Getting to Know the New Gen of Subscribers: What Merchants Should Know About Subscription Behavior
For subscription service businesses, gaining insight into the behaviors of your audience is a crucial step to find success and maximize the potential of your offerings. Generation Z, also known as “zoomers” or “Gen Z”, grew up with the internet, has excellent data literacy, and has unique behaviors as a result of exposure to near-constant social media and digital media.
This generation’s habits and motivators have to be paid attention to because they have a significant impact on the payment trends we’ll see in the future. With this report, we’ve taken a look at Generation Z’s opinions about subscriptions as well as their motivations behind subscribing or unsubscribing to get a deeper look at what kinds of factors may influence them.
The study digs into the psychology of Generation Z’s subscription habits, identifying key motivators and preferences that merchants can use to bridge the gap between current and future offerings.
Key Findings
1. 71% of respondents state that their subscriptions fall within the lifestyle and entertainment category, while retail and ecommerce is much lower at 21.73% of respondents.
2. The majority of respondents heard about their subscription choices via social media (64.29%).
3. Subscriptions are driven by low cost, with over 35% of respondents stating that cost drives their motivation behind subscribing to new services.
4. Free trials are not the top motivator but come in second for 24.4% of respondents.
5. Unsubscribing is often a result of rising costs, with nearly 60% of respondents indicating that rising costs result in them canceling their subscriptions.
6. 30.06% of respondents spend between $21 and $50 monthly on subscriptions, while 26.49% spend only $5 to $20. A small subset of Gen Z spends over $300 (2.08%). 7. The majority of Gen Z respondents prefer monthly payments (67.6%) compared to one-time payments (19.64%).
8. Buy Now Pay Later is not popular among Gen Z, with only 34.52% of respondents having completed a BNPL transaction for subscription purposes.
9. 69.05% of respondents state that “subscription services are nice to have, but not a necessity.”
10. 75% of respondents concurred that the determining factors for continuing a subscription revolve around budget and cost.
Methodology
In our latest study at Revolv3, we performed quantitative research in May/June 2023 to analyze the responses of 336 respondents between the ages of 18 and 27. These individuals included:
● Students (31.85%)
● Full- and part-time employees (32.45%)
● Self-employed professionals (5.06%)
● Temporarily unemployed professionals (18.45%)
● Full-time homemakers (5.65%)
● Disabled individuals (4.46%)
Additionally, these individuals were broken down into groups including singles (70.83%), married people (14%), and domestic partnerships/living together (11%), and examined for the total number of subscriptions subscribed to.
Our goal with this report was to determine the subscription habits of Gen Z and how they impact the subscription and online transaction landscape. Here’s what we discovered.
Digital Streaming Is Essential to Gen Z
Generation Z is highly used to being online and using digital services. For that reason, over half of respondents stated they’d consider their digital streaming services as essential to their lives. Those services include platforms such as Netflix, Hulu, Prime Video, ESPN+, YouTube TV, Paramount Plus, and Peacock TV.
For music streaming, Spotify was named as a favorite, and video game subscription services also topped their lists with services such as Xbox Game Pass Ultimate and PlayStation Plus. Following close behind these services were the health & wellness (40.48%) and financial services (37.2%) categories.
Social Media Shapes Subscription Choices
Another thing for businesses to keep in mind is how social media shapes subscription choices. 64.29% of respondents state that they heard about their current subscriptions on social media, which led to them learning more and eventually enrolling.
Other ways they heard about the subscriptions were through:
● Streaming advertisements (32.14%)
● Friends (30.36%)
● Research (25.6%)
● Google Ads (23.51%)
What does that mean for your business? It means that you can reach your target audience by effectively advertising through the right channels and influencing their decision-making process.
Cost Plays a Role in Subscription Decisions
Gen Z is still young, with most people agreeing that Gen Z falls between 9 and 24 years old. As such, cost still stays a significant influence on their spending decisions. In fact, over 35% of respondents stated that low cost drives their motivation to subscribe to a service.
This is reflected in the fact that Gen Z spends $21 to $50 per month on subscriptions and prefers monthly payments rather than paying for a yearly service as a lump sum.
Free trials can influence Gen Z to subscribe. 24.4% of respondents agreed that free trials did motivate them to subscribe.
