Retailers that want to create loyal millennial customers must offer products and services via subscription, according to a new report from Vantiv. Compared to baby boomers and Gen Xers, the generation of consumers born between 1980 and 2000 has become far more comfortable paying for things—especially physical products—on a recurring basis, the report said. The Cincinnati-based payments processor and acquirer found 70 percent of millennials have a product subscription, compared to 44 percent of Gen Xers and 19 percent of baby boomers. Nearly 90 percent of millennials have a service subscription, while only 78 percent of Gen Xers and 67 percent of baby boomers do.
Vantiv warns e-commerce merchants not to look at its findings as an opportunity to target older consumers with subscriptions. Instead, the company said, it’s time to “double down” on the younger generation, whose spending power will grow to $1.4 trillion by 2020. According to the research, 77 percent of the consumers who don’t currently subscribe to any products are unlikely to do so in the future.
“The business model provides many advantages for merchants,” said Bill Cohn, senior product leader for e-commerce at Vantiv. “First, customer lifetime value to a merchant typically goes up. A consumer can click ‘buy’ once and get razors or beauty products, or coffee pods, shipped every month with no further thought or action. Second, services that would be costly if billed in one lump sum become more affordable. This is particularly important for millennials, who have the strongest appetite for online services but the tightest cash flow compared with previous generations. Third, a growing recurring revenue stream is a good way to increase the value of your company. So for smaller businesses or startups, a subscription model provides a great opportunity to compete with larger incumbents—think for example of groceries and the growing online/subscription meals delivery services.”
Cohn noted, however, that despite all the benefits, merchants need to ensure their payment provider offers features for recurring billers (e.g. Account Updater) that maximize approvals and reduce unnecessary declines.
- Optimizing Recurring Billing Transactions