Subscriptions – are they a source of pleasure or guilt for you? They usually enter Trojan horse-like into our house (“If you let us have a Netflix, we’ll never argue about it”, “I got a voucher on this recipe box, why don’t we give it a go?”) and then stand there defiantly thumbing their noses as I battle with my family (and myself) to get them back out again once I’ve checked my latest bank statement.
What’s intriguing is both their recent growth and their variety. The Royal Mail Subscription Box Boom Report from 2019 estimated that the ‘letter boxable’ part of the UK market would be worth over £1bn by 2022, an increase of 72% on 2017, and that estimate was made pre-Covid. On top of that there are streaming services, SaaS, gaming services and such category-defying brands as Amazon Prime, to name but a few. In the last few days, Kwik Fit have launched a monthly car maintenance subscription package in the UK.
The array of products and services now entering this market is simultaneously astonishing and yet unsurprising. Offering a subscription service gives companies a more predictable revenue stream, increases customer loyalty and gives access to better customer data which astute brands can use to continually improve customer experience.
For customers, there are benefits of convenience, value, access to products or services not easily available on the High Street and potentially a more targeted offer. People also find them a great gift option, with around a quarter of box subscriptions in the UK being gifted to others (1). A combination of a product that needs regular replenishment, but also gives an element of luxury or indulgence seems to work particularly well, as demonstrated by brands such as Birchbox or Dollar Shave Club.
So what can go wrong? It’s really all about the churn. The average subscription length across all subscription boxes in the UK in 2019 was 5.6 months, but dropped to 4.1 months for boxes in the cards, stationery and arts and crafts category (2). The mighty Netflix was able to maintain a monthly churn figure of 2-3% among its subscribers from July 2018 to July 2020 in the US (3), while competitors such as Apple TV+ were at 20% (4). But the battle against churn is a never-ending one - as Co-CEO Theodore Sarandos said in the FQ1 2021 Earnings Call to investors:
“What we have to do week in and week out, year in and year out, is deliver programming that our members love and value.”
And there’s the rub. Customers demand subscription services that are easy for them to cancel and they have grown to expect appealing sign-up deals. The only way to keep them loyal is to continue to deliver a convenient, appealing and good value product or service, otherwise sooner or later the guilt will overtake the pleasure.
Do you need a market investigated, summarised or analysed for opportunity? Get in touch: Fiona Silver | LinkedIn