Key takeaways from 2025 State of Subscriptions: Industry benchmarks & trends

Acquisition rate is measured by looking at the number of new subscribers to a merchant and dividing by their overall subscriber base. So it's very analogous to churn, except it's looking at merchants who are coming in as opposed to leaving. You can see this has been on a downward trend since twenty twenty one. You recall way back then, we were coming out of COVID. Growth was exploding, especially for digital subscriptions.

And since then, we've seen that growth slow down. There's two big reasons for this. One is that the merchants in our ecosystem and the subscriber ecosystem generally are much larger today. So as a percentage of their base, they're acquiring fewer subscribers.

That's one big part of it, but, also, merchants are being more judicious with the subscribers they let in and are focusing more on acquis or retention and profitable growth. So it's not growth at all costs anymore. It's about smart growth. Retention is a big piece of that.

Leading into that acquisition rate being lower is in part trial conversion rate. We've seen this be on a downward trend as well too.

Trial conversion rate looks at the percentage of subscribers who start a trial to those that make it to the paid status. So they have to come completely out of trial and and have a successful payment to be included as in this trial conversion rate. We've seen this come down. It's very related to, acquisition coming down, but it's also due to, again, the subscriber preferences evolving.

Acquisition rates are dropping. People are really focusing on what can we do to retain the customers that we have in the door.

So when you think about that shift, as I'm sure you've seen it in your own data, how has that impacted your growth strategies? What are you doing to balance retention with acquisition, and where are you where are you changing it up given that trend?

Avi, why don't you take this one first?

Yeah. I think, having a focus on retaining and engaging existing users is, important in the subscription business, especially with our intention of, building a flywheel for sustainable long term growth.

You want, as a subscription business, everyone who finds value in your product to stick around, so engagement can serve as a pretty effective, leading indicator to retention likelihood.

At Codecademy, we've, directed our efforts towards, a variety of retention strategies, like, improving onboarding experiences, targeted reengagement campaigns, and also, surfacing relevant content and features to our learners, through recommendations on the platform and through emails. So we put a lot of work into also evaluating what factors contribute towards learners, renewing or canceling their subscriptions. And we've, found a lot of success in directly addressing those factors, and, that has helped improve our retention rates.

Value reminders are another tool that work very well in terms of articulating the value your subscription brings, to users, both in terms of, keeping existing subscribers then also reactivating, churn subscribers.

Lastly, we've also found that highlighting failed payments, and making updating payment methods as frictionless as possible, has really helped improve our Dunning's recovery rate.

Over the past few years, so we've seen a significant shift in the market and customer behavior, particularly in the technology space. The increased competition means buyers now have more options, leading them to explore more solutions before they commit. Right? The try before you buy mentality, it's created a scenario where trials often serve as an exploratory tool rather than a step towards conversion.

Right. And on top of that, with, the markets restricting, your companies are trying to run more efficiently. So you see more and more trials where there's a real need from whoever the purchaser is or the sign off at a company wanting to see a return or a value. And the trial uses a time to prove that return on investment.

Right. And sometimes due to the nature of the company and the use cases, it can be really hard to show value in such a short period of time. For sure.

Yeah. I think that becomes more and more difficult. And also something we've seen is a rise of, you know, payment methods like prepaid debit cards or one time use cards. Right?

They'll use those to initiate the trial. You might be successful in a single payment and then after that they fail. And those have a much higher decline rate than other payment methods. So this understanding of payment methods is becoming more and more of a thing for trials in the space and understanding.

You can get a good feel for the intent of the customer if they use a one time use card. You know, the next payment is not going to be successful.

How has your team or teams at your companies adapted to meet this kind of consumer and their evolving preferences? Brian, why don't you take us in on that one?

Yeah. There's there's a few different points that we've looked at flexibility here. One thing I really wanna focus on is that a lot of the subscribers coming on these days have grown up with the Internet, and that's given a very different set of expectations. They're not willing to put up with a ton of friction. They're not willing to put up with, a lot of obstacles in their way to doing things like canceling or suspending their account. Right?

And one of the surest ways to avoid that retention and churn that we've already talked about is by pissing the customer off. Right? Customers have much less tolerance now than they did five or ten years ago to subscription shenanigans, I'll call it. And so we've had to adapt our business and make sure that we're we're ensuring we're really serving our our student subscribers as best we can in their own interest, not necessarily in ours.

Making it easy for them to cancel, putting less friction in the way there, and providing more payment methods, all of that flexibility you mentioned, that's how we get them interested in resubscribing. That's how we get word-of-mouth on college campuses saying, oh, yeah. I I worked with Chegg for a while, and they made it easy to turn off when I was done with them. You know?

I'll I'll totally go back in a few months. You should try them out. I was opposed to the horror stories you hear about, certain companies that won't be named that have charter monopolies on Internet access in some areas that are notoriously difficult to cancel, and get that mouthed all the time. Right?

You don't wanna fall into that camp because subscribers won't put up with it anymore the way they used to. So providing those options, making it easier for them to access functionality, not making them call into your support line when they wanna make simple account changes. Like, these are table stakes now. They they didn't use DB, but now they are, because the the customer base has shifted.

I'm in a lot of conversations with people that are looking to start up their subscription business or that are evolving their subscription business, and most of them now talk to me about customer portals.

That's one of their first questions. It's like, how do you make it easy for my customers to make the changes they need on their own? Just self serve. And it's not just to upgrade to give us more money. It's really to to cancel, to change the number of licenses they have, to change the payment method on file and all of that. It's it's definitely part of that play of how do I make it easy so that these customers actually trust me and wanna continue to do business with me as a company.

