From weekly milk deliveries from the last century to today’s AI-driven digital platforms, recurring revenue models have evolved to meet modern demands for convenience, personalization, and loyalty-driven engagement.

When we think about the subscription economy today, we often imagine it as something shiny and new, tied to our streaming services or monthly Amazon deliveries. But in truth, the concept of subscriptions has been around for decades. Growing up in the old U.S. of A, I remember we had weekly deliveries of milk and soda pop—all in recyclable glass bottles, by the way. And I heard stories of how my dad, long before he considered law school and before refrigerators were common, delivered ice to people’s homes for their iceboxes. Yes, you heard that right, kids: iceboxes.

Heck, I joined the subscription economy ranks myself as a paperboy, riding my bike and pitching tightly rolled issues of the Boston Globe onto porches all across my hometown—all before getting to school by 8am.

The milkman system of the last century wasn’t so different from today’s subscription models. Customers paid weekly for fresh milk dropped at their doorstep, with empty bottles swapped out. Bread, eggs, butter and even coal were delivered on a predictable schedule. Today’s subscription economy—with its promise of convenience, recurring deliveries, and loyalty—is really a reboot of what worked back then, just supercharged by technology.

Fast forward to today, and consumers don’t just want convenience—they expect it. According to a 2022 McKinsey report, 15% of online shoppers now subscribe to at least one recurring delivery—a massive jump from just a few years ago. And it’s not just about the usual suspects like Netflix or Amazon Prime.

The subscription model is taking over industries across the board. In fact, subscription businesses have grown 5x faster than the S&P 500 over the past decade. In addition to media streaming, all kinds of consumer goods, luxury car brands, software companies, and even airlines, are embracing the subscription model to lock in predictable revenue while building deeper customer relationships.

In the consumer space, HelloFresh delivers meal kits, while Rent the Runway allows people to subscribe to high-end fashion. On the B2B side, companies like Salesforce and Adobe have shifted to software-as-a-service (SaaS) models, keeping clients tied to ongoing services instead of one-off purchases. Perhaps more surprising, in agriculture, data-driven subscriptions offer insights to farmers looking to optimize crop yields.

These examples show just how far the subscription model has come. But how are brands pulling this off? And more importantly, what do companies need to do to make sure their subscription model drives loyalty instead of becoming another monthly charge that customers will eventually cancel?

Why Brands Are Flocking to the Subscription Model?

The subscription model has become a dominant strategy for businesses across many industries, offering a unique set of advantages. Brands are embracing subscriptions not just for the convenience they offer consumers but for the powerful business benefits they deliver.

Predictable Revenue
One of the biggest draws of the subscription model is the steady, predictable revenue it generates. Unlike one-time sales, subscriptions offer a recurring stream of income, making it easier for companies to forecast and plan for sustainable growth. All the investors I speak with, prize recurring revenue models when evaluating new businesses for investment—especially when the model can scale efficiently. Recurring revenue is viewed as more reliable, providing a strong foundation for future profitability.

Subscription companies have seen a 437% growth in revenue over the past decade, vastly outpacing traditional business models as companies lean into predictable income to weather market fluctuations and gain investor confidence.

Stronger Customer Relationships
Subscriptions help brands build long-term customer relationships by creating continuous touchpoints. Instead of a single transaction, brands can regularly interact with their subscribers, offering personalized experiences that strengthen loyalty and reduce churn.

And it’s not just for small purchases. Porsche Drive allows subscribers to swap out Porsche models on demand, while Lamborghini’s on-demand service lets clients switch between luxury supercars for $8,000 per month. This flexibility ensures that high-value customers stay engaged over time, fostering loyalty and ongoing interaction. In industries where retention is more important than acquisition, these models can create customer lifetime value well beyond initial sales.

Data Goldmine
Subscriptions also provide brands with a data goldmine, allowing them to track customer behaviors, preferences, and habits over time. With this steady stream of data, companies can refine their offerings, improve personalization, and predict future trends. Investors see this as a huge advantage because brands that know their customers can build more robust and tailored services, increasing long-term stickiness.

