We are asked a lot of questions about e-commerce optimization. In recent years, one of the most common questions is about subscriptions, which are increasingly popular in the age of e-commerce and streaming. Are there subscription options that consumers like better than others? How do consumers prefer to pay for subscriptions? What drives them to unsubscribe?

We recently fielded questions through Forrester’s ConsumerVoices Market Research Online Community, an online focus group, to ask these questions and more. The panel had more than 750 respondents in Canada, the UK, and the US. Those consumers told us the following:

  • They subscribe to a variety of products ranging from snacks to streaming media to meal kits to coffee pods. Fewer than 20% of consumers said they subscribed to nothing. Among the subscriber majority, streaming was by far the most popular type of subscription. Nearly three-quarters of subscribers said they subscribed to Amazon Prime, Netflix, or some other streaming service such as Hulu. On the other hand, physical product subscriptions — like Grove Collaborative, HelloFresh, or Nuuly — were much less common.
  • Subscriptions prompt brand recall — getting their money’s worth is important. Fewer than 30% said that subscriptions have no impact on their consumption of the product (i.e., they would have used that product or service anyway). The majority did say, however, that subscriptions encourage them to think of a brand first, often so they “can get their money’s worth.” Keep in mind, though, that most of these focus group respondents were thinking of streaming subscriptions, as that was the most common subscription category.
  • Auto-billing and sudden price hikes don’t go over well. Consumers don’t like “services that make you jump through hoops to cancel.” Some respondents said they had to be “diligent” about renewal dates to make sure they had control of payments. While many of the consumers in this survey said they churned infrequently, we know from other Forrester surveys about subscriptions such as boxes or physical goods that businesses have high churn rates. In those cases, consumers often find that they just don’t need the products to which they’ve subscribed.
  • Monthly billing is generally preferred. The majority (almost 70%) of respondents said they preferred monthly billing for their subscriptions because it allowed them flexibility to cancel more easily and to manage their budgets more effectively. Those that preferred annual subscriptions mainly did so because it provided a discount on a service that they know they use regularly anyway. I thought this was an interesting finding: Imagine a company wanting to offer an annual payment option as a “convenience” for users. This consumer feedback suggests that, without a discount, this would likely be an unsuccessful payment offering.

So what are the main lessons if you’re looking into launching a subscription product?

  1. Know that most subscribers want to get the most out of the subscription that they can. For some businesses with a high-variable cost (e.g., a delivery service for food), this often makes your most frequent users unprofitable. Subscriptions make the most sense with low-variable cost services such as streaming.
  2. There is a threshold where consumers are open to annual payments. Several respondents said that the total cost of an annual subscription needs to be affordable for them to even consider it. That’s why Costco can get away with an annual membership fee that starts at $60 — but most consumers pay for their cars and homes in monthly installments. Speaking of cars, subscriptions for services such as heated seats is actually one of the most, well, heated topics in consumer retail these days. Only a few consumers mentioned such services, but one voice summarized it best: “The concept of having to pay a subscription for features on your vehicle raises my hackles the most.”

If you’re a Forrester client and want to better understand subscriptions, please get in touch to schedule time to discuss subscription models and strategies and how they fit your business objectives for the year. If you’re interested in learning more about the solutions providers in the subscription space, be sure to check out our recently published report, The SaaS Recurring Billing Solutions Landscape, Q1 2023. Finally, stay tuned for more exciting research ahead on all things subscriptions, membership programs, and loyalty strategies.