CINCINNATI, March 23, 2017 /PRNewswire/ -- New research from leading payments processer Vantiv shows the growing disparity in subscription spending habits from generation to generation. While Gen Xers and baby boomers aren't signing up at a rapid rate, millennials, more than 70 percent of whom have a product subscription and 89 percent a service subscription, see subscriptions as purchasing made easier at a time when they're bombarded with an abundance of choice.
As subscription spending continues to grow for services like groceries, household items and beauty products, Vantiv's research conducted by Socratic Technologies shows less than half of Gen X consumers and less than 20 percent of baby boomers and retirees use subscription-based products. For service subscriptions, it is much higher coming in at 67 percent for boomers and 78 percent for Gen Xers. Millennials, on the other hand, seem to like the convenience of all subscription services, having things shipped to them on the spot, without having to re-order every week or every month, and the ease of a service subscription too. They also have an overall greater interest in subscribing to products or services in the future that they do not already subscribe to.
"eCommerce merchants must seriously consider subscription strategies to build loyalty," said Bill Cohn, senior product leader, eCommerce at Vantiv. "The business model provides many advantages for merchants. 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."
While many eCommerce merchants may take this generation gap in spending as a sign they need to appeal to older generations, data shows those segments of the population aren't likely to budge. Vantiv's research shows that 77 percent of consumers who don't currently subscribe to any products are unlikely to do so in the future. For online merchants, this data means it's time to double down on the millennial generation, born between 1980 and 2000, which is expected to grow in spending power to $1.4 trillion annually by 2020 according to Accenture.
Although recurring payment models can deliver substantial benefits – including predictable cash flow, higher customer retention, and operational efficiency – billing on a subscription or installment basis does have its challenges. Declined authorizations on recurring billing can threaten profitability and decrease customer lifetime value.
According to Cohn, "Account Updating and Recycling, components of our Vantiv Recovery product, are critical in merchants' payments arsenal to manage their subscription services. These products increase approvals and decrease attrition and operational costs, boosting customer lifetime value. In addition, real-time customer data from our Insights solution are of high value to our merchants in increasing revenue and managing costs of subscriptions in very tangible ways."
Socratic Technologies surveyed 500 people around the United States in partnership with Vantiv's market insights organization, Vantage Point, which provides proprietary research, articles, and interviews with those shaping the business of payments. For more information, including a video and infographic on this research, please visit https://www.vantiv.com/vantage-point-enterprise/smarter-payments/delivering-subscription-services.
ABOUT SOCRATIC TECHNOLOGIES, INC.
Socratic Technologies is a full-service marketing research consultancy that combines cutting-edge, practical innovations with strategic support. Our methods are a fusion of the best practices of time-tested traditional research and interactive, engaging techniques. With this combination of expertise and skills, we turn insights into action for our clients. www.Sotech.com.
Vantiv, Inc. (NYSE: VNTV) is a leading payment processor differentiated by an integrated technology platform. Vantiv offers a comprehensive suite of traditional and innovative payment processing and technology solutions to merchants and financial institutions of all sizes, enabling them to address their payment processing needs through a single provider. We build strong relationships with our customers, helping them become more efficient, more secure and more successful. Vantiv is now the largest merchant acquirer and the largest PIN debit acquirer based on number of transactions in the U.S. The company's growth strategy includes expanding further into high-growth channels and verticals, including integrated payments, eCommerce, and merchant bank. Visit us at www.vantiv.com, or follow us on Twitter, Facebook, LinkedIn, Google+ and YouTube.
© 2017 Vantiv, LLC. All Rights Reserved. All trademarks, service marks and trade names referenced herein are the property of their respective owners. Vantiv and other Vantiv products and services mentioned herein as well as their respective logos are registered trademarks or trademarks of Vantiv, LLC in the U.S. and other countries.
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SOURCE Vantiv, Inc.