Led by Recurly’s CEO Dan Burkhart, CMO Theresa McEndree, and Director of Business Intelligence Brian Grier, the 2023 State of Subscriptions webinar unveils the biggest, most impactful findings in the subscription industry from the past year. With these discoveries, our in-house subscription experts have predicted the year to come: what is the state of subscriptions in 2023?

If you missed our webinar, you can watch the recording here.

The research

The core of this report lies in our research. Our Business Intelligence team analyzed the data of more than 2,200 Recurly merchants and 65 million active subscribers across various B2B and B2C industries over a 12-month period. These insights were the backbone of our ability to identify the most prominent subscriber trends of 2023.

The takeaways

The macro-subscription industry, namely subscriptions in the direct-to-consumer (DTC) space, is in the midst of a digital transformation. These changes are driven by a number of factors:

  • Subscription industry maturity: Increasing competition and commoditization are fueling increasingly rapid growth industry-wide.

  • Macroeconomic pressures: The recession and inflation are severely impacting consumer confidence and subscription businesses need the subscriber data and insights to respond appropriately.

  • Consumer-subscriber expectations: Above all else, consumers and subscribers alike are seeking personalization, value, and convenience when evaluating existing and new subscription offerings.

The insights

Leaning into subscriber growth, payments, and churn, our speakers shared the most prevalent trends and findings in the 2023 State of Subscriptions webinar. 

Acquisition & subscriber growth

Free trials

In 2022, subscribers from Recurly merchants took advantage of 35 million free trials globally. Here are some fast facts:

  • The average length for free trials was 30 days (trials of seven days or less had the highest conversion rate)

  • 34.5% of Recurly merchants offered free trials

  • The average free trial conversion rate was 38.1%

  • 90.4% of trials required payment. Trials that required billing information saw a 40.1% conversion rate

If you’re not already, leverage free trials to drive subscriber acquisition. While on average, a trial length of seven days or less drove the highest conversion rate, it is more beneficial to A/B test trial lengths to see what works best for your business. And while many may think requiring billing details adds friction to the subscriber experience, doing so actually increases conversion rates.

Coupons & gift subscriptions

Subscribers in Recurly redeemed over 19 million coupons in 2022, but gifting is an often overlooked mechanism for subscriber growth. 70% of consumers want gift subscriptions, and a whopping 209k gift subscriptions converted to paying subscriptions lasting 345 days on average.

Overall, despite a global pandemic and economic turbulence, subscriptions are still on the rise. Recurly merchants saw an overall average 21% increase in active subscribers. While the U.S. is seeing an increase in the number of active subscriptions year over year at a 16.7% growth rate, Europe and Asia are experiencing faster growth at 24.6% for both countries.

Payments

Did you know 56% of consumers would abandon their cart (and the store!) if they can’t pay with their preferred payment method? Payments matter–a lot–and the subscription business model needs to account for that in a thoughtful manner. From alternative payment methods to currencies, payments are crucial to local and global expansion.

At a glance, debit cards are the most popular payment method–making up 52.9% of global transactions made in Recurly last year). Alternative payment methods (APM) are on the rise, with PayPal accounting for 18.8% of all transactions and dominating the APM space with 92% of the transactions. Apple Pay is also experiencing a boom with 182% year-over-year growth as an APM. 

Unlock new and better growth opportunities by adding additional payment methods and local currencies, but it shouldn’t be random–keep an eye out for what payment methods consumers want.

Churn

Unsurprisingly, the rise of personalization dictates churn trends. Overall, the average churn rate was 6.7% across all merchants from B2B and B2C industries, and it has stayed relatively steady over the years despite market changes. One of the biggest takeaways is that consumers want flexible plan and pricing scenarios to create their ideal subscription plans. In fact, Recurly merchants and subscribers exhibited pro-personalization behaviors last year:

  • $480 million in revenue from subscription add-on options alone

  • 40% of merchants made plan adjustments last year, many making multiple changes throughout the year

  • 46% of subscribers reactivated their subscriptions after being given the option to pause

Involuntary churn

Involuntary churn rates hovered around 2.2%, and our research indicates that about 50% of subscribers’ total customer lifetime happens after a recovery event. These recovery events led to subscribers staying, on average, an additional 329 days.

Subscriber lifecycle emails also played a crucial role in maintaining relatively low involuntary churn rates. Out of the almost $1 billion in revenue recovered by Recurly, $214 million was dunning emails alone. Subscription business models need to leverage multi-channel communications to drive retention–a must-have in any involuntary churn strategy.

The future subscription trends of 2023

The most prominent conclusions from our research have allowed us to make informed predictions for the upcoming year:

  • There is a strong need to focus on cultivating long-term subscriber relationships through personalization.

  • Subscription businesses must prioritize payments as a growth strategy–understand what payment methods their unique subscribers prefer and provide them in a seamless payment experience.

  • Let technology lead–leverage technology to minimize involuntary churn and automate subscription management at scale. Without the ability to scale, there is no sustainable subscription growth.

Watch a recording of the webinar here, or access The 2023 State of Subscriptions report and see how you can strategize and grow your subscription business faster, smarter, and stronger.