As the cost of living surges and higher prices begin to bite, consumers are starting to sacrifice luxuries to save where they can. Understandably, subscriptions can be one of the first things to go. Further, as this economic squeeze takes place in a context of post-pandemic transition to ‘normal’ life, questions are circulating about the life-span of the subscription economy.
Though 16.9 million British households currently have a minimum of 1 subscription, this represents a reduction of 215,000 when compared to last quarter. So, as digital publishers compete with tightening consumer budgets, and potential subscription fatigue, they might be wondering how the cost of living crisis will impact their business in the long-term. Though nothing is certain, this article looks at a few possible effects of the current economic situation and how publishers can prepare.
Potential Increase in Subscriber Churn
Firstly, publishers should be prepared for an increase in subscriber churn. According to Lloyd’s Bank, since summer last year over 1.2 million subscriptions have been cancelled in the UK. 36% of people have terminated at least one subscription because of a reduction to their disposable income, and 31% cited higher, unattainable, prices as the reason for their departure.
In the context of an untenable economic squeeze, it makes sense that consumers are ‘reprioritising their spending behaviour.’ Though it may seem that this kind of subscriber churn is out of a publisher’s control, there are a couple of strategies available to minimise customer turnover such as modifying pricing plans or making products more accessible (more on this later).
Additionally, investing in subscriber retention strategies and reinforcing existing reader relationships will help to combat churn where the reader is not fully committed to terminating their subscription.
Greater Scrutiny over Value Offering
As the economic crunch forces consumers to double-down on their finances, publishers might find audiences place more importance on how much percieved value for money a service provides them with.
To stay competitive and meet customer expectations, publishers must leverage deep data audience insights to ensure their product offering aligns with what their readers are looking for. Tailoring content output as well as conversion funnels to personal interests is fundamental to capturing new readers.
Additionally, publishers can focus on how they advertise their subscription products and ensure that casual readers are fully aware of the benefits and exclusive features available to paying subscribers.
Need for More Accessible and Adaptive Pricing
In recent years, subscriptions have been a point of contention in some journalistic circles because of the concern that they inherently gate-keep content to wealthier and more educated audiences. Indeed, when the Reuters Institute for the Study of Journalism surveyed news leaders last year, almost half of them admitted that this was a major consideration for them.
In the context of a cost of living crisis, it’s understandable that 51% of subscription providers intend to reduce their prices in a bid to appeal to customers with less to spend. On a longer term basis, 61% of publishers are looking at launching more accessible pricing plans, products and services that broaden their target audience.
The South African Daily Maverick, for example, opts for a ‘pay what you can afford’ model, whilst the Portuguese publication Publico offers a free digital subscription to unemployed users. Though this approach may seem counterintuitive from a financial stand-point, Spain’s El Diario has seen growth in their paid subscriptions since rolling out free and reduced pricing for those unable to pay the full-fee. The publication puts this down to an appreciation for their commitment to an ‘emotional’ rather than ‘transactional’ relationship with their readership.
Publishers looking to adapt quickly to the current economic landscape may consider pushing their annual subscriptions as a way to save, or launch specific discounts or bundles that offer better value for money. Choosing to offer free or reduced pricing should be seen as a long-term investment that allows publishers to adapt to the current circumstances. Publishers can thus start building a relationship with customers that they can leverage later in the customer journey.
Additionally, in the context of uncertain economic times, ensuring that subscriptions are flexible in terms of the user’s ability to modify or cancel their plan is critical. While allowing users an easy option to modify subscriptions might sound counter-intuitive, this is important for building a strong brand-perception and fostering a good customer experience in which audiences feel supported.
Business as Usual?
Although there is definitely potential for greater subscriber churn or a greater challenge in converting new subscribers, 79% of publishers are still confident that subscriptions will be one of their most important revenue priorities in 2022.
Indeed, rising prices and smaller disposable income does not equate to lost interest in subscriptions. In fact, Barclay Card found that in spite of inflation and economic stress, 4 in 10 people still perceive subscriptions as offering good value for money, the opportunity to try new things, and invaluable convenience.
Plus, although for some people subscriptions may represent an unnecessary cost, for other consumers, the regularity of a subscription helps them to budget effectively and know what they’re getting.
Where next for subscriptions?
Taking those statistics into account, it appears that the industry feeling is still overwhelmingly in support of subscriptions as a major revenue stream. For publishers, that means forging ahead and fine tuning subscription strategies is likely to offer the best path forward.
Although the digital publishing industry will likely see some changes to their business, publishers who make use of data and personalisation technologies that help improve customer experiences will be able to effectively protect their business.
To discover how to stay resilient in the competitive subscription market, listen to our recent podcast interview on thriving in mature markets here.