to support them to the tune of $10 month for a year or so.

What it all comes back to is convenience: knowing that something desired will be there when it is supposed to be and in the form in which it is supposed to be.

Millennials are currently leading the charge — but perhaps with stickier structures and more relevant offers, the skeptical older generations might start seeing the appeal as well.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out the February 2019 PYMNTS Digital Fraud Tracker Report

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