Consumer Spending on Service Subscriptions Continues to Rise

Parks Associates is attending SubSummit June 17-19, 2024 to learn more about the subscription economy. SubSummit is the only event for everyone who works in the rapidly growing $2 trillion subscription, membership and recurring revenue industry that represents 96% of US consumers. From Fortune 500 brands to startups ready to grow, every attendee walks away with new partnerships and tactics designed to take their business to the next level. ?

Consumer are shifting their spending from one-off transactions to service subscriptions across an ever expanding range of categories, including entertainment, food delivery, transportation, technology, fitness, and more. Parks Associates online study of 8,000 US internet households, "Subscription Memberships & Bundling: Shopping, Video, Gaming, Mobile,” examines the adoption of paid membership programs, spending on memberships, and interest in new bundled services.?

The research also identifies consumers' perceptions of value and their willingness to switch between internet and mobile service providers to access new bundled services. The research shows an uptake in services across categories and a rise in subscription aggregators and hubs:

• 77% of US internet households participate in free loyalty programs, led by high-transaction providers such as grocery stores and credit cards
• 89% of households have a streaming video service
• 32% subscribe to a streaming audio service
• 20% of internet households subscribe to a gaming service
• 16% have a fitness membership, spending more than $44 per month

Categories that provide entertainment (music, gaming) and convenience (child/baby, meal service) fare particularly well in terms of customer loyalty, with most categories achieving positive Net Promoter Scores (20+). Internet and traditional pay-TV providers, which traditionally have subpar NPS, can benefit from partnering with or bundling in services that garner higher customer satisfaction and loyalty.

The study notes that while many services provide long-term savings, many benefits go unused. On average, only 62% of subscribers across categories say they use all the membership benefits offered, creating an opportunity for better value.

Tech ecosystem players compete in similar subscription categories, but their service designs and deliverables are unique. Apple, Google, and Amazon aggregate and offer subscription services across entertainment and productivity benefits, including fitness benefits such as Apple Fitness, Fitbit Premium, One Medical, and RxPass. Apple and Google also offer robust standalone versions of their services.

Jennifer Kent, Ph.D. , Vice President of Research at Parks Associates, noted, “The evolution of hardware to a service model and demand to drive engagement and loyalty for brands through apps are driving the rise of subscription services. On the streaming audio side, market leader Spotify’s premium adoption is as high as that of Discovery+, the ninth-highest video OTT subscription service.”

“Traditional gym memberships are still growing, but the fitness sector has expanded to include more types of subscriptions,” said Mindi Sue Sternblitz-Rubenstein, MBA , VP of Marketing at Parks Associates. “Fitness subscriptions can provide a more holistic health picture, as they often track various wellness indicators and sync with wearables and other connected health devices. Of course, consumers must use these features to get the benefits.”

“With the decline of pay TV, internet providers seek new ways of acquiring and retaining subscribers,” Sternblitz-Rubenstein added. “Out-of-the-box thinking on bundled offerings can help decrease churn and increase the lifetime value of the customer.”

Ubiquity of Subscriptions

Almost all US internet households have at least one digital subscription, with OTT video streaming services leading in average spend and the number of services used per household.

Free loyalty programs can serve as an onramp to paid memberships, as seen with Best Buy and Target’s membership programs.

Creation and expansion of membership programs also present opportunities for aggregators like broadband providers, cellular carriers, TV portals, and app stores to expand their offerings and compete. For instance, Google recently added Fitbit Premium and Nest Aware to Google One plans for UK subscribers.

“Competitive pressure will force market challengers to forge stronger ties, e.g., Walmart Plus and Paramount Plus. Subscription bundlers should seek offerings that span entertainment, productivity, and convenience,” Kent said.

Entertainment, convenience, productivity, and discount/value are primary value propositions for subscription and membership services. Many services offer a combination of value propositions – the right mix of benefits will depend on the customer target.

Parks Associates expects consumer service providers to partner with a greater variety of service providers and bundle various services to add value and stickiness to their offerings. That experience of selecting bundled services will be a key new frontier of differentiation.

The complex landscape of subscription providers require that subscription aggregators –broadband providers, cellular carriers, TV portals, and app stores – take a more intelligent, personalized approach to subscription discovery, cross-promotion, and recommendation, to better match consumers with the optimal and most profitable configuration of services.

Elizabeth Parks s and Sarah Lee, Ph.D. , Parks Associates are attending SubSummit June 17-19, 2024 to learn more about the subscription economy. SubSummit is the only event for everyone who works in the rapidly growing $2 trillion subscription, membership and recurring revenue industry that represents 96% of US consumers. From Fortune 500 brands to startups ready to grow, every attendee walks away with new partnerships and tactics designed to take their business to the next level. ?

? Parks Associates

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