Retailers need to consider a subscription servicestrategy to gain loyal millennial customers
CINCINNATI, March 23, 2017 – New research from leadingpayments processer Vantiv shows the growing disparity in subscription spendinghabits from generation to generation. While Gen Xers and baby boomers aren’tsigning up at a rapid rate, millennials, more than 70 percent of whom have a productsubscription and 89 percent a service subscription, see subscriptions as purchasingmade easier at a time when they’re bombarded with an abundance of choice.
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Assubscription spending continues to grow for services like groceries, householditems and beauty products, Vantiv’s research conducted by Socratic Technologiesshows less than half of Gen X consumers and less than 20 percent of baby boomersand retirees use subscription-based products. For service subscriptions, it ismuch higher coming in at 67 percent for boomers and 78 percent for Gen Xers. Millennials,on the other hand, seem to like the convenience of all subscription services, havingthings shipped to them on the spot, without having to re-order every week orevery month, and the ease of a service subscription too. They also have anoverall greater interest in subscribing to products or services in the futurethat they do not already subscribe to.
“eCommercemerchants must seriously consider subscription strategies to build loyalty,”said Bill Cohn, senior product leader, eCommerce at Vantiv. “The business modelprovides many advantages for merchants. First, customer lifetime value to amerchant typically goes up. A consumer can click ‘buy’ once and get razors orbeauty products, or coffee pods, shipped every month with no further thought oraction. Second, services that would be costly if billed in one lump sum becomemore affordable. This is particularly important for millennials, who have thestrongest appetite for online services but the tightest cash flow compared withprevious generations. Third, a growing recurring revenue stream is a good wayto increase the value of your company. So for smaller businesses or startups, asubscription model provides a great opportunity to compete with largerincumbents – think for example of groceries and the growing online/subscriptionmeals delivery services.”
Whilemany eCommerce merchants may take this generation gap in spending as a signthey need to appeal to older generations, data shows those segments of thepopulation aren’t likely to budge. Vantiv’s research shows that 77 percent ofconsumers who don’t currently subscribe to any products are unlikely to do soin the future. For online merchants, this data means it’s time to double downon the millennial generation, born between 1980 and 2000, which is expected togrow in spending power to $1.4 trillion annually by 2020 according to Accenture.
Althoughrecurring payment models can deliver substantial benefits – includingpredictable cash flow, higher customer retention, and operational efficiency –billing on a subscription or installment basis does have its challenges.Declined authorizations on recurring billing can threaten profitability anddecrease customer lifetime value.
Accordingto Cohn, “Account Updating and Recycling, components of our Vantiv Recoveryproduct, are critical in merchants’ payments arsenal to manage theirsubscription services. These products increase approvals and decrease attritionand operational costs, boosting customer lifetime value. In addition, real-timecustomer data from our Insights solution are of high value to our merchants inincreasing revenue and managing costs of subscriptions in very tangible ways.”
SocraticTechnologies surveyed 500 people around the United States in partnership withVantiv’s market insights organization, Vantage Point, which providesproprietary research, articles, and interviews with those shaping the businessof payments. For more information, including a video andinfographic on this research, please visit https://www.vantiv.com/vantage-point-enterprise/smarter-payments/delivering-subscription-services.
ABOUTSOCRATIC TECHNOLOGIES, INC.
SocraticTechnologies is a full-service marketing research consultancy that combinescutting-edge, practical innovations with strategic support. Our methods are afusion of the best practices of time-tested traditional research andinteractive, engaging techniques. With this combination of expertise andskills, we turn insights into action for our clients. www.Sotech.com.
ABOUT VANTIV Vantiv, Inc. (NYSE: VNTV) is a leading payment processordifferentiated by an integrated technology platform. Vantiv offers acomprehensive suite of traditional and innovative payment processing andtechnology solutions to merchants and financial institutions of all sizes,enabling them to address their payment processing needs through a singleprovider. We build strong relationships with our customers, helping them becomemore efficient, more secure and more successful. Vantiv is now the largestmerchant acquirer and the largest PIN debit acquirer based on number oftransactions in the U.S. The company’s growth strategy includes expanding furtherinto high-growth channels and verticals, including integrated payments, eCommerce,and merchant bank. Visit us at www.vantiv.com, or follow us on Twitter, Facebook, LinkedIn, Google+ and YouTube.
