Key takeaways from 2024 State of Subscriptions: Industry benchmarks & trends
It’s hard out there. The new year brings new subscription challenges for global companies: spending is down, customer acquisition is challenging, personalization is now a necessity, and payments play a crucial role in the subscriber experience. As companies shift to retention, thorough benchmark and trend analysis are vital for success.
Theresa McEndree, Recurly Chief Marketing Officer, Brian Geier, Recurly VP of Business Intelligence, and Melanie Stout, Optimized Payments Head of Recurring Services, held an exciting virtual event to delve into the impact of the economy on subscription acquisition, churn, and payments.
The findings–included in our 2024 State of Subscriptions report–discuss exclusive benchmarks of over 58 million unique subscribers and 2,200 global brands, including Paramount+, Sling TV, FabFitFun, Sprout Social, and more.
Let’s walk through the event's highlights.
Navigating the acquisition landscape
Since 2020, acquisition rates have steadily decreased, and last year, the median acquisition rate stood at 3.7%. Of these new sign-ups, 50.0% of paying subscribers converted through a free trial, keeping it as one of the most effective acquisition tactics.
McEndree fleshes out the acquisition focus: How are subscribers responding? What are brands thinking about when they look at acquiring new customers out in the market? The formula is obvious–value, flexibility, and personalization. Here’s how to achieve it:
Broaden value and appeal: Offer several choices in plans, products, billing, and payments to add to their experience and increase conversion.
Be flexible: Investigate the upside of product or service add-ons, leverage trials to routinely test plans, and incorporate multiple payment options at checkout.
Personalize the experience: Use segmentation to understand subscriber preferences, interactions, and trends to offer exclusive deals.
We see a market slowdown and normalization after the digital boom during lockdowns–and the numbers reflect it. As consumers become more selective and intentional in spending, businesses find the opportunity to focus on responsible growth.
Retention as the cornerstone of subscription success
Retention has become another focal point in the subscription industry. Consumers are more intentional with their subscriptions, making them less likely to churn. As acquisition slows, so does churn.
While the median churn rate across all industries was 4.1%, direct-to-consumer companies have seen a significant decrease in churn overall. For example, the Digital Media and Entertainment churn rate went from 8.7% in 2022 to 5.6% in 2023.
Brands are zeroing in on managing involuntary churn and finding new ways to improve personalization to retain customers. From flexible plans to add-ons to pause functionalities, customization options deliver a valuable experience across the lifecycle–our merchants saw $2.2 billion in incremental revenue from add-ons last year.
Additionally, recovery events play a pivotal role in building long-term customer relationships. Recurly successfully saved 72.0% of at-risk subscribers, helping them extend their lifetime by a median of 141 days.
Are you doing everything you can to prevent voluntary and involuntary churn? Geier shares his recommendations for an enhanced customer engagement strategy:
Effective churn management: Consider voluntary churn strategies for retention, such as pause or cancel flow offers. And the right revenue recovery tools for involuntary churn–intelligent retries, card updaters, and dunning campaigns.
Relevant product recommendations: Use benchmarks and trends to recommend relevant products, services, add-ons, bundles, or content to drive engagement.
Loyalty and incentive programs: Create loyalty and incentive programs that include perks, discounts, and targeted promotions.
Payment dynamics in an evolving global market
Recurring payments have become an essential part of the subscription experience. As subscriptions become increasingly global and complex, it is paramount that businesses embrace a variety of payment methods, digital wallets, and local payment services.
Stout shared an informative look at the shifting habits of consumers in terms of payment instruments. While debit (45.5%) was the most used payment in subscriptions, there’s been a transition towards credit cards (33.0%), attributing this to lower checking account balances. PayPal emerged as the preferred alternative payment method with high approval and retention rates.
Being consumer-friendly with subscription options can greatly aid conversion and retention rates:
Embrace a variety of payment methods: From digital wallets to currencies, accommodate consumer preferences with more and better choices.
Optimize your processes: Consider payment automation, advanced retry logic, and similar for payment success. Proactively address regulations for business—and consumer—confidence.
Work with a reliable partner: Lack of scalability inhibits revenue growth, making the right subscription technology stack indispensable.
2024 is the year of growth
Looking ahead, McEndree predicted 2024 to be a remarkable year for the subscription industry:
The focus will be on retention, managing involuntary churn, and increasing the lifetime value of subscribers–with artificial intelligence (AI) and machine learning as integral parts.
Automation and regulations will play critical roles as the industry expands globally.
Consolidation and bundling will enable subscribers to package various subscriptions and products.
Companies will require expert partnerships to combat challenges and accelerate growth.
The power of subscription benchmarks
McEndree, Geier, and Stout all emphasized the salience of benchmark analysis in understanding and gaining a foothold in industry trends. Benchmarking enables businesses to compare their performance against industry standards to identify areas of improvement, fostering faster, more profitable growth.
Join our subscription and payment experts as they explore the impact of economic volatility on new signups, customer retention, and subscriber growth. Take a glimpse into the future with 2024 subscription predictions and get actionable strategies for the upcoming year.
Stay ahead of subscription trends and benchmarks. Watch on-demand now.
Frequently asked questions
How is the acquisition rate calculated?
The acquisition rate is the percentage of customers that are acquired each month. The formula is the number of new customers acquired in a given month divided by the total number of existing customers in that same month.
Does the State of Subscriptions report and webinar include U.S. data only or global data?
The State of Subscriptions report and webinar share data from Recurly customers worldwide.
Does the State of Subscriptions report and webinar include B2B or B2C data?
The State of Subscriptions report and webinar include data from B2C and B2B Recurly customers.
Do you have data or metrics focused on annual subscriptions?
Recurly is working on collecting data to report on annual and monthly subscription benchmarks and trends–stay tuned!
Do you have industry-specific metrics?
Yes. We are working on industry highlights for Media (Digital Media & Entertainment and Publishing industries), Software/SaaS, and Business & Professional Services.
How does a reduced renewal rate impact churn?
There is a direct correlation between a lower renewal decline rate and a higher invoice paid rate. A higher invoice paid rate also leads to lower involuntary churn, so a lower renewal decline rate should lead to lower churn.
Many articles say customers are churning more, especially in entertainment. How does that align with what is shared in the State of Subscriptions?
According to the State of Subscriptions report, the overall churn rate across industries stays consistent year-over-year at 4.1%. In the Digital Media and Entertainment industry, the churn rate has decreased from 8.7% (2022) to 6.9% (2023). As subscriptions rise in popularity, the total number of subscribers leaving streaming services will rise. However, expressed as a rate, it is decreasing.
What is the best way to deal with a spike in insufficient funds as a reason for payment decline?
Almost every subscription business using Recurly has insufficient funds as the first or second most common decline reason. Having some sort of decline management strategy is key, particularly for insufficient funds. Recurly data shows that our Machine-Learning Retries are the most effective way to recover insufficient funds failures. Learn more about our intelligent retries.
Can we link Apple Pay with Recurly? What is the process?
Yes. Recurly has added support for Apple Pay as a payment method on your web pages. If you are considering accepting payments via Apple Pay on the Web, we encourage you to read Apple's getting started guide. Please note that Apple Pay on the Web is supported in Recurly.js v4. Apple Pay on the Web currently does not support Recurly hosted pages. Learn more about Apple Pay on the web in Recurly’s Docs Center.