Accidental Subscriptions Account for £688 Million Per Year In The UK

With Brits spending £688 million on ‘accidental subscriptions’ that are hard to cancel last year alone, experts have revealed which types of subscription have the best customer retention rates.

The subscription business model has boomed in popularity in recent years due to their potential for predictable revenue and deep customer relationships.

However, these models also face unique challenges that can impact stability and growth, including difficulty in acquiring and retaining customers due to the need for increased consumer commitment and spending.

What Subscriptions Work Best Without Trapping Customers?

But which types of service, price and payment schedule have the best retention without ‘trapping’ customers? The experts at money.co.uk business insurance dive into the data to find out:

1. Utilities

Utility subscriptions retain their customers the best, at 46% annually, likely due to the essential nature of the services they provide. They typically include things like internet and phone services. These are not typically considered ‘luxury’ expenses for most subscription users, so customers are more likely to continue these subscriptions.

2. Productivity

In second is productivity subscription services, at 42% for annual memberships. These cover both our personal and professional lives, including things like time management apps, cloud storage platforms, and project management tools. Tools that enhance productivity are often deeply ingrained in our daily working or personal lives, so ending these subscriptions can be disruptive.

Read More: 58% of Business Owners Struggle to Maintain Staff Productivity in December

3. Lifestyle

In third, lifestyle apps, which can range from dating to home organisation, play significant roles in a user’s daily life, but they’re not always indispensable. This may be why monthly retention is slightly lower. To boost this, these apps might consider offering more personalised experiences or looking into promotions and partnerships to add even more value for users.

4. Health & fitness

Health and fitness apps have the highest weekly retention rate, 6%, suggesting users are willing to try them but more likely to drop them in a year’s time. This could be due to dissatisfaction with the service or just a lack of motivation. Continuous innovation in features like virtual coaching or adding community challenges could help keep this interest and motivation for longer.

Read More: Combatting sick days: Could health supplements be the answer?

5. Photo & video

Photo and video subscriptions have reasonable initial retention (5% weekly), suggesting that there’s enthusiasm for such tools. However, there’s a sharp decline over time, with these apps having the lowest annual retention rate (30%). New technologies, improved user interfaces and advanced editing features could all help retain users. Collaborations with influencers and professionals in the industry to endorse the app might also help.

How does price and payment schedule affect customer retention?

Weekly subscriptions tend to have a lower price point, averaging £4.78, with the most popular cost of £3.99. This suggests that there are lots of trial or introductory offers here, aimed to attract new users. While these lower prices could attract users who are hesitant to commit long-term, they could also have lower retention unless the value is proven – as weekly retention rates are the lowest, at around 5%.

Monthly

Monthly subscriptions are typically the backbone of a subscription service, with an average price of £7.16 and a most popular price of £8.00, striking a balance between acquiring customers and making profits and typically more than doubling the retention rate of weekly subscriptions.

Annual

Finally, annual subscriptions have a far lower most popular price than the average of £30, at £16, with lots of services taking an aggressive approach to try and lock customers in long-term and increase their retention rate. These lower prices could attract a lot of users but may reduce shorter-term profitability.

What the Experts Say

Kyle Eaton, money.co.uk business insurance expert, shares his tips on setting up a subscription business: “A subscription service is a great business model as it encourages repeat purchases. If you can establish long-term relationships with your customers, they’ll pay you regularly for access to your product or service. This means recurring and more reliable revenue for your business.

“Finding the right niche is crucial to start your own subscription business. You need to consider your target audience, any personal knowledge of your product or service you could maximise, and any competition in your chosen niche.

“An excellent way to begin thinking about what subscription service you could offer is to try and find a problem you can solve with your service. Is there anything missing from the subscription services currently on offer? Could you build a subscription service around your current line of work?

“Entrepreneurs starting out with this kind of business model need to carefully consider all of the relevant costs and competition to be strategic for the best chance of long-term success. Likewise, ensuring secure payment gateways can build customer trust and potentially boost retention.

“You’ll also want to ensure you have the necessary insurance for your new subscription service. In the challenging business landscape, business insurance can protect you against any unexpected issues so you can focus on building your startup.

“Ensure your policy covers you for the risks associated with your specific business model, such as any delivery issues if you’ll be delivering a product or cyber fraud if you’ll be processing payments online. Business insurance will also protect you from everyday risks, such as accidents in the workplace, stock damage, and any legal costs.”

Dame Clare Moriarty, Chief Executive of Citizens Advice, said:

“With budgets increasingly squeezed and living costs often exceeding the amount people have coming in each month, it’s vital consumers feel in control of their spending.

“Companies relying on people forgetting to cancel at the end of a free trial is an unacceptable business model that exploits busy, cash-strapped consumers.

“While the government has acknowledged subscription traps are a problem that need to be fixed, the plans laid out in the upcoming Consumer Bill risk failing to fix them. We need to see the root cause of subscription traps tackled head on. Consumers should be offered a choice over whether their subscriptions auto-renew and whether they want to continue after a free trial.”