It’s no surprise that payments are crucial in delivering seamless subscription experiences. From payment alternatives to local currencies, businesses continuously work to improve their checkout and recurring payment experience. And now, new technologies like artificial intelligence (AI) and machine learning (ML) can certainly boost these efforts.

During AI & churn: Mastering subscription payments, our event in partnership with GoCardless, Blinkist CTO Sebastian Schleicher, GoCardless CPO Andy Wiggan, and Recurly CEO Joe Rohlich, sat down to discuss how to tackle churn and leverage AI for payments optimization.

Put on your headphones to experience this event or keep reading the top ten questions asked during the presentation.

What are the biggest insights that have been key to success when optimizing the subscriber experience and life cycle?

Start listening at 7:37

Sebastian Schleicher shares the early stages of the Blinkist subscription, and how his team continued to optimize until building the right subscriber experience across the lifecycle:

  • Finding the ideal free trial period: After several tests, Blinkist established a 3-day trial. A testing period that allowed customers to fully experience the subscription while bringing revenue for the brand. 

  • Investing a lot in communication: Always being fair and transparent, setting clear expectations for the customers of what they can expect by when. Iterating the checkout page and communication cadence that kept consumers informed about their subscriptions.

  • Keeping the audience engaged: Blinkist invested in a 7-day activation program during the first week, spent educating their subscribers about features and the overall product. Additionally, they started weekly newsletters and push notifications to make sure people use the product, not just pay for it. 

And the brand continues to see impactful results, “I think today, we are 8% over our planned renewal revenue”, says Schleicher.

Additionally, they’re currently investing a lot at the moment when people decide to turn off auto-renewal–using that moment and changing people's opinions through personalized offers and prices.

“So this entire cycle is super important to us. We think about fairness, transparency, and product centrism because people will not buy your subscription. They will buy a product.”

What are the fundamental building blocks for successful payments and subscriptions that we should be thinking about?

Start listening at 14:08

Andy Wiggan highlights two main challenges subscription brands must overcome: “It's really about payment mix and having the means of doing retries in an intelligent way.”

Passive churn is a bit more constrained thanks to the use of payment retry technology, a stack that has become table stakes in churn management. Running 5% of all transactions in dark mode through a machine learning model and essentially saving thousands of revenue every month.

On the other hand, the payment mix. When you're accepting payments, unless you're tied to an app store, you can't have any options. There are payment methods that naturally lend themselves to lower involuntary churn than others, such as bank payments because there's no card in between.

Finally, GoCardless CPO reminds the importance of analyzing data across the lifecycle. “Making sure you really understand at a super granular level everything that's happening, both in terms of usage and activity of the customer [...] all the way through to know exactly why something's failing and when it's failing.”

Did you know? Recurly retries declined transactions using machine learning, whenever and however the transaction is most likely to be accepted.

Where do you see some of the next frontiers and opportunities for involuntary churn?

Start listening at 22:17

Wiggan points out the changes and improvements already happening in the industry. First, the advancements in predictive analysis by payment service providers (PSPs) and platforms like Recurly that help prevent customer churn. 

Second, finding a way to measure someone's intent of being a customer. Whether that's through usage or certain habits, you can find that sweet spot and figure out when it's better to offer a grace period, for example. If when someone who constantly uses your product, has a payment failure, don't be hounding them to try and recover that payment. Give them grace and find a subtle and gentler way to approach revenue recovery.

The fragmented nature of payments requires tapping into the right networks to predict and mitigate payment failures. The speaker envisions the future of reducing payment churn lies in expanding and enhancing these networks. Today, GoCardless’ goal is to create a global bank payment network that significantly reduces failures, leveraging a substantial data pool to refine its predictive model and product offerings.

Where is voluntary churn management going next? 

Start listening at 25:05

Sebastian Schleicher shares that voluntary churn at Blinkist results from the perspective of an expensive product or that subscribers feel like they don’t use it enough. To combat this and get to their desired state they’re working towards better machine learning algorithms for content discovery and dynamic pricing for different types of customers.

For example, configuring several products and implementing a decision tree logic that displays different price points based on location and demographics. Then use machine learning to figure out what's the best price.  

Another aspect is finding the right timing for communications–when to message customers about certain offers or recommendations. There's so much power in triggering these alerts at the right time. “And I think Recurly sits on so much information that telling us it's a good moment to send an offer to our customers,” states the CTO. 

How can you bridge the gap between initial offers and how that plays into retention?

Start listening at 33:09

Andy Wiggan shares an interesting hard-soft rule approach. When you're acquiring customers, you're screening for the value of that subscriber, and then you're setting your price point accordingly.

Considering this, there are hard rules that you put in place, such as not accepting cards from a certain Bank Identification Number (BIN) range because they might take advantage of the free trial and not become a real customer.

