Recurly Report: Lower Interest Rates Lead to a Subscription Sign-Up Surge
Consumers' wallets may begin to feel a little less pain now that interest rates are finally starting to decline, and the psychological advantages of knowing that relief is on the way may encourage spending in the run-up to the holidays. Can retailers anticipate a spike in the number of people signing up for subscription services?
58% of consumers signed up for one to three subscription services in the last year alone, indicating a high level of demand. If subscription services provide a positive user experience, they may increase client base growth and cultivate brand loyalty among current customers. Whether it's personalized payments, limited-edition items, or other adjustable benefits, these companies are searching more and more for innovative methods to win over customers and demonstrate their worth.
I spoke with Joe Rohrlich, CEO of subscription management platform Recurly. Rohrlich has worked with subscription brands like BarkBox, Scentbird, and Twitch. In this discussion, he talks about how the current status of the economy may affect customers' propensity to spend in subscriptions, the tactics used by subscription businesses to differentiate themselves in the crowded market, and the benefits of using subscription models to rethink consumer brand loyalty for diverse industries.
The diversifying subscription economy
Tyler Nesler: How are current economic factors influencing consumer willingness to invest in subscriptions and how might lowering interest rates directly impact the rate of new signups?
Joe Rohrlich: Consumers are more conscious than ever about the number of subscriptions they have. If you ask them, they say they want to go manage those more effectively. And at the same time, the GDP that's going towards subscriptions [is] growing faster than the overall economy. We're more cost-conscious, but we're spending more on subscriptions. And I think if you want to unpack that a little further, we think about subscriptions as being largely driven by areas like streaming media, but the reality is there are more diverse industries that are adapting into recurring and subscription business models, [such as] things like hotel loyalty programs or retail “subscribe and save” [programs].
TN: How do subscription models differentiate businesses in the marketplace?
JR: Businesses are interested in the subscription model because they're economically attractive. The predictability of recurring revenue and the annuity value there are attractive. Every CFO and CEO wants more of that. And at the same time, the reality is you, as a subscription merchant, are going to have to deliver a more personalized service than ever. Personalization could come in the form of your product, [in] the content, or the benefits that you provide to your subscribers. It can also come in the form of things like how the subscriber can purchase that. So more variable-based pricing, as an example, where I can downgrade my subscription at a time when there aren't new shows coming out that are going to be of interest to me, but I also don't want to cancel altogether, and then I'll be able to upgrade my subscription at a later time. I think a big trend will be offering more optionality to the consumer and more personalization of the experience and the offers that are presented.
Innovations in bundling and direct subscription services
TN: There's been a lot of talk about bundling and subscription fatigue. Do you think that's a major user experience issue that needs to be fully addressed, and how so?
JR: The reality is there are going to be innovations in bundling. We've obviously seen headlines on the sports front around ventures there. At the end of the day, the value of having a one-to-one relationship with the subscriber with my brand versus as a rollup is so immense that we are still going to see a strong push for merchants to create enough value for their subscribers that they're able to earn a one-to-one relationship there. A good example of that would be the NFL, which has a thriving subscription program of its own. And yes, I can watch NFL games through my subscription to Paramount+ or Sling or what have you, but I'm still willing to subscribe for the unique content and experiences that the NFL can provide. And to the NFL, I imagine that's got a lot of value to having a direct one-to-one relationship with the consumer.
Using subscription models to rethink consumer brand loyalty for diverse industries
TN: It sounds like it really is a matter of building loyalty with the brand.
JR: One of the more interesting things with subscriptions is that more brands are coming to our front door in industries you wouldn't think of as subscription industries, such as airlines. They're interested in subscriptions as a way to rethink consumer loyalty. Rather than having to spend $20,000 to earn premium status with an airline, what if you could subscribe for $20 a month to get early access to some of those same perks? And so we're seeing more industries like that that have traditionally relied on loyalty rethink the construct of a loyalty program using subscriptions as the hub of that experience.
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