For CPG brands and retailers, the subscription model offers tremendous opportunities for recurring revenue and consumer connection. But what is fueling consumer choice in the subscription economy, specifically for FMCG products, and how can brands capitalize on it?
It’s tempting to assume that consumers choose product subscriptions primarily to save money (think Amazon’s Subscribe & Save). However, our Subscription Lifestyle research revealed otherwise: in almost every category, consumers, especially those with multiple subscriptions, valued other subscription benefits more than a lower price.
Do you know what drives consumer choice for product subscriptions in your category? Is it convenience, cost, quality, or surprise? Getting it right is critical for your Go To Market strategy.
Our latest research explored consumer behavior and attitudes towards subscriptions across a variety of CPG categories. The results have revealed some surprising factors driving consumer decisions in these categories.
Read on to learn what subscription benefits consumers value most and the marketing implications for your brand
- Subscription benefits consumers value: “Make my life easier,” “Surprise me,” “Show me something new”
- Heavy subscription users prioritize lifestyle benefits; light users prioritize economic benefits
- The more subscriptions a consumer has, the more likely they are to want more.
- Subscription hopping is common among heavy subscription users
- New SKIM research of 16,000 consumers in 5 countries reveals current use, attitudes and expectations around subscriptions in packaged goods and digital categories
- Channel-specific consumer insights are essential for FMCG brands to capitalize on the great opportunities in the subscription economy.
Product subscriptions: What do consumers value most?
The first reason consumers sign up for subscriptions, from replenishment to curated options, is the value it offers them. How do consumers measure that value? Well, in addition to cost, consumers say they want you to:
- “Make my life easier.” In many categories, value starts with convenience. Subscriptions make it easy for consumers to get what they want and need.
- “Surprise me.” Many consumers enjoy having a mystery box of curated goodies showing up at their door every month. It’s a fun way to brighten their day.
- “Show me something new.” In some categories, consumers choose subscriptions because they love trying new products without the hassle of shopping for them. And they might prefer trying sample sizes.
3 factors impacting choice for product subscriptions
Beyond the primary value to the consumer, our research revealed three factors that challenge assumptions about consumer product subscription decisions.
1. Consumer value differs across categories for product subscriptions
SKIM surveyed 4,000 US consumers across four categories of physical goods: personal care, household products, beauty and food and beverage. We found important differences in the reasons consumers signed up for subscriptions, depending on the product category and subscription type.
In the Beauty category, for example, consumers chose subscriptions to try something new or exclusive, to get better quality products, to treat themselves, or to try sample sizes. Cost savings ranked much lower.
In other categories, however, convenience and cost were more important reasons for signing up. That’s true especially for subscriptions based on replenishment of stock (think Chewy Autoship for pet supplies), as opposed to curation-type subscriptions (like the popular beauty box Birchbox).
2. The rise of the subscription lifestyle
Heavy subscription users want more. Here’s a finding we didn’t expect: heavy subscription users (people with seven or more subscriptions) are more likely to sign up for additional subscriptions than light users (with only one subscription). This holds true across every tangible goods category.
In fact, two-thirds, or more, of heavy users signed up for additional subscriptions within the past year.
However, heavy subscription users are eager to try new things, which can lead to subscription-hopping and churn.
Lifestyle vs. economic benefits. Heavy users value the lifestyle benefits of subscriptions, while light users are more focused on price and economic benefits.
These attitudes and preferences define the subscription lifestyle. Heavy subscription users who embrace the subscription lifestyle are very “bought in” to the benefits they gain from subscriptions. While lights users clearly see the value, they are more measured in their enthusiasm and may have more reservations.
3. Generational differences
Almost half of Millennials have four or more subscriptions, far more than any other generation. They value convenience more than saving money and are quickly becoming the subscription lifestyle generation. Millennials are comfortable with shopping online and believe in the safety, security, and convenience of having products delivered to their door.
No other generation, older or younger, has embraced the subscription channel to the same extent. By contrast, only 18 percent of Boomers (and older) have four or more subscriptions.
Consumer behavior and the subscription economy: Implications for CPG marketers
Based on the information and insights we uncovered in our research, here are some key takeaways and advice for FMCG brands entering the subscription channel.
Understand the value proposition in your category. Using category-specific insights to develop your brand messaging and subscription pricing strategies is essential for success in this channel.
Target prospects with the greatest potential. Millennials are embracing the subscription lifestyle, but which generation is the best match for your category and your products? For instance, consumers 55 and over are much more likely to have a pet food subscription or a vitamins subscription than other age groups. Consider how you will attract and retain heavy subscription users and optimize customer lifetime value (CLV) for your most valuable subscribers.
Plan for switching behavior and churn. While consumers embracing the subscription lifestyle are happy to try new things and sign up for new subscriptions, you might find your subscribers “hopping” to your competitors. That means you need subscriber-centric retention strategies to keep consumers engaged.
Deeper subscription insights for your category
Interested in delving deeper into our deep well of first-party data and findings for your specific category? With more than a decade of experience helping the world’s leading subscription brands, as well as new entrants, optimize subscription strategies, we’re happy to help.
SKIM provides subscription channel advisory and research services in strategy, product portfolio optimization, pricing, communications, innovation, and decision journeys.