70% of subscription businesses use customer data to fine-tune their services, according to Business Insider. For example, Spotify relies on data from listening habits to provide highly customized playlists, keeping users tied to their platform.

Freemium Model and Customer Stickiness
The freemium model has become a strategic way for brands to hook customers early, offering basic services for free while encouraging them to upgrade to paid, premium tiers over time. This approach creates stickiness, building familiarity and trust with users before asking them to commit financially.

Companies like Dropbox and Zoom have perfected the freemium model, offering free versions of their software to create early adoption and leading users up the value chain to more robust paid offerings. This progression helps businesses move users from casual engagement to committed, paying customers. In the end, the freemium model not only drives initial acquisition but ensures that users are more likely to stick with the brand over time as they see more value.

In 2021, Pret A Manger launched a coffee subscription service, allowing customers to enjoy unlimited drinks for a flat monthly fee. The service has proven incredibly popular, increasing customer loyalty and boosting foot traffic. Similarly, Volvo’s Care by Volvo subscription gives customers access to vehicles with added perks like insurance and maintenance in a single monthly payment, ensuring long-term brand engagement.

From coffee to supercars, the subscription model has transformed industries by offering predictable revenue, fostering stronger customer relationships, and creating valuable data insights.

Subscriptions You Never Saw Coming

The subscription economy has grown far beyond the usual suspects like streaming services and beauty boxes. It’s infiltrating industries once thought immune to such models, from farming and pet care to air travel and heavy equipment. These sectors are using subscriptions to offer continuous value, providing convenience and efficiency to customers while securing predictable revenue streams for businesses.

The agriculture industry, traditionally tied to seasonal sales and one-time equipment purchases, has found new life in subscriptions. Indigo Ag, an agricultural tech company, launched a subscription service in 2023 that provides farmers with real-time data analytics to optimize crop yields. This shift allows farmers to pay for actionable insights, turning unpredictable seasons into more manageable, data-driven operations. By 2025, the agritech market is projected to hit $22 billion, largely driven by services like Indigo Ag’s, which offer ongoing support rather than one-off solutions. The ability to continuously provide value throughout the growing season ensures farmers stay connected to the service, while reducing the need for repeated large capital expenditures.

Subscription models have also entered the pet healthcare industry, making life easier for pet owners. In 2022, Pawp introduced a subscription offering 24/7 access to veterinarians for just $24 a month. As pet ownership continues to surge, especially among millennials and Gen Z, this service provides peace of mind without the cost of in-person vet visits. The global pet care market, currently valued at $261 billion, is seeing rapid adoption of subscription services, growing at an annual rate of 20%. The model capitalizes on pet owners’ desires for affordability and convenience, offering continuous support for their pets without the hefty price tag of emergency clinic visits.

Even air travel, an industry known for its one-off transactions, is being disrupted by the subscription economy. Surf Air, a California-based airline, has turned air travel into a subscription service, offering unlimited flights within the state for a flat fee. This subscription approach transforms a traditionally costly and complex process into a predictable, hassle-free experience. Recent surveys suggest that 36% of consumers would consider subscribing to travel-related services if it simplifies their experience or offers savings. The rise of these models demonstrates that consumers value ease and predictability, even in high-cost categories like air travel.

The construction industry, long dependent on capital-heavy purchases of equipment, has also begun shifting toward subscription-based services. Caterpillar now offers a subscription for its heavy machinery data and performance analytics, allowing contractors to continuously monitor equipment usage, receive predictive maintenance alerts, and prevent costly breakdowns. This shift has been part of a larger trend, with the construction technology market expected to grow to $2.71 billion by 2027. By using a subscription model, Caterpillar has transformed the traditional sale of physical products into an ongoing service, allowing construction companies to scale operations more efficiently and reduce downtime.

