For a successful subscription service, you must put the customer first

Nowadays, more people than ever use subscriptions to buy meal kits, stream popular TV shows or receive regular supplies of anything from beauty products to craft beer.

Nearly four in five UK adults have at least one subscription, with an average of three per person, according to Finder.com’s ’What are the most popular subscription services in the UK?’. This represents a significant change in consumer behaviour – one that all businesses should be aware of.

The latest subscription trends

The extraordinary growth of weekly food box deliveries is one of the most striking trends, with Statista predicting the market size could reach £1.26bn in 2025. Other popular sectors include cosmetics, male grooming, clothing and pet products.

Digital and content subscriptions are another growing trend with over-the-top video services projected to rise from £6.5bn in 2024 to £8.3bn in 2028, according to PwC’s Global Entertainment & Media (E&M) Outlook. Emerging categories include home security, nutrition and mental health support.

However, this shift is not restricted to everyday essentials. There has also been an increased emphasis on luxury items, such as fine wines and gourmet foods.

Generational differences are also evident. Research from Skim Group found around half of Millennials have four or more subscriptions, compared to just 18% of Baby Boomers, while younger generations increasingly favour digital convenience.

Of course, financial incentives are a big part of this change with savings ranging from 10%-15%, but personalisation and tailored experiences are also key. For beauty products, that could mean exclusivity, while for household goods, convenience is uppermost. There is also demand for digital subscriptions that offer premium or ad-free services.

Supporting subscription models

For businesses, the advantages of offering subscription services are clear. Recurring revenue models offer stability. And excitingly there are still plenty of untapped opportunities to capitalise on this trend.

However, successful subscription services require sector-specific payment gateways that can match the full range of billing and payment methods. They can also provide the following services:

• Automated retry when payments fail
• Foreign payment processing
• Fraud prevention
• Real-time transaction monitoring
• Scaling for large-volume buyers

Putting the customer in control

Beyond the financial incentives, the most important requirement is flexibility. So, options to exit or pause payments should be front and centre, along with the capability to change frequency, pay in instalments and defer billings.

Services that lack these capabilities could encourage distrust of the entire model.

Subscription-based businesses should also take note of the government’s Digital Markets, Competition and Consumers Bill, which has introduced a new set of requirements specific to subscription contracts. Further information can be found by reading Hogan Lovells: ‘The UK’s new requirements for subscription contracts with consumers – DMCC Bill Deep Dive Part 3.

Reactions are crucial

It is vital to get ahead of churn by predicting and managing revenue volatility. Technical solutions such as network tokens and smart AI-powered payment prediction are increasingly important.

Data analytics, supported by AI, can help predict customer behaviour and identify, for example, when a customer might run low on a specific product – or want to add new ones.

By tracking these patterns, subscription businesses can tailor offers or incentives to keep customers engaged.

Through predictive analytics, businesses can reduce churn and increase retention. AI can also prevent fraud, improve customer targeting through propensity scoring and make product recommendations.

All of this can boost revenue and increase customer spend.

The challenges of scaling 

As business grows, companies must consider international markets with all the billing complexity of multi-currency processing and different regulatory requirements.

In particular, services must cater to the local market’s preferred method of payment – bank transfer or card? Other considerations include:

• Logistical and customs regulations for product-based subscriptions
• Shipping and international delivery logistics
• Scaling the infrastructure for billing, stock-keeping unit complexity and automated invoicing

The future

As seamless, secure subscription models increase market share, businesses that embrace personalisation will lead the way – and payment services are an important part of this. By fostering trust, flexibility and convenience they can help build lasting relationships that drive business growth.