Millennials are currently the most active generation in the subscription economy, with a staggering 92% signed up for some sort of subscription service.
It’s tempting to dismiss this significant majority as merely an indication of the success of digital subscription services such as Netflix and Spotify, but that isn’t necessarily the case.
Among U.S. Millennials, 52% had active subscriptions to monthly deliveries of personal grooming products as of February 2017. Clothing delivery services were equally popular, and 47% had a subscription to pet supplies.
The 'new membership economy'
To distinguish between digital and physical subscriptions, we refer to the latter as the "new membership economy."
The main differences between the two are the mechanism for delivery and that digital subscribers also pay for nonuse. It took me several years to realize that no one was using our family Hulu subscription even though we were still paying for it, for example.
As for product deliveries, the shipping announcement, invitation to customize, and the delivery itself all remind the customer that he has an active subscription. If the shipments aren’t interesting or relevant, a cancellation will inevitably follow.
Marketing subscriptions to Millennials
Millennials' propensity to be active in the new membership economy stems from their desire for experiences instead of owning products, as well as their roles in developing and marketing such services.
Individuals who grew up with the internet are keen to use it to develop their ideas: Younger people have spent their lives on social media platforms, so it only makes sense that they excel at promoting their services on such channels.
Today’s subscriptions are also more convenient, they're more personal, and they provide a great value. As recently as a decade ago, subscribers would be the ones eating charges for shipping and handling, and they might also face complicated cancellations or other hurdles.
The emergence of Amazon and digital-first e-commerce players such as Warby Parker are some of the biggest drivers of change as delivery began to seem like less of a hassle.
For retailers, Millennials represent a formidable economic force. By 2020, projections indicate, they’ll be spending $1.4 trillion per year and command almost one-third of all retail sales.
For old-world retailers such as Sears, which has now lost money for the sixth consecutive year, selling direct via subscriptions could be a way to establish new relationships with customers and compete with Amazon in a place where they are not as strong as standard e-commerce.
The new membership economy might be only a smaller subset of e-commerce, but innovation will lead to more growth.
Large consumer packaged goods companies such as Procter and Gamble have experimented with it, mostly so its Gillette brand could continue to compete with subscription rivals such as Dollar Shave Club and Harry’s.
At the outset, Gillette’s subscription model was known as the Gillette Shave Club. It has undergone a rebranding and is now Gillette on Demand. Along with sending razor blades continuously via subscription, they now let customers text "Blades" when they need more cartridges, automatically creating an order.
According to P&G research, 41% of subscribers were getting more blades than they needed. Now, they receive refills only when they request them, if they choose that method.
Gillette looked past continuous engagement to create a service that relies on properly timed communication and delivery in the right channel. This rebranding and new technology is aimed at Millennials, though the jury is still out on whether the plan will work.
Superlative subscription strategies
Engaging Millennials is critical for emerging subscription businesses. Unsure how to get started? Consider these three strategies:
1. Identify the individual.
Millennials need to feel like they belong to a unique group. True personalization or customization is the most effective way to generate that impression.
Being able to select products versus passively receiving standardized shipments is the best indicator of customer longevity — and 52% of Millennials feel that a personalized product earns their loyalty.
Companies such as Stitch Fix rely on knowing the style preferences of their customers and then sending them clothing to try risk-free. A selection of products — possibly with celebrity or influencer endorsement like beauty sample box Ipsy — provides a specially curated experience to create a personal connection with the customer.
A curated experience can combat the paradox of too many choices, which can overwhelm consumers.
2. Offer exclusive products and experiences.
Giving subscribers the opportunity to get products they can’t buy or acquire elsewhere is a powerful motivator.
Many Millennials thrive on exclusivity, so subscriptions can offer products no one else has. From an exclusive color or style to the chance to meet a celebrity or go behind the scenes of an event, the opportunities for exclusive experiences are endless.
Twenty-four percent of Millennials like packaging that indicates a limited-release product, catering to their desires to have the latest and greatest. To this end, subscription companies can offer certain products or packages for a limited time to generate hype for their releases.
3. Get a little, give a little.
Winning over Millennials might also mean giving back to causes or nonprofits close to their collective heart.
Doing good is a basic human need, and savvy subscription services can mine this while connecting on a deeper level with their subscribers. Many companies, from TOMS to Patagonia, have embedded the value of giving back into their core missions and cultures.
And up-and-coming subscription brands can do the same: Take actress Sofia Vergara's new underwear subscription company, EBY, which donates 10 percent of proceeds to Seven Bar Foundation and thereby helps women to start their own businesses through microfinance programs.
Millennials are now young adults in their 20s and 30s starting their careers and families. While their economic impact is already substantial, it will only grow. To ensure the new membership economy has a bright future, companies need to focus on strategies that drive initial engagement and lasting loyalty with this generation.
Georg Richter is founder and CEO of OceanX, which is reinventing the membership economy by transforming customer-brand interactions and providing a powerful engine for subscriptions. Georg specializes in implementing next-generation technologies and innovative technology solutions that transform commerce from transactions to relationships.