Yeah. And I'll I'll I'll focus on that word you just used there, trust. Right? Trust matters more now as we have more and more subscription options in any given space than it used to.

You need to let the customers trust your business and trust that you're not gonna screw them over. Trust that you're going to make life difficult for them. And that you're going to continue to improve how they can access your your business offerings, whether that they can downgrade just as easily as upgrade. Exactly.

A level of trust that's vital for for customers to want to come back to your site month after month, want to resubscribe after they've canceled. You've got to build that trust now.

We do turn off some of our marketing materials, for customers that are in a paused state. Not all of them. But, again, we wanna build that trust. We don't want them to feel overly pressured that they're getting bombarded bombarded by marketing messages because that can turn off today's savvy customers just as much as entice them back if you go overboard on it. So we found a lot of success with pausing and resuming.

When we talk about reengagement of those lapsed subscribers, we look at marketing and promotional strategies.

We can offer coupons to entice resubscription, advertising new product offerings.

We want customers to see that things have changed since they realized that. Right? There's a benefit in coming back. You'll get something different this time.

But the key is really to to go back to that theme of of the customer trusting us and making it easy. You've gotta recognize the reality that customers value that ability to come and go. Right? Everybody talks about, I've got five different entertainment media subscriptions, and I turn off one this month and one the next month.

Right. That's the true reality. And I think fighting against it is is kinda pushing into a headwind that isn't gonna help anybody out. You you can't really lock in certain segments of the customer base the way you used to be able to.

Are you looking at anything like tokenization at the gateway level or, things like offering more alternate payment methods because fraud is less, or are you not as hit with fraud that that's a concern?

Yeah. Those are all things that we're considering. I mean, you know, Avi and Brian talked a lot about, you know, understanding your customers and personalization. And the reality is in the world that we live in today, there's so much competition, and we're all spoiled.

Right? Remember dial up when you loaded a web page and you had to wait as it slowly crawled on the page? You don't have to do that anymore. I open my front up.

I expect whatever I'm doing to be instant. And if I can't handle it myself, I won't use the service. Right? I wanna upgrade.

I wanna downgrade. I wanna cancel. I wanna pause. Right? Right. I want those things immediately.

And so we're trying to understand where our customers are. We're trying to meet them there while also trying to be where fraudsters are and trying to figure out how to mitigate that. And the reality is you come up with a solid strategy. You're super pumped about it.

And then six months into it, the fraudsters find a way to poke a hole in it. Right? So no. I don't want us silver bullet.

You really just have to be vigilant and continue to watch and monitor because they're gonna find a way to, you know, get through whatever you're currently doing.

Yeah.

What if this that effort into something productive?

Do you know how I don't know how much you could accomplish, but I imagine it'd be pretty fantastic.

No. It's a lot. It's a lot. Great.

Let's talk about can you pause?

Let's wrap this up looking forward to the future. So when I think about trends, takeaways for this conversation, I'm thinking about what do you think is gonna define success for your subscription strategies in the next twelve years? So if you if you have a magic wand or a crystal ball, this is the time. This is the time to share with both our listeners and with each other on what you think is coming.

Avi, why don't you start with that?

Yeah. I think a a couple, different pillars, are gonna be born in first, off offering tailored experiences based on user behaviors and preferences, and reducing friction on the onboarding experience for new users and getting them to that moment sooner.

And, with the goal being to showcase value quickly.

Users these days don't like to waste time browsing around and searching.

I think, you know, as personalization on various apps has gotten better, I think the tolerance for, a subpar onboarding experience has also decreased.

So I think that improving on personalization onboarding can have positive impact on trial start and trial conversion rates.

I think second, prioritizing engagement, continuously showcasing value and new content and features, helping users discover, those and feel like they're constantly benefiting from the subscription is important, and it'll also help show that you're a dynamically evolving platform. And lastly, I think offering flexibility, more, features to help them manage their subscription, upgrade, downgrade, you know, cancellation incentives, pausing incentives, and potentially even modular bundles, that allow users to play pay for what they value most.

I like it. I mean, what I'm hearing is a lot around time to value and that in the coming twelve months, customers' expectations are not gonna get easier. It's just gonna get harder.

And that time to value has to happen faster and, honestly, more frequently.

Right?

You know?

Steve, Brian, anything to add there when you think about subscription strategies in the next twelve months?

I'm happy with this. There's no wrong answer. Right?

I will come back in twelve months and be like, ah.

Maybe you should. We we we can follow-up on this and see how we did.

That could be fun.

So first off, you gotta make sure you're listening and understanding where your customers are today, like Abby was saying. You can't ignore it if a significant segment of your customer base is turning away from traditional payment methods and choosing something new. You have to learn from those patterns. Right?

Our goal should always be to anticipate where our customers are going so that we can meet them there and be ready ahead of time. If you're always playing catch up and you only recognize your customer shifting away from your options after the fact, you've missed out. You've missed an opportunity. Right?

There's also a lot of value that you can get out of knowing payment processing strengths and weaknesses. It's not just the customers. Our students change over time, but so do all of the different payment gateways and payment options out there. Knowing how each of them operates, recognizing where you can be best served by focusing on new capabilities or changing cost structures, things like that.

You can get real payoffs, by aiming at the right goal in the future.

Customers, like you said, are expecting more from payment services now than they ever did before. So if you want them to continue to choose you over somebody else, you gotta make it easy.

You gotta meet their expectation.