Subscriptions and the Subconscious

A new Payments Journal article finds recurring subscription models cost people significantly more money than they realize. Subscription services—including everything from gym memberships and magazine subscriptions to content streaming and monthly retail deliveries—are by now a familiar part of the consumer landscape. But a survey of 2,500 U.S. consumers found more than four in five believed they were spending less on recurring monthly subscriptions than they actually were. The article suggests that by separating the recurring expense from the consumer’s purchase intention, spending is essentially camouflaged. Further, encouraging customers to sign up for auto-renewing memberships at least partially lifts the burden of a seller having to actually close the sale. The responsibility instead lies with the consumer to stop the transaction.

And yet, another new study (Savary & Dhar, 2020) finds that consumers may retain subscriptions they don’t use or need because they fear the impact of ending the subscription on their identity. Sure, this reasoning sounds implausible compared to a competing theory—that people are just too lazy to cancel subscriptions. However, evidence abounds that people will devote great time and energy to saving money. Who hasn’t heard stories about drivers using more gasoline to find a marginally cheaper price per gallon? Maybe the failure to cancel a recurring subscription really does have roots in something beyond simple apathy.

Savary & Dhar (2020) suggest that subscriptions (like other retail purchases) often support and telegraph facets of a consumer’s identity. And when people have limited confidence in the portion of their identity being supported by the ongoing subscription, they may pay to maintain it even if it isn’t providing the explicitly promised benefit. According to a report on the article, canceling such services can feel like giving up on a desirable or aspirational part of themselves.

All that dry, academic language translates to this: Canceling a gym membership might imply throwing in the towel on health, fitness, and body image. Letting a magazine subscription lapse may feel like surrendering some aspect of knowledge or expertise. Canceling a fashion box may suggest a retreat to a plain, “basic” aesthetic. So, many consumers keep paying even if they aren’t using what they’re paying for.

Even despite this tailwind for subscription marketers, growth in the subscription retail model appears to be leveling off after a decade of explosive growth. McKinsey suggests that the model likely peaked in 2016, with investment deals related to subscription-box models falling dramatically in 2017 and 2018. An article from early this month even argues that subscription-everything retail may eventually come to represent a specific (and bygone) era in time.

“The subscription box service may someday become an icon of 2010s nostalgia, much like what America Online was to the ‘90s and gelatin-enveloped tuna was to the ‘60s.”

Arthur Zaczkiewicz, WWD

In fact, a recent survey finds the subscription-services industry in retrenchment and increasingly defensive. Key decision-makers are shifting from an emphasis on customer acquisition to customer retention. Fortunately for these marketers (if not, necessarily, for consumers), an appeal to identity insecurity could be just the nudge to keep consumers paying for a service they don’t really need.

References (non-hyperlinked)

Savary, J., & Dhar, R. (2020). The uncertain self: How self-concept structure affects subscription choice. Journal of Consumer Research, 46(5), 887–903. https://doi.org/10.1093/jcr/ucz022