Recurly’s CEO complements this by sharing an interesting example of a sports streaming brand that has identified moments that bring big acquisition opportunities like The World Cup. At the same time, they've been able to study these cohorts of customers and understand that they are coming in for an event. They are not buying in yet to the value of this ongoing subscription–doesn't mean they can't forever, but they don't at the moment.

And so they asked themselves: “Do we make a different offer to this group? If we know that you've entered for this reason, do we intentionally downgrade their subscription to a lower cost after the second month?” Then the brand can eventually attempt to increase the value and the cost. 

What upsell tactics are successful in grabbing customers' attention and ensuring conversion?

Start listening at 38:34

Schleicher suggests businesses carefully consider when and how to present upsell opportunities. Timing, combined with traditional marketing tactics, has been truly effective for Blinkist. Instead of saying “$79.99 per year”, say “a cappuccino a month,” plus build urgency with messages like “this offer is just applicable for the next two minutes.”

Blinkist CTO underlines: “You don't need a lot of research. Just try it. It will work. And like I said, transparency and honesty.” You need to make sure people understand the value of your product. And if you make it comparable is even more helpful.

He shares an example, where the brand tested the “Subscribe” vs. “Buy now” call-to-action, only in the Southern U.S. audience. It was a 15% conversion uplift in conversion. Sebastian encourages you to experiment and then find a sweet spot.

How can businesses prepare for an unprecedented amount of subscribers and achieve peak performance?

Listen to the full answer: Starting 41:56.

Sebastian Schleicher suggests working on being elastic. “There are other systems like content delivery networks that speed up your performance and you keep stuff where at where the where the spikes are, you outsource it to to vendors that do that for you. For example, we do it with Recurly,” states the CTO.

Rohlich points out that choosing the right partner is key. One of Recurly’s partners was expecting to gain up to 1 million subscribers in a day due to a sports event. To prepare, all partners created a war room to rehearse and test together. 

Check this out: How Recurly helps businesses scale for large digital events.

For customers that subscribe for an event and churn. Do you make it easy for them to cancel and hope they come back?

Start listening at 45:47

Joe Rohlich chimes in, with a personal and professional perspective. From a business point-of-view, Recurly is seeing a very significant trend toward providing options to consumers–like pauses, downgrades, and ramp pricing.

The personal approach is similar to what Sebastian stated about trust. “There's a difference between giving the option to pause and having to call 18 phone numbers to try to cancel and still not being able to figure it out.”

Andy echoes Joe’s proposal. He suggests avoiding nefarious practices like redirects and difficult cancels. Plus, it comes down to personalization and customer segments as well. If someone hasn’t used the product for six months, show them the cancel button. If someone's super active and you're not sure why they're canceling, then obviously you can offer more steps. 

So it's not about making it easy, it's about making it personalized with alternatives and downgrades for the customers that you think you can retain.

What are companies doing to protect ARPU against massive offers?

Start listening at 51:49

Recurly’s CEO answers. The first thing to do is consider what's the average lifetime value of a customer. You may have cohorts with a higher ARPU that would be interested in an expansion of price or added products, and others who have a lower ARPU. Both can coexist to balance things out.

What power do bundles and collaborations hold for subscription businesses?

Start listening at 54:1

Joe Rohlich comments that some industries are more mature from a subscription standpoint than others, such as publishing or streaming media. And we all know that as individuals, you can only maintain so many subscriptions. So the logical experimentation amongst our customers when it comes to licensing and bundling agreements. 

All three experts discuss how bundling products or services provide added value for customers, they require careful experimentation and consideration for usage and revenue share models. Collaborating with other businesses or platforms can also help expand reach and attract new subscribers, but it’s important to carefully consider how they may impact usage and revenue share models.

Is subscription fatigue slowing growth in the industry?

Start listening at 60:01

Blinkist CTO calls out the maturity of subscription offers, and how users have learned what subscriptions are about. So, when people got educated on what they were paying for all the time, they started to become more sensitive and cost-conscious.

Additionally, Joe states that despite the rising conversations around subscription fatigue, the industry continues. This growth suggests that there is still immense potential in shaping lives through subscription services. 

However, businesses should still be mindful of customer preferences and ensure that their subscription offerings are tailored to meet the needs and interests of their target audience. Providing valuable and personalized subscription experiences can also help prevent burnout.

Recurring payment optimization starts today

There are endless opportunities for innovation and growth. Our industry experts emphasize on predictive analysis, understanding customer intent, and leveraging networks for data are among the most prominent. 

Developing a deeper understanding of customer behavior and preferences through data analysis will allow businesses to tailor their payment options and subscription models to better meet the needs of their customers. 

Additionally, leveraging networks and partnerships can provide valuable insights into customer trends and behaviors, helping businesses stay ahead of the curve in terms of payments and subscriptions.

By prioritizing retention, harnessing data, personalizing experiences, and implementing effective marketing and scaling strategies, businesses can drive growth, reduce churn, and increase revenue generation. 

Don’t know where to start? Check out our guide to understand the key drivers to reduce your churn rate and increase your subscription business revenue.