How to create digital experiences that ease subscription anxiety and drive loyalty
Published January 12, 2023 by Will Grounds – Creative & UX Director
Over the last few years finance brands and apps such as Monzo and Starling Bank have made it even easier for consumers to visualise their subscription costs, allowing them to keep better track of spending and cancel subscriptions they no longer use or can no longer afford.
The number of subscription cancellations is only set to increase as the financial consequences of the cost-of-living crisis start to take effect. This means that consumers will be more cautious about signing up to further subscriptions and will be reviewing where they are currently spending their money.
But it’s not just about financial circumstances and worries. Consumer behaviour often changes in a time of crisis for a number of reasons.
In this article you’ll learn how consumers react in a cost-of-living crisis, the changing shifts in consumer expectations, why customers cancel and finally the strategies we recommend to address subscription anxiety.
How consumers react in a cost-of-living crisis
Research from Harvard Business Review on consumer behaviour during previous recessions indicate that consumers often prioritise consumption by sorting products and services into the following categories:
It’s therefore disheartening if your subscription service falls into the latter two categories, especially when we learn that consumers typically become more price sensitive and less brand loyal during a recession. However rather than putting the brakes on marketing and research budgets the smartest brands react by improving the affordability of their offerings, bolstering customers' trust and investing in research to evaluate and spot new business opportunities in a changing economic landscape.
Types of consumer subscriptions
Before delving into changing consumer expectations, it’s important to understand the type of consumer subscriptions typically on offer. Extensive research from Mckinsey indicates that consumer subscriptions can be categorised into three main groups: replenishment, curation and access.
Automated purchase of commodity items that save time and money, such as razors or vitamins, replenished at set intervals. This section accounts for roughly 32% of ecommerce subscriptions.
At 55% of overall subscriptions, these are the most common types, and are highly personalised to surprise and delight. Categories include clothing, beauty and food.
Exclusive access to members-only perks or lower prices via a monthly fee. This group accounts for 13% of subscriptions.
Expecting great experiences, not great subscriptions
Further research from Mckinsey indicates consumers don’t have an inherent love of subscriptions. If anything, the sign-up process often makes it harder to acquire new customers. However recent research from PYMNTS: Subscription Commerce Conversion Index suggests that providing a great end-to-end experience with tangible benefits, lower costs or increased personalisation are what consumers want from their subscriptions.
To continue subscribing, consumers (particularly curation and access subscribers) expect personalised subscriptions to become more tailored over time.
Enjoyment and convenience
Consumers also seek subscriptions that provide them with enjoyment that amplifies convenience. ‘Enjoyment’ being defined as quality, variety, access, novelty and fun.
Recommendations and reviews
Finally recommendations, including word of mouth and positive online reviews, is a key trigger for consumers to sign up with a subscription service, particularly those for curation and access.
Why consumers cancel
Consumers are quick to cancel services that don’t deliver a superior experience — for example, because of poor product quality, dissatisfaction with the assortment, or a lack of perceived value.
Curation and access subscribers also cancel when they don’t feel that they are getting value for the money, probably because these services offer more discretionary products.
Overall, Mckinsey found that nearly 40% of e-commerce subscribers have cancelled a subscription they had previously signed up for. These rates are similar across replenishment, curation, and access subscription services. The problem with high churn rates makes it more difficult for brands to cover their acquisition costs and to scale their revenues.
The good news is that consumers become sticky once they find subscription services they like. Replenishment services have particularly high long-term subscription rates: 45% of members have subscribed for at least one year, about ten percentage points higher than the level for curation or access services. The companies with the highest long-term subscription rates include Amazon Subscribe & Save, Dollar Shave Club, Ipsy, JustFab, and Loot Crate.
Don’t stand still in a cost-of-living crisis
It can be daunting for senior decision makers to know how to react in a cost-of-living crisis. We know that organisations can hit the alarm when sales drop, cutting costs that ultimately put long term performance at risk. However simply standing still puts both subscription acquisition and retention at risk. Prospects may choose not to sign up and existing customers may cancel and move to a competitor offering a better or more appealing plan, service or experience.
How we help
With consumer behaviour changing in a cost-of-living crisis it’s important to keep on top of what your prospects and customers current needs, behaviours and preferences.
At dotcentric we run qualitative user research programmes to gather a deep understanding of how consumers are currently engaging with your subscription services. Typically we run interviews and usabilty testing with key persona groups such as new members, long standing members and members that have recently cancelled or paused their subscriptions. We then analyse our findings and provide detailed insights and actionable recommendations for marketing and product teams to make informed decisions about how to address both subscription acquisition and retention.
Our research also provides teams with insights and recommendations for both revised subscription plans alongside new services and products that indicate product-market-fit within the context of changing economic conditions.
Finally our user research programmes also provide a set of hypotheses to test using web experimentation and personalisation to help teams increase acquisition conversions and decrease customer cancellation.
If you would like to learn more about how we could help you get a deeper insight into your subscription experiences, please get in touch and we can set up an informal meeting to take through our approach and experience in more detail.