These examples show how subscriptions have expanded into industries that were once considered too niche or too traditional for recurring revenue models. The key to their success lies in offering continuous, value-driven services that cater to the needs of modern consumers, who increasingly prefer convenience and predictability.

Benefits Beyond Predictability: Building Long-Term Loyalty

The subscription model goes beyond just offering predictable revenue streams. It creates unique opportunities for businesses to build deep, long-term loyalty by continuously engaging with their customers. As consumers increasingly value convenience and personalization, subscriptions offer flexibility and emotional hooks that one-time purchases can’t match.

Flexibility is Key
A major benefit of subscriptions is the flexibility they offer to consumers, allowing them to adjust their usage based on evolving needs. Unlike traditional purchases, subscriptions let customers scale their engagement with a brand, making it more adaptable to their lives.

Another example is Peloton, which offers subscription-based workout classes through its app and equipment. Users can adjust their workouts, try new types of classes, or engage in social elements like live leaderboards. The flexibility to tailor their fitness experience has been key to Peloton’s success, helping the company retain subscribers even during turbulent periods.

The Psychology of Subscriptions
Subscriptions also tap into consumer psychology by encouraging people to stick with a service even if they aren’t actively using it. This is often referred to as the Fitness Club Principle—where people hold onto their gym memberships even if they rarely go, simply because having the membership makes them feel better about themselves and canceling feels like losing something valuable. This same principle applies to all sorts of subscription services, where customers feel better just knowing they have access, even if they don’t use it regularly.

In fact, 37% of consumers continue subscribing to services they don’t actively use, simply because they might want to use them later. This reluctance to cancel subscriptions drives long-term engagement and boosts retention. Brands like Spotify and Hulu benefit from this phenomenon, as subscribers may not use the service daily but hesitate to unsubscribe in case they miss out on content or exclusive features they value.

Another example of leveraging consumer psychology is Amazon Prime, where customers are willing to pay an annual fee to enjoy benefits like free shipping, exclusive deals, and Prime Video. Even infrequent purchasers continue their Prime subscriptions just for the comfort of knowing they have access to these perks whenever they need them.

Personalization: The Data Advantage
One of the greatest strengths of subscriptions is the ability to personalize the customer experience based on data collected over time. Subscriptions give brands more opportunities to collect data on consumer preferences, usage patterns, and behaviors, enabling them to deliver highly tailored experiences that keep customers engaged.

Take Stitch Fix, for example, which combines fashion with data-driven recommendations. Subscribers receive personalized clothing selections based on detailed style profiles and past purchases. The ability to provide curated options makes the experience feel more personalized than shopping in a traditional retail setting, increasing satisfaction and retention.

Similarly, Spotify uses algorithms to analyze listening habits, offering curated playlists and music recommendations. This level of personalization makes users feel like the platform knows their tastes intimately, making it harder for them to leave.

Convenience and “Subscription Lock-In”
Subscriptions also create a kind of lock-in effect due to their convenience. Once customers become accustomed to a service that simplifies their life—whether it’s a grocery delivery subscription like Instacart or a productivity software subscription like Microsoft 365—the convenience factor makes them less likely to switch. The ease of having products or services delivered consistently on a schedule or accessed at any time builds a habit loop that reinforces loyalty.

Blue Apron, for example, delivers pre-portioned ingredients and recipes directly to customers’ homes. The service’s convenience means users don’t have to worry about grocery shopping or meal planning, making it easier to justify renewing the subscription, even if it’s not used daily. It’s the convenience that subscribers value, often more than the individual product itself.

Who Gives a Crap, a toilet paper subscription service, has seen explosive growth by combining convenience with a social mission, donating 50% of profits to build toilets for communities in need. Subscribers stay not only for the product but for the brand’s values.

Harry’s, my favorite subscription razor company, fosters loyalty by offering personalized shaving kits and refills tailored to each subscriber’s grooming preferences. Customers can adjust their deliveries as needed, ensuring they never run out but don’t feel locked into a rigid schedule.

