Yet, in April, we saw one of the world’s biggest players in the subscription economy — Netflix — announce a net loss of 200,000 subscribers globally. In addition, the company expects to haemorrhage a further two million subscribers over the next few months.

Naturally, this raises the question of whether the subscription economy boom is starting to wane, and if so, what brands can be doing to react, keep customer churn to a minimum, and even keep pace with growth projections.

In my view, a key component to this is the service function, and more specifically service agents themselves. Let’s look at why.

Is the Subscription Boom Waning?

Yes, there are caveats to the Netflix case, chiefly that it suspended its services in Russia. Further, it’s seen increased competition from new players in the space, especially Disney+. However, given that the company is projecting to lose even more of its subscribers, it ought to serve as a warning to the rest of the subscription economy.

If we look more generally at this sector, the immediate driver of any stalling in growth and loss of customers is inflation and a rise in the cost of living. For many consumers, getting notified that another subscription charge has been taken from your bank account will only prompt them to probe whether they have extracted value from that service or not.

This doesn’t mean there is going to be a mass exodus from subscription services — there are subscriptions for just about everything these days, whether that’s streaming services, beauty products or food boxes. They aren’t going to just disappear.

However, it is probably going to be the case that we’ll see consumers going through a process of justifying expenditure and asking: is this thing I pay for monthly really of value to me?

We also need to view these changes in the context of more macro trends in consumer behavior. Firstly, the vast increase in online shopping and boom in services that offer convenience as their unique selling proposition has only heightened consumer expectations of brands. In some places, you can now get a full week’s shop on your doorstep in 20 minutes, ordered on your smartphone. These buying scenarios have been accelerated by the COVID-19 pandemic.

Secondly, this has also been coupled with a dramatic drop in the cost of switching to another brand. It is now no longer a huge undertaking for consumers to cancel direct debits and move to a competitor — it’s just one click away. This is probably why, when we spoke to 3,000 consumers across the US and UK last year, we found that just one poor experience is enough for 95% of consumers to consider never returning to the brand.

Overall, then, convenience is at an all-time high, but brand loyalty and the cost and effort of switching is at an all-time low. Add in the new dynamic of the rising cost of living, it’s easy to see this contributing to the loss in subscriber numbers associated with Netflix, and potentially the subscription economy more broadly.

Retention and Customer Service

And when I say the loss in subscriber numbers, what I am referring to is customer churn. This is why it is critical to focus on customer retention. For subscription services, growth and increasing the number of subscribers has been the key objective. But now, with consumer behaviours changing and costs rising, reducing the churn rate and increasing retention and loyalty now ought to be the key objective.