According to one respondent:
“You can see if you like the subscription service and if you do like it, you can pay full subscription fees. It’s all a matter of liking the subscription or not going through with it. That’s why I like free trials, preferably the thirty-day trials.”
And, interestingly, Gen Z is not particularly impulsive. Only 5.95% stated that they’d subscribe on impulse, but 21.73% stated that perceived need would be a key motivator.
While subscriptions are important to focus on, businesses also need to think about retaining subscribers. Increasing costs have been named as a leading cause of dropping a subscription service (60%) especially when the costs increase with no advanced changes to improve the service. Price increases without notifications and a lack of transparency were frowned upon by respondents.
One option for retention could be pausing payments when inactive, which more than half of respondents agreed they would use and still remain with a service. Another 24.4% of respondents stated that they’d like an option to change their billing frequencies, and 26.49% said they’d prefer to be able to upgrade or downgrade at will. 67.26% state that they want monthly payments, and only 19.64% agree that they’d prefer to complete a one-time or instant payment. That could be why Buy Now Pay Later (BNPL) transactions don’t appeal to Gen Z for subscriptions, with only 34.52% stating that they’d used it for that purpose previously.
Emotion and Subscriptions
Emotion can play a role in subscription purchases for Gen Z. 69.05% stated that they believed “subscription services are a nice-to-have, not a necessity,” meaning that businesses do need to show that their subscriptions have value to keep Gen Z subscribed to services they otherwise don’t see as essential. Businesses also have to overcome the challenge that over half of respondents believe that subscription services promise more than they deliver in terms of value. For example, some Gen Z respondents subscribed to streaming services for certain programming. One respondent stated:
“Streaming services will remove certain popular shows that are often the reason I subscribe in the first place. Then I have to go through the hassle of unsubscribing as that service no longer interests me.”
And while 59.53% of respondents say that subscription services have improved their quality of life, over half (55.35%) were willing to unsubscribe from a service if they felt there was a lack of interest shown in them by the subscription service provider.” This points to a need for engaging, targeted content for all subscription holders.
What to Do to Engage Gen Z and Retain Subscribers
There are several things businesses can do to both engage and retain subscribers in the long term.
Create Value
Gen Z has an eye on their money, and they want to get value for what they spend. Gen Z customers want subscription services that offer functionality, unique features, and content or services they can’t find elsewhere. Additionally, they want to try these services before buying, so free trials and demos are key to engaging this audience.
Focus on Flexibility and Convenience
Gen Z wants convenience; they prefer having multiple payment options, flexible subscription packages, and services they can integrate with their current workflows. An easy sign-up process can influence people to subscribe, with 63.99% of respondents stating that the likelihood of subscribing would be based on how easy it was to sign up.
Stay Transparent
Gen Z does not like surprises and can find your business dishonest if you aren’t clear about your pricing, data usage policies, or terms and conditions. Avoid adding hidden charges or making undesirable changes to services or products. Provide subscribers with timely notifications prior to the end of trials or demos.
Offer Personalized Services
64.88% of respondents stated that they would subscribe to a service if there were personalization options available.
Focus on Customer Service
Gen Z expects effective, prompt customer service and support. Subscription services with rapid customer service are more likely to retain subscribers. Businesses can implement chatbots, social media monitoring, email communication, and other methods of staying in touch with subscribers to improve retention rates.
Wrapping Up
Understanding the behaviors of Generation Z is an essential step toward improving subscription retention rates. This demographic’s exposure to digital media and social media platforms has influenced and shaped their subscription choices and preferences. Our findings show that Gen Z places importance on cost-conscious decision-making, and low-cost motivations help drive subscription choices. Free trials can also have an impact, though they are secondary to the overall perceived value of a product.
Engaging and retaining Gen Z subscribers requires personalized content and experiences, flexibility, value, and customer service. Businesses that can retain transparency and clear communication while catering to this demographic will be well-positioned to succeed in the subscription service and digital landscape.
About Revolv3
At Revolv3, we are the first billing suite dedicated to payment approvals. Our subscription billing management program helps you keep costs low while optimizing billing options that make it easy for Gen Z to subscribe to your services. Ready to learn more? Talk with payment experts at Revolv3 and learn how we can help.