Subscriptions provide far more than predictable revenue—they build ongoing relationships, leveraging flexibility, personalization, and consumer psychology to create loyalty that lasts. As more companies adopt these models, the key to success will be engaging customers in ways that make them feel both valued and locked in for the long term.

Subscription Pitfalls and Tips for Success

The subscription economy has grown rapidly across many industries, but it’s not without its challenges. Streaming services, for example, have broken up traditional cable TV bundles, giving consumers more choice and flexibility. However, with people juggling multiple streaming subscriptions—from Netflix to Disney+ to HBO Max—the combined cost has begun to resemble the bloated cable bills they initially sought to avoid. This highlights a common pitfall of the subscription model: while acquisition is relatively easy, retention proves far more challenging.

Retention Over Acquisition

Focusing too much on acquiring new customers and not enough on retaining them is a major pitfall for subscription models. Signing up customers is only the first step—keeping them engaged long-term is the real challenge. Without continuous value delivery, customers are likely to cancel their subscriptions after a few months.

In fact, studies show that the average churn rate for subscription businesses can be as high as 6-8% per month. This means a significant portion of the customer base can slip away if brands don’t actively work to engage them. HBO Max, for example, saw a spike in churn following major content removals from the platform, proving that retaining customers requires consistent value and content.

Brands must consistently surprise and delight their subscribers. Seasonal surprises, like exclusive product releases or limited-time offers, keep customers engaged and eager for more.

Personalization Is Non-Negotiable

With so many subscription services available, personalization has become essential for maintaining customer loyalty. A “one-size-fits-all” approach no longer works in competitive sectors like health, beauty, and fashion.

Take Huel, a meal replacement company, which uses data collected from its subscribers to offer personalized meal plans tailored to individual dietary preferences. By ensuring that their product aligns seamlessly with a subscriber’s lifestyle, they build long-term loyalty.

Research shows that 91% of consumers are more likely to stay loyal to brands that offer personalized experiences. Spotify is another example, using algorithms to provide customized music recommendations based on user behavior, which helps keep users engaged with the service and less likely to cancel.

Brands should use customer data to offer tailored experiences. Whether it’s personalized playlists or curated subscription boxes, companies that use data to deliver unique experiences will keep subscribers engaged and less likely to leave for a competitor.

Avoid Subscription Fatigue

Subscription fatigue is becoming an increasingly common problem as consumers sign up for more services than they can manage. What started as a solution to bloated cable bundles has morphed into a situation where people are overwhelmed by the number of recurring payments they need to keep track of each month.

Netflix, Amazon Prime, and Spotify have all experienced cancellations due to subscription fatigue, as users look to streamline their monthly payments. In a 2022 survey, 34% of consumers reported canceling at least one subscription service due to redundancy or lack of use. The same trend is visible in other industries, such as meal delivery services, where companies like Blue Apron have experienced churn as customers tire of weekly meal kits.

Brands can combat subscription fatigue by bundling services and simplifying billing. Apple One is a prime example of this strategy, bundling services like Apple Music, Apple TV+, and iCloud into one monthly payment, which reduces the cognitive load on customers. Companies can also offer more flexible plans or pause features to give customers breathing room and reduce the feeling of being overwhelmed.

Whoop, a fitness tracker subscription service, offers real-time health and fitness data and retains customers by continuously updating its technology and adding new features. By keeping its service dynamic, Whoop prevents customers from becoming bored or disengaged.

ClassPass, a fitness subscription service with a presence in the UK and Australia, allows users to book classes at multiple gyms and studios with flexible cancellation options. This adaptability keeps users engaged and makes it easy for them to justify staying subscribed.

In Sweden, Voi Scooters introduced a subscription service for its electric scooters, offering unlimited rides for a fixed monthly fee. The service is tailored to urban users who need convenient, eco-friendly transport, and the subscription model encourages repeat use by offering flexibility and financial savings.

The subscription model offers brands the opportunity for predictable, long-term revenue, but it also requires consistent innovation and engagement to succeed. By focusing on retention, offering personalized experiences, and addressing subscription fatigue, companies can create lasting value and loyalty.

