With PYMNTS research finding that estimated total monthly expenditure on subscriptions fell by 46% in March versus six months prior, we can now invoke “the great unsubscribe.”
It’s certainty trending, as we see in that figure from the latest edition of “The Subscription Commerce Conversion Index,” a PYMNTS and sticky.io collaboration. The data makes clear that preventing cancellations is where subscription commerce firms need to focus up — and fast.
Get the study: The Subscription Commerce Conversion Index
In a conversation with PYMNTS’ Karen Webster, sticky.io President and CEO Brian Bogosian acknowledged the impact inflation is having, noting that he recently spent $7.15 a gallon to fill his car with gas.
“I was like, ‘How does the normal working family survive, commuting kids to school, paying the bills, the mortgage and getting food?’” he said. “It puts the highlight on subscriptions. I think merchants will experience churn of consumers if they’re not thinking about ways they can deliver more value along with the convenience.”
While he said merchants continue to flock to the sticky.io platform for the cash flow assurance subscriptions can provide, brands are also under intense pressure to adjust strategies now.
Providing palpable value is the first and best move, he told Webster, as is creativity in all things, as subscription brands feel the sting of cancellations hit more services in the current climate.
Saying he sees product shortages continuing for some time — a red flag for subscription brands that aren’t supposed to run out — Bogosian used a personal story to make his point.
The Bogosians have a hot sauce surplus in that they don’t use nearly the amount that arrives in their subscription box each month.
“My wife said we have enough hot sauce,” he said. “Bottles are piling up.”
Same with an organic sleep aid. But that supplier didn’t offer a creative solution.
“I ended up canceling it and saying, ‘Well, when I run low again, I guess I’ll resubscribe,’” he said. “There’s a lot of things you get digital subscriptions for, but this change in the economy is forcing people to say, ‘I’d better take a look at my bank statement and see what I am being debited for every month’ and be a more cost conscious of saving $15 here, $25 there, because it all adds up.”
Busting out of Free Trial Prisons
In offering advice on what subscription firms should do to shield themselves from churn this year, Bogosian started with what not to do — like using free trials to ensnare consumers.
Seeing this is a real problem for the space, he told Webster: “Certain platforms will provide on free trials, for example, locking that transaction until you get consent from the consumer by email or text that says, ‘I want this to be fulfilled again.’ Everybody’s being more conscious of where they’re spending their dollars.”
What’s good about this is “it does force merchants to be much more creative about customer satisfaction. It ups everybody’s game,” Bogosian said. Better personalization is the prime tactic here.
Catering to specific predilections and gaining insight into consumption patterns to customize subscription boxes “is all part of the data flow from consumers back to merchants,” he said.
“Personalization is an important tool for merchants to use around what the consumer is looking at,” he added. “What are they shopping? What are they putting in the basket, then not checking out and abandoning? It’s very valuable for merchants to understand the tastes and preferences of consumers and tailoring bundles and offers to those consumers that will be successful.”
A success story in this regard is skin care. Bogosian said that given a huge product assortment in the space “and knowing what the consumer has been looking for has been very valuable to those merchants in how they package and bundle and price [their] offers. They have tailored the offers to those consumers and have seen a pretty significant uplift — 15% is what I was told — around what their sales have been as a result of tailoring offers to consumers.”
See also: The Great Unsubscribe Hits 16% of Millennials, 14% of Bridge Millennials
Differentiate or Die
The flip side of deep personalization is being undifferentiated, and that’s going to end up hurting those merchants. It’s hard to love a subscription without its own personality.
“Merchants that have standard off-the-shelf products that aren’t differentiated, the quality may not be as high, they’re going to experience more pain than those that continue to really focus on the quality of the products that they’re offering to consumers,” he said.
Same on the high end, where extravagant nice-to-haves are getting the subscription ax.
Bogosian said he sees downward pressure on luxury subscriptions in his data and in the field, but he told Webster, “There are a certain subset of consumers that aren’t going to compromise on the things they really feel that they need and will end up maybe going into the red or looking for other areas to be able to cut back. Do you start to cook more at home as opposed to going out to dinner? There’s a whole bunch of factors at play, and I think it varies by product segment.”
What makes this discussion more interesting is the rise of Generation Z consumers, now acquiring buying power and starting to show their millennial siblings another form of rivalry: spending.
“Gen Z consumers are a lot more aware that they have these subscriptions,” he said. “They’re very much on it. They realize what they’re paying and what they’re getting for it. It forces the merchants to even up their game further and being able to communicate and engage with what their needs, wants and desires are relative to the products that are being provided.”
Because they’re operating on a budget, “they understand the value that they’re receiving,” he said. “If they’re enamored with something, it’s really important from a personalization standpoint to understand the other things they’re looking at in order to provide ways of offering other products and services that may resonate with that particular consumer.”
Part of being creative isn’t just offering account pause options and the like but rethinking your model to make sure it’s aligned with consumer desires and market realities, like inflation.
Recalling a conversation with a confectionary company executive, Bogosian said, “he was like, ‘I’m not sure if people want the same box of chocolates every month.’”
Bogosian’s reply? “Well, it doesn’t have to be the same box of chocolates. And fulfillment in June, July and August is terribly expensive because of the requirements to protect it from heat. Don’t do it in June, July and August. And why does it have to be monthly?”
“There’s a lot of creative ways for companies with flexible software to be able to manage different offers and personalize it to the individual around their anniversaries, their birthdays, and other kinds of things that may be appropriate for the products being sold,” he said.
As a parting thought, Bogosian noted how few subscription brands offer loyalty rewards, which he sees as dancing dangerously close to churn and oddly out of step with retail in 2022.
He said, “To the extent that they can offer the carrot of providing rebates or other products or free products, or they get a higher discount on an anniversary date or something, I think those kinds of creative methods of marketing are absolutely essential to extend that subscription for consumers, especially now where we have all kinds of other financial pressures.”
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