The subscription economy—how brands can unlock sustainable revenue streams

If you shave with a razor that arrived yesterday, brew coffee from beans that came two days ago and settle in with this month’s new book, you’re among the majority of Americans engaged in the booming subscription economy. According to a recent Harris Poll survey, a majority of Americans (60%) subscribe to at least one product subscription service—not counting streaming companies such as Netflix. Subscription purchases hit $650 billion in 2020 and are forecast to hit $1.5 trillion in 2025. Subscriptions make good sense for both consumers and businesses. Companies get a reliable revenue stream while customers enjoy convenience and, often, savings and flexibility. While 3 in 5 Americans subscribe to at least one subscription service, a plurality among that group pays for two to three. What are we buying? Entertainment (see Loot Crate) was the top specific category in our survey, with 1 in 4 Americans saying they subscribe. Clothing and accessories (such as Stitch Fix) followed closely at 24%, as did health and beauty products (including Dollar Shave Club). Petcare (BarkBox, for example) and coffee (such as Trade Coffee) rounded out the top five at 23%. We asked about 11 popular types of subscription but “other” was generally the most popular category—potentially a nod to just how vast the array of options is. Super Bowl commercials Tracking the latest brand and agency plans Enter here Here are three other insights we gleaned from our poll regarding consumers’ subscription habits: Subscriptions aren’t just for the young Subscription services have been around for a long time: The Book of the Month Club, for example, started in 1926. But the digital age, with the attendant ability to customize and streamline the whole subscription process, fostered the industry’s boom. Perhaps that is why younger adults, coming of age as the sector bloomed, are far more likely to subscribe than older ones. So, four in five Gen Z adults subscribe but the industry’s popularity declines by age group with 71% of millennials subscribing, 58% of Gen Xers and only 44% of baby boomers. But older generations may get bang for their bucks: 61% of boomers usually use the items and services they receive while only 49% of Gen Zers and 45% of millennials say the same. Subscribers’ tastes are also dictated by generation. Gen Zers are three times more likely to subscribe to entertainment services as boomers, for example, 46% to 15%. Subscription service preferences also vary. While 84% of subscribers prefer to select precisely which products they receive, boomers (94%) are more particular than Gen Zers (79%). Conversely, a smaller majority of Americans (61%) like to be surprised, with Gen Zers (76%) nearly twice as likely to enjoy such reveals as boomers (40%). See our Year in Review stories here The bottom line: Younger adults are more extravagant in their choices while older subscribers are more deliberate. Subscriptions can be visibility-raisers The ability to sample new and different products and services is one of the major value-adds for consumers and sellers. Three in 5 subscribers (61%) said they often buy brands they first learned about from subscriptions. It’s a convenient and reliable way to get your brand in front of new potential customers. Men (65%) were more likely than women (57%) to follow up in this way. And millennials (76%) were disproportionately likely to make a follow-up purchase, as opposed to baby boomers (45%) who are more set in their consumption ways. Subscribers want a good deal How can subscription services close the deal? Price and quality are far and away the most oft-cited factors, with 69% of subscribers citing each as important. Quality of customer service was a distant third at 43%. Again, boomers are more particular. While price and quality topped the list for each generation, they are more important to boomers (for whom price topped the list at 82%, followed by quality at 76%) than Zers (for whom quality was tops at 59% followed by price at 56%). Boomers are also less interested in customer service (35%) than the ability to return unwanted products (42%) and subscription flexibility (such as the ability to skip months) at 41%. Gen Zers, on the other hand, are more interested than other generations in the selection of available products, which they prize above customer service. The subscription industry is a great opportunity for buyers and sellers alike. If you want to expand your market, you should sign up. Check out the latest Ad Age events and award programs

The subscription economy—how brands can unlock sustainable revenue streams

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