How to Succeed in the Subscription Economy

The subscription economy offers incredible opportunities, but success requires careful strategy and execution. Brands must not only attract customers but continuously innovate to keep them engaged. Here are key strategies for thriving in this model, backed by real-world examples and proven approaches:

Offer Tiered Pricing and Trial Options
Offering subscriptions with tiered pricing is one of the most effective ways to attract a broad customer base. It allows consumers to start with a lower-cost commitment before upgrading to more expensive plans as they see value. Spotify is a great example, offering a free tier with ads, a premium ad-free version, and a family plan. This structure enables customers to try the service before committing to a paid plan, and they can scale up as needed.

Freemium models are equally effective. Zoom provides its basic video conferencing service for free, with paid options offering additional features like longer meetings and cloud storage. This no-risk approach allows users to explore the service and upgrade as their needs grow.

Trial offers, like Netflix’s and Disney+’s 30-day free trials, also reduce friction for new users by allowing them to experience the service fully before committing. Trials are highly effective at building trust and encouraging long-term subscriptions.

Use Data to Innovate
Successful subscription businesses rely on data to continuously improve their offerings. Amazon Prime has used customer behavior data to expand far beyond fast shipping, adding services like streaming, grocery delivery, and cloud storage based on user needs. By tracking how members interact with the platform, Amazon stays ahead of competitors by delivering value that customers didn’t know they wanted.

Similarly, Netflix uses data not just to recommend shows but also to decide which new series to greenlight, ensuring that the content resonates with their audience. This personalized experience keeps users engaged and reduces churn.

Investing in AI and machine learning tools helps brands predict trends and offer tailored experiences. Hulu, for example, analyzes viewer data to push personalized recommendations based on past behavior, further enhancing retention.

Engage Continuously
Engaging subscribers continuously is essential to maintaining loyalty. HelloFresh keeps its meal kit subscribers excited with surprise recipes and personalized offers based on their dietary preferences, creating a sense of freshness and anticipation with every delivery. This type of engagement helps subscribers feel valued and keeps the service from becoming stale.

Brands like Loot Crate build anticipation by offering sneak peeks of upcoming boxes, encouraging long-term subscriptions through exclusive content and rewards. Engaging subscribers regularly helps reduce churn by making them feel part of an ongoing experience rather than a one-time transaction.

Developing loyalty programs that offer subscribers perks for long-term engagement can deepen brand loyalty. Sephora’s Play! Box is a great example, providing beauty products alongside exclusive access to events and tutorials, enhancing the overall experience.

Simplify the Customer Experience
Ease of use is a critical factor for subscription services. If the process is complicated or inconvenient, customers will cancel. Apple One bundles services like Apple Music, Apple TV+, and iCloud into a single monthly payment, simplifying the management of multiple subscriptions and making the experience more seamless for users.

Similarly, Slack, a workplace communication tool, makes subscription management simple with easy onboarding and team management tools. This streamlined experience has helped Slack grow its business subscription base by making it indispensable to enterprise clients.

Offering simple sign-up processes, easy pause or cancellation options, and bundled services can make subscriptions more attractive and prevent customers from feeling overwhelmed or trapped.

Final Words

The subscription economy is evolving fast, with everything from pet care to aviation jumping into the recurring revenue model. Much like my dad slinging ice before refrigerators took over, today’s brands are providing convenience and consistency—but with the added advantage of data, personalization, and digital engagement to keep customers coming back.

For marketers, the game has shifted from just acquiring customers to keeping them engaged. Investing in customer loyalty and consistently delivering value will future-proof brands in a world that’s becoming more subscription-first by the day.

Sources
• Zuora’s Subscription Economy Index
• McKinsey: The Rise of the Subscription Economy (2022)
• Accenture: The Value of Personalization in Subscription Services
• Brightback: 2023 Consumer Retention Report
• Statista: Subscription Churn and Retention Rates