Here’s a trend you’ve probably noticed — in all likelihood, it’s the reason that you clicked this link and made it here to the Trim blog. The trend is simple: as consumers, we are living in the most subscription-saturated era in American history.
The average Trim user who signed up for our service within the past 90 days has 6.0 subscriptions on their credit card, not including utilities and payments to financial institutions (like student loan servicers). It’s hard to find historical records on the popularity of subscriptions with the U.S. population, but we do know that in the 90 day period that started exactly a year ago, the average new Trim user only had 5.4 subscriptions.
Imperfect data aside, we’ve heard qualitatively from hundreds of users who are drowning in more subscriptions than ever before. The movement even has its own name: try Googling “subscription economy” or “digital membership economy.”
But why is this the case? It turns out that there are several reasons why consumer businesses have followed the lead of their enterprise counterparts in pivoting to recurring revenue business models. Some of these factors reflect the changing nature of consumer consumption in a digital world; others smack of “revenue optimization” at customer expense, literally.
Read on for the top five reasons that consumer businesses love selling subscriptions:
- Predictable Revenue
There’s nothing that the finance department at a major corporation loves more than recurring revenue. With less fluctuation in the month-to-month take of the business, companies have a far more stable platform to make decisions, from hiring to inventory.
These factors alone make it extremely tempting for consumer-oriented businesses to move to subscription pricing, even if it’s not necessarily an intuitive choice for the consumer.
- Increased Switching Cost
Subscriptions are hard to cancel and that’s a fact. How many times have you remembered a “free trial” way past its expiration date and rushed over to the computer, clicking through 15 menus only to find that you need to “phone a representative” to cancel?
Many companies, including otherwise reputable services like the New York Times, deliberately make it difficult to cancel your subscription in the hope that it’s just too much work. This is the whole reason we started Trim: there is literally zero benefit to the consumer in making cancellation difficult and it needs to stop.
- Lower Barrier to Upsell
From a business’s point of view, one of the best side effects of having your credit card on file is that they can easily sell you new things. Maybe your monthly craft beer club crate wants to convince you to switch a more expensive selection — it’s as easy as convincing you to click a button and boom, ten more bucks a month.
- The Internet Makes Anything Easy to Subscribe
Ten years ago, the thought of subscribing to a physical product like razor blades would have been very strange. But the Internet has made it far easier to manage the nuts and bolts of a subscription business, from customer management to shipping. There are even companies that exist to make it easy for anyone to make a subscription box that they can sell to others.
- Subscriptions Are More Profitable
The lifetime value — which is a fancy phrase for total profit — of subscription customers is greater than customers who buy a product or service one at a time, when they need it. This is due to a combination of the reasons above, and it is the single biggest reason why consumer businesses will stop at nothing to become part of the subscription economy.
The Bottom Line
To be fair, subscriptions aren’t always bad for the consumer — they add a layer of convenience and seamlessness to products and services that you know you’ll need.
As the winners of our most loved subscriptions ranking show, the key to a great subscription business lies in delivering true value to customers. Companies that force subscriptions on their customers simply because it’s “better for business” are doomed to fail. These consumers will find different options, and we can’t wait to help.
Check out your subscriptions — and cancel the crappy ones — by signing up for Trim.