Merchants Take Note: Millennials Are Driving the Subscription Economy
Dog food. Underwear. Razors. Music. Coffee beans. Beauty products. Data storage. The subscription model is everywhere. If you’re a millennial, you’re likely already buying things this way. However, many businesses are behind the curve in adapting to growing consumer demand for these services.
The millennial generation is leading the charge in the subscription economy: 92 percent have active subscription services, according to a recent survey conducted by Vantiv and Socratic Technologies. For a demographic that doesn’t remember an age without the internet, getting services and products on-demand has become routine. The subscription economy offers an option that's simple, recurring and tailored.
Most millennial product subscriptions lie in personal grooming (34 percent), with food (30 percent) and household items (29 percent) closely following. The top three service subscriptions are online video (60 percent), gym membership (41 percent) and music services (40 percent).
As millennials establish themselves in their careers, buy homes, begin families, and spend more cash on products and services, it’s likely many will continue with and add to their subscriptions. They will be purchasing more and looking for easier ways to access goods and services, while balancing the rest of their life. Merchants have an opportunity to grow their business by capitalizing on this increase in millennial buying power and their demands for convenience.
Here are a few reasons why marketing subscription services towards the millennial generation can benefit your company:
- Customer lifetime value goes up: When a customer can click "buy" once and receive a product the first day of every month, they're clicking their way into loyalty. For merchants, these customers then become regulars and oftentimes expand their spending on other goods. Additionally, 61 percent of millennials have given a subscription as a gift, providing another opportunity to expand business.
- Savings attract customers: The millennial generation has the strongest appetite for online services, but the tightest cash flow compared to previous generations. Services that would be too expensive if billed in one lump sum become affordable as they're spaced out over time. Similarly, unit discounts given in exchange for product subscriptions are enticing. Merchants should consider how to capitalize on these models for their business and roll them out with marketing to attract customers.
- Revenue increases and is predictable: With a subscription model comes regular cash flow. For smaller businesses or startups, a subscription model provides the opportunity to compete with larger incumbents. Understanding that millennials are the highest adopter of subscription services, merchants should be placing marketing dollars towards that demographic to ultimately increase company value.
Check out Vantiv’s infographic for more of the subscription services data.
Bill Cohn is senior leader, e-commerce product management at Vantiv, a credit card processor and payments services provider.