It started small at first.
You signed up for a free month of Canva Pro just to add a little pizzazz to your mid-term presentation. The card on file was a formality. You fully intended to cancel the service next month to dodge the $15 fee.
Well, one month quickly turned into two and snowballed into a full year. Pretty soon, you’re $180 down, and you haven’t made a snazzy presentation since March of last year.
While companies like Canva email account charge reminders to consumers, not every company is as dutiful, which puts the burden of subscription monitoring on consumers. The sheer amount of available (and unnecessary) subscription options invading our economy hijacks the inattention of young consumers for profit.
“Close to a dozen of them,” said junior Cooper Thompson, regarding the number of services he subscribes to. “It’s definitely my fault for not keeping track, but sometimes the cost is small enough that I don’t notice it until it’s a couple [of] months later.”
Thompson is not alone. A 2021 survey conducted by West Monroe found 89% of consumers underestimated how much their subscriptions were costing them. It does not help that lavish subscription spending is prevalent amongst college-aged students, who spend an average of $377 a month on subscriptions.
Subscription-based services are exploding in popularity as of late, bolstering a 435% increase in the last decade, according to The Subscription Economy Index in 2021. Pair that expansion with the allure of cheap short-term convenience for consumers and suddenly there’s inflation, a subscription market that eclipsed half a trillion dollars worldwide last year.
“Even established companies — from furniture to fashion to food — are getting into the subscription game,” said Dr. Samia Islam, an associate professor of economics. “We are seeing the bandwagon effect among businesses. Soon, consumers will not know any other way of engaging and transacting in the market, except for perhaps basic needs.”
Businesses from all walks of life are starting to lean into the online economy’s momentum to support their bottom line. Even in industries where it’s extremely unnecessary to implement a monthly payment.
From AI LLMs to toothbrushes, it seems the new way to increase revenue is to lure a consumer into a subscription and hope they forget about it.
“The idea of a subscription model is that it is just frictionless. It frees you up,” said Anne Hamby, co-director of the College of Business and Economics behavioral lab. “It can be problematic because if we forget about it and we’re not using the service or product, then we are not getting the value that we’re paying for.”
The momentum produced by these models is what makes them so valuable for business.
But that value is relative for consumers.
An example can be found in late March of this year, after Netflix raised the prices of all three subscription plans — for the second time in a single year. Their cheapest plan increased from $7.99 to $8.99 for the privilege of streaming the services’ dwindling content library, accompanied by ads, of course.
“It hasn’t been worth it lately,” said Thompson. “I usually subscribe when there is a show I want to watch, but after I finish it, I don’t use it [Netflix] for a while after that.”
It’s hard to believe that in the ever-so-distant year of 2019, customers were paying the same price for an ad-free experience. It can be difficult to gauge the rationale behind these price hikes besides typical corporate greed.
“Over the arc of subsequent years, subscription models have become sort of trendy,” said Hamby. “Other businesses sort of viewed the unintended consequence of the model, namely how people forget, and saw that they can have some free revenue.”
There is something frustratingly lethargic about this method of revenue generation from a consumer standpoint. Have companies really become so lazy they don’t even want to work to convince consumers for a dollar? Instead relying on the diminishing attention span of their consumer base to support their bottom line.
“Customers are prone to inattention, we have too much going on to be able to spare the bandwidth to read the fine print,” said Islam. “While it is generally assumed that all consumers are taking the time to do their own homework before they make a choice in the market, businesses use ‘framing’ that plays on the buyer’s emotions and sensitivities.”
It’s a bit of a grey area on who is really at fault for any excess payments. On one hand, the Federal Trade Commission (FTC) could require businesses to implement manual renewal systems instead of automatic resubscriptions. Alternatively, maybe consumers need to be a bit more attentive to who they’re subscribed to through calendar reminders and good old financial responsibility.
However, the fast-paced nature of the digital economy makes this the slightest bit difficult.
Re-upping a subscription manually may be the tedious, albeit necessary solution for forgetful college students wondering where that $15 mysteriously disappears every month.
