Research results that consumer carelessness that does not review the continuation of the subscription contract leads to an increase in the revenue of companies that provide services
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Selling Subscriptions | NBER
(PDF file) https://doi.org/10.3386/w31547
Gauging the 'subscription economy' boon to companies | Stanford Institute for Economic Policy Research (SIEPR)
Stop binge-watching and read your credit-card bills. Subscription services make lots of money when you're not paying attention. | Morningstar
A research team led by Stanford University economists Lilan Ainaf and Neil Mahoney used transaction data obtained from major payment card networks under the condition that service names could not be identified. We researched 10 popular subscription services in categories such as: The study used payment data from August 2017 to December 2021 and analyzed data on 23 million accounts and 35 million subscription subscriptions.
Analysis shows that when consumers switch from credit cards to debit cards, subscription churn rates nearly quadruple. A change of card requires updating the billing information for the subscription, at which time the consumer is believed to have reviewed the continuation of the subscription agreement.
The graph below shows the maintenance rate of various subscription contracts, and the central '12 months' point corresponds to the timing of updating credit cards, etc. It can be seen that the retention rate gradually decreased over time, and that the subscription contract retention rate dropped sharply around the 12th month when the card was switched.
In response to the rapid rise in the churn rate due to card switching, the research team estimated the ``impact on corporate earnings when the subscription is continued due to consumer carelessness.'' Ta. As a result of the survey, in the plan of $ 12.99 per month (about 1900 yen), which is the average price of the subscription service, if the consumer does not make a positive decision such as reviewing the plan every month, the company's profit is about 85%. estimated to increase.
``It is reasonable to think that there are many subscription services that would not have been viable as businesses without the carelessness of consumers,'' said Ainaf et al.
Services such as
Mahoney said, ``If the subscription price has been raised, but no one has information about it, it is unlikely to lead to cancellation. “If this happens, consumers are more likely to consider changing plans or canceling.”
The research team says that the increase in subscription services in recent years is due to the 'growth of e-commerce' and 'helping consumers by eliminating the hassle of pay-as-you-go systems.' However, the research team pointed out that ``automatic renewal of subscription contracts takes advantage of careless consumers who continue to contract despite not finding the value of the contract.'' “Subscription services may bring convenience to consumers, but it is also possible for businesses to take advantage of careless subscribers. may be motivating them to move from pay-as-you-go to subscription contracts.'
In addition, the research team investigated the impact on corporate profits of encouraging consumers to review their contracts at various intervals, from once a month to once every two years. They found that inviting consumers to review once every six months reduced additional revenue for businesses due to consumer negligence by approximately 50%. “Our research proves that well-regulated subscription economies can bring economic benefits to consumers. For consumers and businesses, the issue of subscriptions is It's very important,' he said.
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