You may not realise how many things you are subscribed to. There’s Netflix, Amazon, Spotify, iCloud, your mobile data plan, and that is just the beginning. Nowadays, many companies are shifting to subscription plans as payment. But why? There are many psychological hooks deeply rooted in these monthly commitments, but people also find them extremely convenient. Are we getting our money’s worth, or are we paying more than we should without noticing?  

Subscriptions are more than just a way to pay for a product or service – they are a financial goldmine for businesses. The subscription economy grew by a remarkable 435% over the last decade and is projected to reach a market size of $3 trillion by the end of this year. Companies that employ subscription-based payments choose to do so because they see them as steady and recurring income. One-time sales are more unpredictable and fail to create a strong consumer-business relationship. Subscriptions provide a clear understanding of a company’s income, as an exact amount can be calculated based on the number of active subscribers.  

Subscription models are now everywhere. With the rise of services such as Netflix and Spotify, the need to buy or rent physical media quickly fizzled out, making consumers pay a monthly fee rather than owning the content. Some of the most unexpected industries have adopted subscription models, for example, Simmer, which is based in the UK, prepares meals for its customers every week, offering monthly payment plans. Simmer, along with many other meal preparation companies, found a way to adopt subscriptions in an industry that would never think of applying such an idea to food. 

A key advantage of subscription models is that they encourage habitual usage by customers, making them more likely to use the product or service, whether they need it or not. On the other hand, the more clever reason businesses opt for a subscription model is that many customers forget to cancel their subscriptions. As the payments are automatic, customers will get charged regardless of whether they use the product or not. The lowest sustainable amount of revenue a company generates from a subscription model occurs when its customers are proactively cancelling their subscription when finished. However, a company will generate much more when its customers are lazy and forgetful which is common among consumers. The passive nature of the subscription model is its greatest advantage and is therefore what makes it so profitable, explaining why so many companies have shifted to adopting subscription models. 

Every subscription we have ever seen comes with a free trial because most people forget to cancel their trial before it ends. As the first payment gets processed automatically, companies will earn great amounts from unwanted purchases. The same idea carries forward when companies start with a lower price for the first month and then charge more from then on. A 2022 study by C+R Research found that 42% of consumers had forgotten they were still paying for a service they no longer used. Subscription models thrive off of unwanted renewals of contracts simply because the charges are so common and likely to occur.  

Consumers will also find it difficult to cancel their subscriptions, as companies implement complicated cancellation procedures, which include having to call a representative who will try and convince you to stay on the plan, or in some cases, swapping the positions of the cancel and continue buttons to make the user mess up the cancellation process. 

However, if customers did not like the product or service offered as a subscription in the first place, they would never subscribe. So, what are the benefits to the customers from subscriptions and why do they like them?  

Firstly, a subscription model gives companies the chance to lower the presented price of the product or service, as well as showcase it as something that can be cancelled at any time, saving the customer money and promising flexibility. Subscriptions feel cheap because they are, in the short-term. Most do not realize that they are subscribed to several different products and services, and with the price of some increasing after the first month, the combined cost of all the subscriptions can become staggering. If one is organized and not forgetful, one would find subscriptions extremely convenient and beneficial and would prefer several over one-time payments. But is everyone like that?  

Subscriptions have become the dominant business model because one of their abilities is to make customers feel that they are more in control of their finances and getting a better price. However, many fail to cancel their free trials and pay an extra, unwanted month or, in some cases, a year’s payment. Subscriptions can be both a blessing and a curse. While they offer convenience and affordability, their hidden power lies in how easily they trick us into paying without noticing. Whether they are worth the cost depends not on the product itself, but on how well we manage them.