A CMO’s guide to The State of Subscriptions
As we embark on another year of subscriptions, a fresh outlook on marketing is mandatory. Consumers are conducting their annual evaluations of their subscriptions, and they are deciding if your subscription service is still worth the money.
Whether you’re a streaming media subscription business or a SaaS recurring revenue service, understanding the current and future state of subscriptions is critical to a well-thought-out marketing program. Our State of Subscriptions report was written to equip marketers like you with the data, insights, and predictions to dominate another year.
Over a 12-month period, the Recurly research team analyzed over 2,200 merchants’ data based on industry, geography, merchant size, and more. We also looked into subscriber data–65 million unique active subscribers, in fact–to report on prominent trends and draw data-driven conclusions across acquisition, payments, subscriber growth, and churn.
Our subscription trends report will help you better understand the current state of subscriptions because you can:
Evaluate the data: Review the current subscription numbers, conversion rates, churn rates, and customer lifetime value to gather benchmarks across the subscription industry.
Study industry trends: Stay updated on the latest industry trends and research on how other companies and subscribers in the same or similar sectors are using subscriptions.
Identify key drivers of subscription growth: Identify the factors that influence subscription growth such as pricing, product offerings, marketing strategies, and the subscriber experience.
Evaluate subscriber preferences: Now that you know what influences subscribers, continue evaluating and gathering insights on what they value in a subscription and what could be improved.
Assess competitors: Analyze the subscription offerings of competitors, their strengths and weaknesses, and opportunities for differentiation.
Invest in technology: Use subscription management and recurring billing technology that includes analytics and automation software to gather data, optimize the subscriber experience, and improve marketing efforts.
Free trials, coupons, and even gift subscriptions remain tried-and-true tactics and are typically expected from consumers, especially in direct-to-consumer industries. They easily make your subscription product or offering more enticing, and strengthen your marketing strategies with a strong upsell or cross-sell when the customer is more committed to your brand.
Furthermore, we found that gift subscriptions are not getting the attention they deserve. Nearly 70% of consumers want to give and receive gift subscriptions, but less than 5% of Recurly merchants offer them. Take advantage of these opportunities and create marketing campaigns to drive more revenue around subscription options you know customers want. At a time as crucial as acquisition, recurring revenue businesses must learn to highlight the value in a way that appeals to price-conscious consumers financially and emotionally.
Debit cards were the most popular payment method of 2022, making up about 53% of transactions in Recurly last year. When it comes to payment methods and currencies, the more, the better. Shoppers want options at checkout as it makes the experience frictionless, and in this day and age, there is a high demand for digital alternative payment methods. In fact, PayPal accounted for approximately 19% of transactions in Recurly in 2022 and Apple Pay experienced 182% year-over-year growth.
It’s important to note that younger demographics tend to have a lower net worth, and net worth determines how much funds are available for extra expenses. In relation to debit cards, this means there is a higher chance of a card decline due to insufficient funds. Decline rates for different payment methods are highly correlated to age demographics, so consider this when you’re evaluating target audiences.
Globally, subscriptions are growing at a faster rate in Europe and Asia, both of which saw a 24.6% increase in the number of active subscriptions from 2021 to 2022 compared to 16.7% growth in the U.S. Create more ideal customer profiles to reach more audiences worldwide.
Moreover, marketers biggest focus to improve subscriber growth rates should be personalization. From plan customizations to subscriber lifecycle communications, subscribers are attracted to subscription offerings that give them the flexibility to create a plan that caters to their preferences. For example, Recurly merchants saw $480 million in incremental revenue just from add-ons last year. Our data also shows that subscription businesses have an opportunity to dive into more email communications, such as gift cards and subscription renewal reminders.
Churn rates are a reflection of ever-changing consumer behaviors and preferences, and economic uncertainty has led to a slight increase in the average overall churn rate from 6.6% in 2021 to 6.8% in 2022. While today’s consumers are more reactive to price increases, the slight change in the overall churn rate proves that subscriptions remain a consistent part of consumers’ lives, and even major economic changes only impact churn rates slightly.
Marketers should focus on promoting the value of their subscription offerings, especially by sharing exclusive content, leveraging brand loyalty, and providing access to discounts–primary drivers of subscription signups.
2023 subscription industry predictions
While the subscription economy evolves with the changing financial landscape, subscriptions are still a huge part of consumers’ lives. Marketing teams in both B2B and B2C environments should focus on the following this year:
Migrate from single to omnichannel engagement: Today, an omnichannel strategy not only includes channel management but global expansion as well, expanding subscription business footprints to new channels and new geographies.
Focus on cultivating subscriber relationships: At the core of every successful subscription business model is the ability to deliver relevance and value at reasonable prices to price-conscious consumers. Companies would be wise to pivot their focus to retention and lifetime revenue growth–learn what motivates subscribers to stay and what repels them.
Create the optimal acquisition environment: Consumers are most affected by price–71% of subscription cancellations are caused by price increases–and they are more likely to try new services if businesses offer coupons, promotions, discounts, free trials, and the like to mitigate the cost impact.
Offer customization to increase customer LTV: Our research revealed that subscribers feel more loyal (51%) and tend to spend more money (42%) with brands and businesses they subscribe to, so build reasons for loyalty through personalization.
Gather more data and insights to inform your marketing strategy by downloading our full subscription trends report.