For subscription service businesses, gaining insight into the behaviors of your audience is a crucial step to find success and maximize the potential of your offerings. Generation Z, also known as “zoomers” or “Gen Z”, grew up with the internet, has excellent data literacy, and has unique behaviors as a result of exposure to near-constant social media and digital media.
This generation’s habits and motivators have to be paid attention to because they have a significant impact on the payment trends we’ll see in the future. With this report, we’ve taken a look at Generation Z’s opinions about subscriptions as well as their motivations behind subscribing or unsubscribing to get a deeper look at what kinds of factors may influence them.
The study digs into the psychology of Generation Z’s subscription habits, identifying key motivators and preferences that merchants can use to bridge the gap between current and future offerings.
Key Findings
1. 71% of respondents state that their subscriptions fall within the lifestyle and entertainment category, while retail and ecommerce is much lower at 21.73% of respondents.
2. The majority of respondents heard about their subscription choices via social media (64.29%).
3. Subscriptions are driven by low cost, with over 35% of respondents stating that cost drives their motivation behind subscribing to new services.
4. Free trials are not the top motivator but come in second for 24.4% of respondents.
5. Unsubscribing is often a result of rising costs, with nearly 60% of respondents indicating that rising costs result in them canceling their subscriptions.
6. 30.06% of respondents spend between $21 and $50 monthly on subscriptions, while 26.49% spend only $5 to $20. A small subset of Gen Z spends over $300 (2.08%). 7. The majority of Gen Z respondents prefer monthly payments (67.6%) compared to one-time payments (19.64%).
8. Buy Now Pay Later is not popular among Gen Z, with only 34.52% of respondents having completed a BNPL transaction for subscription purposes.
9. 69.05% of respondents state that “subscription services are nice to have, but not a necessity.”
10. 75% of respondents concurred that the determining factors for continuing a subscription revolve around budget and cost.
Methodology
In our latest study at Revolv3, we performed quantitative research in May/June 2023 to analyze the responses of 336 respondents between the ages of 18 and 27. These individuals included:
● Students (31.85%)
● Full- and part-time employees (32.45%)
● Self-employed professionals (5.06%)
● Temporarily unemployed professionals (18.45%)
● Full-time homemakers (5.65%)
● Disabled individuals (4.46%)
Additionally, these individuals were broken down into groups including singles (70.83%), married people (14%), and domestic partnerships/living together (11%), and examined for the total number of subscriptions subscribed to.
Our goal with this report was to determine the subscription habits of Gen Z and how they impact the subscription and online transaction landscape. Here’s what we discovered.
Digital Streaming Is Essential to Gen Z
Generation Z is highly used to being online and using digital services. For that reason, over half of respondents stated they’d consider their digital streaming services as essential to their lives. Those services include platforms such as Netflix, Hulu, Prime Video, ESPN+, YouTube TV, Paramount Plus, and Peacock TV.
For music streaming, Spotify was named as a favorite, and video game subscription services also topped their lists with services such as Xbox Game Pass Ultimate and PlayStation Plus. Following close behind these services were the health & wellness (40.48%) and financial services (37.2%) categories.
Social Media Shapes Subscription Choices
Another thing for businesses to keep in mind is how social media shapes subscription choices. 64.29% of respondents state that they heard about their current subscriptions on social media, which led to them learning more and eventually enrolling.
Other ways they heard about the subscriptions were through:
● Streaming advertisements (32.14%)
● Friends (30.36%)
● Research (25.6%)
● Google Ads (23.51%)
What does that mean for your business? It means that you can reach your target audience by effectively advertising through the right channels and influencing their decision-making process.
Cost Plays a Role in Subscription Decisions
Gen Z is still young, with most people agreeing that Gen Z falls between 9 and 24 years old. As such, cost still stays a significant influence on their spending decisions. In fact, over 35% of respondents stated that low cost drives their motivation to subscribe to a service.
This is reflected in the fact that Gen Z spends $21 to $50 per month on subscriptions and prefers monthly payments rather than paying for a yearly service as a lump sum.
Free trials can influence Gen Z to subscribe. 24.4% of respondents agreed that free trials did motivate them to subscribe.
