The Value Proposition of Subscription Services

Subscription models are one of the most thriving models of business currently. Names such as Amazon Prime, Sam’s Club, and Dollar Shave Club are recognizable to most Americans, and they all use the same format of recurring payments, rather than a one time expense. There are 255 million other subscriptions on the market being used by 61 million people nationwide, which encompasses a vast amount of products and services being offered. 

These numbers are only projected to grow, as the subscription market is growing 3.7x faster than traditional companies in the S&P 500. Changing demographics show that younger generations, such as Millennials and Gen Z, are more inclined to subscribe to these subscription services. As Gen Z matures, it is highly likely that subscriptions will become even more dominant, soaring above the 21.9% usage rate in that generation. The COVID-19 pandemic further fueled this market’s growth, with subscription-based businesses expanding by 11.6% during lockdowns.

Consumers are especially drawn to subscription models for their affordability and convenience. 14.1% of subscribers find them cost-effective and 22.7% value their ease of use. Usage-based pricing, as seen in replenishment subscriptions, offers flexibility for users that prefer to pay as they go.

Data shows subscriptions are here to stay