A CPO’s guide to The State of Subscriptions
From a product perspective, consumer preferences mean everything. With this kind of knowledge, you create a product or service that your ideal consumers truly want–and keep them loyal to your brand. And every year, consumer preferences change, and that is a weighty consideration for subscription businesses especially, whose goals include acquiring and retaining long-term subscribers and optimizing customer lifetime value.
Our State of Subscriptions report was written to equip product experts like you with the data, insights, and predictions to create a product or service and subscriber experience that caters precisely to your most high-value customers.
Over a period of one year, we analyzed more than 2,200 merchant data based on industry, geography, merchant size, and more. To learn specifically about consumer preferences, we looked into the behavior of more than 65 million unique active subscribers to share subscription trends, insights, and evidence-based conclusions. In our State of Subscriptions report, you’ll find data-driven conclusions about subscribers’ responses to acquisition, payments, growth, and churn tactics from some of the world’s leading subscription brands.
With our subscription trends report, you can:
Evaluate the data: Gather data on subscriber acquisition, retention, churn, revenue, and consumer preferences to get an overall picture of the current subscription economy.
Analyze customer behavior: Get a better understanding of customer behavior, such as how they interact with a subscription product or service as a result of changes.
Evaluate pricing and packaging: Assess the current pricing and packaging options compared to subscriber preferences to ensure they are competitive and meet your customers' needs.
Identify areas for improvement: Use our research to identify areas where improvements can be made to your subscription offering, such as reducing churn or increasing revenue.
Develop a roadmap: Based on the findings, create a roadmap for improving your subscription business model, including setting goals and milestones.
Continuously monitor and evaluate: Regularly track the performance of the subscription product and make changes as needed based on data and subscriber feedback. This will ensure that the subscription product continues to meet customers' needs and remain competitive in the market.
Subscribers in Recurly took advantage of 35 million free trials in 2022. We found that trials lasting seven days or less had the highest conversion rate of 42.8%. What does this mean for you? Subscribers want to see and experience the best value of your business in a week or less, so design a free trial that captures your value propositions and some of your best offerings from the get-go.
But one of the biggest opportunities in acquisition lies in gift subscriptions. While only about 3% of Recurly merchants offered gift subscriptions last year, 289,952 gift subscriptions were converted to recurring subscriptions, lasting 345 days on average. Gift subscriptions aren’t as widely used as trials and coupons, but their growth is exploding as this is one of the most cost-effective ways for merchants to acquire new subscribers–and they also make great gifts.
One of the biggest learnings about payments is that consumers want more options–so much so that 56% of shoppers will abandon a site altogether if their preferred payment method isn’t available at checkout. Some important takeaways:
Debit cards are the most popular payment method overall, accounting for 53% of transactions in Recurly last year.
Alternative payment methods are on the rise–PayPal made up almost 19% of transactions in Recurly in 2022 and Apple Pay saw 182% year-over-year growth. In fact, Recurly merchants saw a 119% revenue lift by enabling PayPal and a 154% revenue lift by enabling Single Euro Payments Area (SEPA).
As businesses grow, offering more currencies allows them to accommodate larger audiences. For example, of the merchants offering three or more currencies, 33.3% have a total payment volume of over $100 million annually.
To keep up with subscriber demands, we found that approximately 40% of Recurly merchants make plan changes each year, many making multiple adjustments. Subscriber lifecycle communications played a large role in maintaining a positive subscriber experience, especially in the Digital Media and Entertainment and Consumer Goods and Retail industries where there is an emphasis on staying in regular contact with their subscribers.
Furthermore, Recurly recovered $214 million in revenue from dunning emails alone in 2022. If your subscription management and recurring billing solution doesn’t automate this feature, you’re forgoing hard-earned revenue. Another revenue opportunity is with plan add-ons–Recurly merchants saw $480 million in incremental revenue from add-ons in 2022.
The general consensus is that subscribers want a unique experience. Personalization is the cornerstone of successful subscriber growth from plan changes to tailored email communications to plan customizations. Give subscribers the option to customize the entire subscriber experience.
While a personalizable subscriber experience can help mitigate voluntary churn, decline management techniques are going to be the best thing you can do to manage involuntary churn. With an average overall involuntary churn rate of 2.2%, churn is not going anywhere. Still, it’s important to partner with a subscription management and recurring billing platform that can automate these necessary processes in the background so you can focus on your core product or service offering.
Let the experts focus on churn, so you can hone in on your product or service’s relevance and be conscious of pricing decisions.
2023 subscription industry predictions
The subscription business model is maturing, and with it comes complexities that require the readiness to adapt and scale quickly. In general, product teams in the subscription industry can look forward to the following:
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: Create incomparable value by allowing your subscribers to customize a subscription that caters to their exact wants and needs, whether that be billing frequency, the ability to pause a subscription, or choosing their preferred payment method at checkout.
Prioritize payments as a growth strategy: Expand beyond traditional payment methods to attract and retain more customers, have greater control over decline and involuntary churn rates, and position your business for global readiness.
Ensure operational efficiencies: Streamline your plans, pricing, and promotions with a fluid system that sets you and your subscribers up for success. Having the ability to accommodate growing groups of subscribers worldwide means abandoning manual lifts and streamlining as much as possible.
To learn more about the state of subscriptions, download our full report.