According to one respondent:
“You can see if you like the subscription service and if you do like it, you can pay full subscription fees. It’s all a matter of liking the subscription or not going through with it. That’s why I like free trials, preferably the thirty-day trials.”
And, interestingly, Gen Z is not particularly impulsive. Only 5.95% stated that they’d subscribe on impulse, but 21.73% stated that perceived need would be a key motivator.
While subscriptions are important to focus on, businesses also need to think about retaining subscribers. Increasing costs have been named as a leading cause of dropping a subscription service (60%) especially when the costs increase with no advanced changes to improve the service. Price increases without notifications and a lack of transparency were frowned upon by respondents.
One option for retention could be pausing payments when inactive, which more than half of respondents agreed they would use and still remain with a service. Another 24.4% of respondents stated that they’d like an option to change their billing frequencies, and 26.49% said they’d prefer to be able to upgrade or downgrade at will. 67.26% state that they want monthly payments, and only 19.64% agree that they’d prefer to complete a one-time or instant payment. That could be why Buy Now Pay Later (BNPL) transactions don’t appeal to Gen Z for subscriptions, with only 34.52% stating that they’d used it for that purpose previously.
Emotion and Subscriptions
Emotion can play a role in subscription purchases for Gen Z. 69.05% stated that they believed “subscription services are a nice-to-have, not a necessity,” meaning that businesses do need to show that their subscriptions have value to keep Gen Z subscribed to services they otherwise don’t see as essential. Businesses also have to overcome the challenge that over half of respondents believe that subscription services promise more than they deliver in terms of value. For example, some Gen Z respondents subscribed to streaming services for certain programming. One respondent stated:
“Streaming services will remove certain popular shows that are often the reason I subscribe in the first place. Then I have to go through the hassle of unsubscribing as that service no longer interests me.”
And while 59.53% of respondents say that subscription services have improved their quality of life, over half (55.35%) were willing to unsubscribe from a service if they felt there was a lack of interest shown in them by the subscription service provider.” This points to a need for engaging, targeted content for all subscription holders.
What to Do to Engage Gen Z and Retain Subscribers
There are several things businesses can do to both engage and retain subscribers in the long term.
Create Value
Gen Z has an eye on their money, and they want to get value for what they spend. Gen Z customers want subscription services that offer functionality, unique features, and content or services they can’t find elsewhere. Additionally, they want to try these services before buying, so free trials and demos are key to engaging this audience.
Focus on Flexibility and Convenience
Gen Z wants convenience; they prefer having multiple payment options, flexible subscription packages, and services they can integrate with their current workflows. An easy sign-up process can influence people to subscribe, with 63.99% of respondents stating that the likelihood of subscribing would be based on how easy it was to sign up.
Stay Transparent
Gen Z does not like surprises and can find your business dishonest if you aren’t clear about your pricing, data usage policies, or terms and conditions. Avoid adding hidden charges or making undesirable changes to services or products. Provide subscribers with timely notifications prior to the end of trials or demos.
Offer Personalized Services
64.88% of respondents stated that they would subscribe to a service if there were personalization options available.
Focus on Customer Service
Gen Z expects effective, prompt customer service and support. Subscription services with rapid customer service are more likely to retain subscribers. Businesses can implement chatbots, social media monitoring, email communication, and other methods of staying in touch with subscribers to improve retention rates.
Wrapping Up
Understanding the behaviors of Generation Z is an essential step toward improving subscription retention rates. This demographic’s exposure to digital media and social media platforms has influenced and shaped their subscription choices and preferences. Our findings show that Gen Z places importance on cost-conscious decision-making, and low-cost motivations help drive subscription choices. Free trials can also have an impact, though they are secondary to the overall perceived value of a product.
Engaging and retaining Gen Z subscribers requires personalized content and experiences, flexibility, value, and customer service. Businesses that can retain transparency and clear communication while catering to this demographic will be well-positioned to succeed in the subscription service and digital landscape.
About Revolv3
At Revolv3, we are the first billing suite dedicated to payment approvals. Our subscription billing management program helps you keep costs low while optimizing billing options that make it easy for Gen Z to subscribe to your services. Ready to learn more? Talk with payment experts at Revolv3 and learn how we can help.
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