Subscription services are all about the churn

 

Subscription services seem to have been flavour of the month for a long time as the number of product categories where customers can receive regular deliveries of products to their homes has grown exponentially.

Recent research from Zuora has shown that 89% of UK adults now subscribe to such services. That’s a sizeable 58 million people who receive goods from organisations on a subscription basis. This number has increased 11% on the previous year and the average per month spent is a hefty £56 (it hits £62 for the 35-54-year-old grouping), which is a massive uplift on last year when the figure stood at only £18.49.

This growth is down to subscription services moving beyond just media and entertainment – chiefly streaming type offerings – to now include the likes of recipe boxes, beauty products, snacks, online data storage, and even the humble sock. In fact, pretty much everything can now be purchased on a subscription-type basis.

We’ve had the situation where shaving subscription service Dollar Shave Club was bought by Unilever for around $1 billion, which certainly fired up a lot of excitement within the retail and FMCG environments as dollar and pound signs flashed before the eyes of many a thrusting entrepreneur.

The reality is not quite so paved with gold. For many of these subscription services there comes the big issue of customer acquisition and the even tougher task of customer retention. For many of the categories where subscription services have appeared the competition has been intense, which has placed great pressure on all the operators in the market.

The result has been that the cost of attracting new customers has increased and the double whammy is that it is proving very tough to keep hold of them because rivals are inevitably desperate to steal them.

This leads to the problem of churn. This is the key metric that the likes of SKY are measured on because ultimately the success of the business revolves around the ability to limit the number of customers it loses. Retention is the name of the game and the many subscription services that have cropped up in recent years will know this all too well. And things are likely to only get tougher in this part of the market.

Glynn Davis, editor of Retail Insider

K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.