Gen Z(ero Ownership): Why Consumers Are Far More Willing to Subscribe to Services Than to Make a Purchase
Retailers, take note: mobile consumers are now more willing to open their wallets for a subscription service than a one-time purchase, according to a yearlong analysis of 992 apps and over 349 billion mobile impressions.
With the subscription economy’s rapid growth in recent years and even big tech players like Apple considering subscription models for its entertainment services, the availability of subscription offerings clearly isn’t showing signs of slowing down any time soon.
Over the past few years, the rise of e-commerce and direct-to-consumer (D-to-C) offerings like Ipsy and HelloFresh have prompted a shift in consumer behavior, effectively driving a decrease in ownership values and increasing interest in the convenience of the subscription. In a year-over-year comparison of mobile apps, costs to acquire a first-time purchaser are up more than 60 percent (at a whopping $75.22), while purchase rates have fallen a staggering 213 percent year-over-year. However, the outlook is good for those capitalizing on the subscription approach. Costs to acquire a subscription customer have dropped by more than half to $36.39, while engagement has increased by 45 percent.
In terms of platform, Android has seen an avalanche of new app releases (a three-to-one ratio to iOS), but Apple users are still a better target for subscriptions: iPhone app subscriptions rates, at 10.9 percent, are 121 percent higher than Android’s 2.7 percent.
For retailers, this may be ringing bells in the form of the biggest subscription service out there: Amazon Prime. The e-commerce giant’s $119 annual or $12.99 per month subscription boasts more than 100 million members, with 82 percent of households holding a Prime account. While Amazon may be losing money on doling out Prime benefits, its subscribers make up for it by spending an average of $800 more than nonmembers.
Of course, not every retailer can match Amazon on its Prime benefits, but they have other advantages, such as offering unique products, along with convenience and personalization. Just look at Stitch Fix and Dollar Shave Club, which leveraged the success of their subscription offerings to capture billion-dollar valuations. Brands would be wise to experiment with a subscription program that best matches their offerings, whether it’s a discount or early access program, a monthly box of curated items, or special seasonal items.
According to PYMNTS, about 41.2 million shoppers subscribe to consumer retail services and, on average, spend $464.81 annually on items such as beauty products, clothes and fragrances. It’s the category that brings in the most subscription money per user, beating both gaming and streaming services.
The Rise and Growth of Programmatic Advertising
Once retailers figure out a subscription program that works for them, they’ll also have to adjust their marketing strategy. While Facebook and Google still dominate digital ad spending, programmatic in-app ads are expected to surge in the coming years. Currently, the U.S. leads in programmatic spending and growth, with China a distant second and the U.K. in third. Sixty-five percent of all money spent on advertising in digital media in 2019 will be programmatic, according to Zenith’s Programmatic Marketing Forecasts, with the U.S. in the lead in programmatic spending and growth.
Time is of the Essence With Shopping App Users
Better marketing is essential going forward for retailers, as nearly 27 percent of shopping app users register but don’t make a purchase — that’s a lot of money left on the table. Time truly is of the essence when incentivizing purchases; our data shows that app users are more likely to be engaged with relevant messaging until the third day after an app is installed. While organic marketing is better, even paid promotion is effective during this period.
While retailers should continue to focus on encouraging users to make purchases, they should also take advantage of this cultural shift and widen their strategies by offering a subscription that makes sense for their brand and fills a hole in the market. As our report shows, consumers are clamoring for subscription offerings that delight and provide value for them. There’s no reason brands can’t follow in the subscription-leader footsteps of Stitch Fix, Dollar Shave Club and even Amazon.
Mark Ellis is co-founder and CEO of Liftoff, the leader in performance-driven mobile user acquisition.
Mark Ellis is co-founder and CEO of Liftoff, the leader in performance-driven mobile user acquisition. Under Mark’s leadership, Liftoff has become a trusted partner to mobile-first and Fortune 1000 brands alike, recently recognized as the Stevie American Business Awards’ Fastest-Growing Tech Company of the Year in 2019.
Prior to founding Liftoff, Mark was VP of corporate and business development at Ooyala (acquired by Telstra in 2014) and has also held strategic planning and business development roles at Google and the Walt Disney Company. Mark received an MBA from Harvard Business School, a Masters from Cambridge University and his bachelor’s degree in Political Psychology from Princeton University.