America’s Relationship with Subscription Services | Blog | Insight Venture Partners
Business Development

America’s Relationship with Subscription Services

by Waterstone Management Group

Personal budgets have evolved a lot in recent years as a swarm of new services has emerged, each with a recurring monthly fee. These subscription services range from foundational elements of modern lifestyle to disruptive niche offerings.

Knowing millions of consumers spend billions of dollars per month, our team was drawn to these questions: How happy are people with various subscription services? Which are they most or least dependent on? Are they acutely aware of the expenses, or does it amount to background noise?

We conducted an analysis of 2,500 Americans’ budgets, spanning 21 categories of subscription service. What follows are our most useful findings.

Perception vs. reality

We suspected people underestimate how much they spend on subscription services, so to begin our survey, we played a little game to test the theory. It involved three steps:

  1. We began by asking people to think generally about “recurring monthly expenses associated with digital services, devices and subscription boxes.”
  2. Then we gave people 10 seconds to guess how much they spend per month on such expenses.
  3. After recording an initial answer, we asked people to take 30 seconds to think about the question more carefully, before answering a second time. We prompted them with specific examples of services and service categories, including “WiFi, mobile service, Netflix, Spotify, Birchbox, Dollar Shave Club, GoDaddy, Playstation Now, iCloud, Fitbit, etc.”

Here’s what we found:

  • Average of first guesses (10 seconds): $79.74/month
  • Average of second guesses (30 seconds): $111.61/month

That’s a 40% increase in estimated spend between the two guesses.

Next we took people through an exhaustive inventory of their recurring monthly expenses, across 21 categories.*

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*A number of services in our service categories, particularly apps, have free versions. For our analysis we focused solely on consumers using paid versions of these apps.

When our inventory was complete, we had a new number to contend with: $237.33. Across the 21 service categories we introduced, that was the average total spend in reality.

  • First guess: $79.74/month
  • Second guess: $111.61/month
  • Actual spend: $237.33/month

That’s a 112% increase from the first to second guess and a 197% increase from the first to actual spend.

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Clearly, most Americans are unaware of how much they spend on subscription services. When pressed for a quick answer, they dramatically underestimate the amount. This is a boon for companies operating subscription models… and bust for advocates of conscientious budgeting!

Below is a list of the services from most popular to least popular, along with the most frequently selected amount spent on each service.

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*Respondents were allowed to select the closest amount to what they pay per month, in $10 increments. So, if someone pays $8.99 per month for an app, they selected $10.

Top of mind expenses

Once we established which services each respondent subscribes to, we asked people to rate how acutely aware they are of that monthly expense, on a scale of 1-10.

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Built to last

We assessed people’s relationships with subscription service(s) from each category, in two ways:

  1. How satisfied are they with the service(s)?
  2. To what extent do they feel attached to or dependent on the service(s)?

For each subscription, respondents could identify one of four statuses:

  1. Happily hooked
  2. Happy, but not hooked
  3. Unhappily hooked
  4. Unhappy, not hooked

Because the fourth option represented such a small minority of responses, and naturally indicates a customer who won’t be a customer much longer, we eliminated those responses from the results below.

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Waterstone Management Group

Waterstone is a management consulting firm that helps technology companies and investors create measurable value by identifying and capitalizing on disruptive growth opportunities and by driving excellence in Services, Cloud, and Customer Success performance.

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