Locked-in monthly payments were a good trick for a while, but the tide is turning. Companies need to find a better way before they lose their customers for good
Has the subscription era peaked? For a while there it seemed that the trend was unstoppable. Everything from software to appliances is being sold as a service, and it makes so much business sense: companies can enjoy consistent revenues while gathering valuable customer data. But the good times don’t last forever.
It’s not just a slowdown in subscriber growth. Consumer resentment of being forced into regular payments has crystallized into major pushback, with a new US Bill and FTC enforcement policy both calling for cancellation to be made as easy as signing up, and even new services arising to help consumers get out of those sticky deals.
It was good while it lasted…
Subscription services snowballed over the past decade, in fields from fitness to mobility. Some of those monthly bills, such as for dominant software packages such as Office 365, have become pretty much unavoidable; others, such as newspaper subscriptions, may be agreed to after repeated paywall blocks wear down customer resistance. Maybe they just seem like a good deal, with a free trial and a commitment billed as “the price of one cappuccino a month”.
But all those imaginary cappuccinos add up, and when consumers realize that their total subscription payments are closer to the monthly grocery budget – or that they are paying for services they don’t even use – they look for a way out. It’s not just a question of buyer’s remorse. The subscription model is fundamentally misaligned with an increasingly insecure job market; how can a gig worker commit to regular payments?
Streaming services may be among the first to see a change in outlook. Although new subscriptions soared in the first year of the pandemic, those numbers have levelled off and consumer sentiment has soured. Research shows that 98% of subscribers in the UK cancel within a year, and over a third believe subscriptions are bad value. Even more startlingly, in a US survey, around 80% of respondents said they wanted free, ad-supported options from streaming services – even though the same majority said the quality of ad-supported content was lower.
People are simply fed up.
…but not for everyone
It hasn’t all worked out for providers, either. With limited budgets, subscribers forced to choose between competing offers tend to choose the biggest: Netflix rather than AppleTV, the New York Times rather than their local newspaper.
In journalism’s winner-takes-most market, for example, the two main categories of readers are those who subscribe to one or two papers (dominated by a handful of titles worldwide) – and the “never-subscribers”, who carefully manage their click budgets but won’t bow to the paywall pressure. In this segment, publishers are losing out twice: once on subscription fees, and once on advertising numbers.
Regional or niche players are in a no-win situation. They have less chance of attracting subscribers in the first place, given their smaller footprint. And they’re up against market leaders who are investing heavily in building and retaining their subscriber base. Who can compete with the LA Times’ 20 new marketing hires (and more on the way)?
The risks of sticking with a subscription model just keep piling up. You’re fighting an ever tougher battle against the heavyweights, competing for a shrinking and jaded market. Businesses that overextend themselves in subscription campaigns may regret that spend if cancellations continue to rise, but locking customers in with obscure and manipulative exit routes isn’t the answer. As customers are turning against the subscription model, businesses that continue to push them to sign up could lose goodwill; ones that make it hard to cancel definitely will. And regulatory pressure regarding data collection and cancellation traps is building.
All-you-can-eat is over
In this new context, it’s time to revisit options for pay-per-click content. Despite frequent calls from the consumer side for bite-sized servings, suppliers haven’t had any incentive to offer them when subscription income was so much juicier. But at this point, the cost of investing in attracting subscribers may be uneconomic, especially if there’s a better option on the table.
Crypto technology has revived the old question of online micropayments – something that was envisioned at the very beginning of the web, but never achieved. Until very recently, online payment mechanisms were not only too expensive, but also too much hassle. New frictionless offerings such as Geeq Pay can solve both those problems, however, making transactions of just a few pennies economically viable for the seller as well as appealing to the customer.
Besides the technical barrier, content providers have long resisted pay-as-you-go offerings because the return seemed so unfavourable. Why make it easy for customers to reject your subscription plan? But it’s become clear that, given a “subscription or nothing” deal, many will choose nothing. Businesses need a third option. It’s not about cannibalizing the subscriber base, but attracting new customers. And it’s rapidly becoming a matter of survival.