Millennials are driving the Subscription Economy
Written by Benedicte Lykke Larsen
The young generations, also known as Millennials, have a fundamentally different consumer behaviour than previous generations. Consequently, more and more companies must think in new, innovative solutions – and business models – in order to attract these consumers’ attention. One example is their attitude towards material goods, which they prefer renting instead of owning (from ownership to usership), which has not only created new opportunities but also challenges for many companies. In addition, sustainability, convenience and RoT (return on time) are essential to the busy, young consumers.
These consumer trends have paved the way for a business model that has become more and more common – the subscription-based business model.
Who are Millennials? Understand their behaviour and way of thinking
The young consumer, consumer of the future, Millennials, Generation Y – there are a lot of ways of saying that. It is a group of consumers, born between 1980-1995, who place heavy demands on the companies they choose to be involved with. As such, it is essential to understand why these consumers think and act as they do. For instance, a large part of this generation can be characterised as ‘Digital Natives’, meaning that they have grown up in the digital age, which drastically influences their perspective on life. Furthermore, they focus on the environment and sustainability, while wanting flexibility, convenience and control in their life. They advocate of equal rights for all and are more receptive to innovative ideas and products than previous generations.
A value, or mindset, which is also fundamentally different among young consumers, is their attitude towards material goods or possessions. Especially in the Western society, young consumers have grown up in a world with a range of options, opportunities and products, all of which they have access to. They can buy technology from China, fruit from Brazil, water from Fiji – you name it, they can get it. This abundance of choices and products has resulted in younger consumers generally devaluing the need for (and the value of) material possessions. At the same time, these consumers were raised in a world where their parents were challenged by the Financial Crisis. You may be wondering why this is relevant? Because houses, cars and material possessions suddenly became a financial burden instead of a blessing to these consumers’ parents. As a consequence, the trend “from ownership to usership” and the sharing-economy took off in the same period, especially among young consumers.
RoT – Return on Time – and convenience
Convenience also plays an important role among young consumers. These consumers feel that they are busier than ever before, which is why RoT (Return on Time) is important. Companies must bear this in mind when developing new products and services to this target group. New business models, especially subscription-based, have derived from this way of thinking.
Interestingly, young consumers have begun to subscribe to recurring deliveries. In the United States, 70% of young consumers have at least one recurring delivery-subscription. Examples include vitamin pills or groceries that arrive on a weekly basis. Why? Convenience and RoT.
These types of subscriptions allow young consumers to optimise their time and control their finances by purchasing exactly what they need. Just think of concepts such as Cleanly (pick up, clean and return your laundry), Dollar Shave Club (send razors and shaving-gear on-demand) and Stitch Fix (sends five pieces of clothes per month, which you can then buy at a cheaper price). The list has gradually become quite long and there are many interesting and innovative services out there.
How can your company become better at capturing the demands of young consumers?