100% of businesses feel the impact of failed payments, survey finds
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Optimizing subscription billing and payments goes far beyond mastering recurring billing and ensuring the right payment method is offered. Failed payments mean lost sales, but more importantly, customers also lose confidence in the business, eroding customer lifetime value. To create sustainable subscription growth, brands should choose billing and payment partners that are strategic, not just tactical.
In April 2024, Recurly commissioned Forrester Consulting to study the challenges and opportunities in subscription management and recurring billing solutions for consumer subscription brands. This study found challenges with the payment experience and immaturity in subscription management as many struggle to achieve sustainable subscription growth with their current technology. Keep reading to learn more about our findings.
Subscription growth is the top priority
Whether by acquisition, expansion, or optimization, growth is top of mind for leaders at consumer subscription brands. While acquiring new subscribers is the top priority in the coming year, brands can’t overlook the importance of expanding products, entering new markets, and optimizing subscriptions–all of which require a thoughtful billing and payments experience. Subscription brands need to prioritize technology that will drive more efficient billing, payments, and revenue operations, delivering data that generates actionable insights.
Immature subscription management hurts customer experiences
Simply put, the consumer subscription market is immature. Just 7% of respondents are confident their organization has the analytics, technological, and operational capacity to deliver world-class subscription billing experiences for their customers. And 100% of surveyed businesses felt the sting of failed payments. This immaturity translates into outsized challenges with the customer experience, which impacts everything from brand perception to revenue growth.Â
The more mature organizations are customer-led; they know improving the customer experience drives business growth through increased customer loyalty. These organizations have more advanced technology and leverage analytics and industry benchmarks to continuously improve operations. In fact, the number one benefit respondents expect from investing in mature technology is faster, more profitable growth. That growth is built on increased subscriber acquisition, increased subscriber lifetime value, and improved subscriber retention. They also expect built-for-purpose subscription and billing technology to improve subscriber relationships, increase loyalty, and lift brand perception.
Sophisticated monetization strategies grow revenue faster
Most subscription businesses are too focused on acquisition and use only basic KPIs. Even though 61% of respondents say their organizations are measuring churn rates, this percentage is too low. Many business leaders need to shift to a retention mindset where payment functions are a critical strategic lever many organizations do not take advantage of. Only 36% are tracking the recovery rate indicating most subscription businesses aren’t paying enough attention to payments. Few respondents report using advanced techniques, such as multiple and backup payment options, dynamic and ISO message adaption, or rerouting and cascading payment providers to mitigate churn.
Read more: Key subscription business metrics to follow
The hard and soft consequences of failed payments
Every respondent reported negative consequences from failed payments–hard consequences and soft consequences. Hard consequences directly impact the business, which include decreased customer lifetime value (65%), lost revenue (61%), and increased operational or technical costs to recover failed payments (31%). The soft consequences may be harder to measure but cannot be ignored. They include damaged subscriber relationships (53%), more challenging subscriber acquisitions (52%), and damaged brand perception (45%). For nearly two-fifths, failed payments have led to IT and engineering teams becoming disillusioned and opposing further investment in new subscription technology. Losing this support could prevent subscription businesses from ever reaching maturity.
The struggle to grow and evolve with current technologies
Building high-growth subscriber strategies means identifying and addressing key challenges. For subscription businesses, the lack of maturity means inadequate billing and payment technology. 67% of respondents whose top priority was growing by subscriber acquisition reported they struggle to achieve high growth with their current technology. Expanding products or markets is a priority for 79% and is challenging or very challenging for 63%. On the tech and operations side, 59% face significant challenges in making billing, payment, and revenue operations more efficient.
Furthermore, one of the biggest problems with current technology is a lack of flexibility, which makes personalizing offers–a key component of any consumer subscription experience–more difficult. 63% reported their current billing tech introduces friction with multi-gateway payment orchestration. Over half of respondents also struggle with a lack of churn management capabilities, a lack of scalability, and limited analytics or reporting capabilities.
The consumer expertise is criticalÂ
Billing and recurring payment solutions providers should be strategic partners. Using the right vendor allows brands to focus on driving lifetime value, building the brand with innovative offerings, and providing the best possible subscriber experience. Most importantly, partners must have expertise in consumer subscriptions. The most mature platforms have the flexibility and scalability that allow brands to adapt to subscriber preferences, enable personalization, and meet growth goals. They also need intuitive dashboards that support making better business decisions, as well as support in payment orchestration, revenue recovery, and churn management tactics.
This study found that most subscription companies lack maturity, and immaturity—both in processes and technology—means businesses struggle to monetize value and meet consumer needs. Despite the widespread negative consequences of failed payments, few brands use advanced payment technology to drive growth and improve their checkout flow. Consumer subscription businesses need a partner with a platform that is flexible and scalable, but more than anything else, businesses need a partner with expertise in consumer subscriptions.
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