Conversations with the DMA: The Subscription Economy Surge

Riding the Subscription Wave

Subscription services have always been popular with consumers, but the last twelve months have seen a surge as the world moved to a working from home routine. Now we can get a subscription for almost anything, from toilet paper, food boxes, trendy beers, flowers, cosmetics, and household cleaning products. They know when and how often, delivering weekly, monthly or on a completely personalised schedule to make our lives that bit easier.

Subscriptions and the WFH Routine

When we descended into lockdown 1 brands truly went subscription mad. Anything and everything became a subscription service. Brands had to be reactive with the closing of stores and consumers suddenly craved convenience like never-before.

The DMA reported that customers’ interest in subscription-based buying has increased significantly over the last year; consumers are buying more personal hygiene products (15%), clothes (15%), beauty and cleaning products (14%) and alcohol (13%) via a monthly subscription in 2020 – all notable increases. 45% of consumers streamed live television at least weekly, up from 20% in 2017. Netflix even had to reduce their streaming quality to allow for more users at the same time.

Our own Scott Logie chaired an event on this topic as part of his role on the DMA’s Customer Engagement Campaign. The event shared some research around the surge in subscription during the last 12 months, driven by our change of behaviour in lockdown. There was a discussion with Pact Coffee, who provide a fresh coffee subscription; and Santander Bank, who are using AI and machine learning to remind customers of subscriptions they are paying and may have forgotten about.

A Subscription is for Life … or is it?

There were several interesting points that came out in the discussion. Firstly, while this surge has been great for subscription businesses, it creates a challenge; what happens when we return to normal? Will people stop using subscriptions as much and create a retention challenge for the brands? Clearly now is the time to be thinking about this and offering the flexibility that will be needed to retain as many customers as possible.

Which brought the conversations on to a couple of other topics. Transparency: it was noted not only in the research but also came through very strongly from the panel that being open and honest with the end customer is vital. Pact Coffee goes as far as to send emails just before each delivery to make sure customers know what they are ordering. This gives them the chance to defer this month’s order, choose something different or even add to the order being dispatched. These are sent out every single day and over 60% of the emails get some form of interaction. They firmly believe that this openness and choice builds loyalty over time. Gone are the days of subscription services using inertia as their main retention policy!