Subscription programs are increasingly popular among a wide variety of retailers including Amazon (Prime), Barnes & Noble (B&N Membership), and Sephora (Flash). These types of programs give members access to a set of exclusive benefits for a fixed fee upfront, but what are the implications for subscription businesses and customer retention?
On June 27, 2022 (ET), Wharton Prof. Raghuram Iyengar spoke about his research on this topic. Using state-of-the-art machine learning methods, he and his co-authors found that the effect of subscription is economically significant, persistent over time, and heterogeneous across customers. Interestingly, only one-third of the effect on customer revenues is due to the economic benefit of the subscription program and the remaining two-thirds is attributed to the non-economic effect. Profitability analysis also shows that a large fraction of customers are not profitable for the retailer.
Watch the full event recording above.