Welcome, everyone, to our panel discussion on monetizing milestones.
So we're currently releases an annual report. This one is the twenty twenty five state of subscriptions.
It looks at all of our proprietary data over the last year and shares out some benchmark data as well as some trends that we're seeing in the subscription industry.
We will share a link to the report in the chat as a follow-up to the webinar, and we also encourage folks to engage in chat and ask questions. We've got folks there ready to answer. For those not familiar with Recurly, we're a subscription management platform. We've been around for fifteen years. We power subscriber growth for brands like Paramount plus, Twitch, Business of Fashion, FabFitFun, and many more subscriber businesses out there today.
I'm excited to host this panel. My name is Mary Rosberg. I am the VP of growth evangelism at Recurly. I've been here for eleven years and many more years in subscriptions.
With me today is Brian, who I will have introduce himself. He'll take us through a couple of highlights around the report, and then we'll jump into the panel. Brian?
Thanks, Mary. As Mary said, my name is Brian, Brian Geier. I'm the VP of business intelligence at WorkCurley, and my team is the ones who, put together, a lot of the data behind this report. I've got experience at a lot of different subscription businesses and, have been on both the b two b side and b two c side. So excited to take you through some of the data.
Alright. First, an overview of the report. We look at the full year ending December twenty twenty four. For this report, it includes data on twenty two hundred merchants and sixty seven million subscribers.
So a ton of different variety in our merchant base and subscriber base, to slice and dice the data in a bunch of different ways. And we'll just go through some of the quick highlights, here today. The overarching theme of this year's report is that subscriber expectations are maturing and evolving. Consumers are demanding flexibility, but at the same time, they have a pretty good sense of what they want.
That's gonna come up through a variety of different data points that we talked about here and likely in the panel as well too.
First, acquisition rate.
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. If 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. Subscribers generally know a little bit more about what they want today. They've tried multiple services perhaps.
So there's a greater likelihood today that someone would start a trial and perhaps not roll the pay because they already have a pretty good sense of what they want. Maybe they just wanted a particular piece of a sub serve subscription. Maybe it's a particular show, or football game or something like that, and that's causing one part of this drop.
So I'm gonna sit here. I think that's it.
This data point on this slide is, I feel like, the most interesting and gonna be the biggest trend into twenty twenty five and beyond. Subscribers aren't just canceling and leaving subscription services forever. They're canceling and coming back at a fairly, frequent rate, and it's increasing over time. So in the last year, twenty percent of subscriptions that were acquired by our merchants, came from subscribers who are formally with them. So they canceled, came back, and had a successful payment.
This has been increasing over the last several years and is very high in certain industries like digital media and entertainment and publishing. One of the reasons for that is, again, due to the subscription ecosystem maturing and our merchants maturing, subscribers have tried trials out.
They understand the services that they're getting, and that makes them also more likely to come back as well too, and that's what you're seeing here. They know whether they like the service, but they may have just had, used it for a period of time when they wanted it, and now we're coming back to it.
Next slide is fraud and alternative payment methods. This has been on the rise for several years, and twenty twenty four was no exception. One of the big reasons why fraud and alternative payment methods are on the rise is because they have a very low, broad based decline rate and decline rates generally. So the rate at which merchants are able to convert subscribers from attempting, to sign up to paid, is fairly high with with APMs, and that's one of the reasons why the popularity is increasing. The other reason is because merchants frequently see an increase in conversion rate on their website through these alternate payment methods, and that comes back to, offering subscribers a lot of flexibility. That flexibility gives them different options and more options, as long as it's not overwhelming, can cause, conversion rates to increase and more subscribers to enter into the funnel.
Just to wrap it up, the really big theme from this report is flexibility and personalization.
So empowering your subscribers to make the decisions that they wanna make and meeting subscribers where they're at is super critical.
There's two the the next two pieces of this ladder up to that. So having the right technology and tools in place to give that flexibility and personalization as well as using the data that you have to know where your subscribers at so you can meet them at that point. Both those pieces are very important.
Alright. Now let's go into the panel.
Okay. So now we're coming to what I think is a a really fun portion. Brian, that was fantastic. Thank you for sharing the insights. Thank you for giving us the highlights of what we're seeing in the data this year.
We'd like to dive into that data. We'd like to dive into those themes, with our panelists that have joined us today. So I'd love to have the panelists actually introduce themselves.
Abhi, why don't you start us off?
Hey, everyone. My name is Abhi Sharma, and I'm a senior product manager at Codecademy.
We're a global edtech platform that help, people across the world their own tech skills like coding and data science. I work on our growth strategy for our b to c and b to b subscriptions, and a lot of the work I do is focused on improving our user acquisition, retention, and revenue.
Awesome. Brian?
Hey. I'm Brian Gregory, senior director of engineering here at Chegg dot com, where we primarily help college students learn more effectively and succeed in school. I've been in software engineering for about twenty five years now. My teams work on a variety of pretty foundational integrations for our other teams to build on. I've worked in both the domain name industry and EdTech, which has given me a lot of experience digging into data and connecting the dots to help understand what's coming next. We're always interested in how we can best serve our subscribers better, including the commerce and payment space that Recurly plays in.
Steve.
Hey. I'm Steven Welland. I'm the senior director of business systems at Lucid Software. We offer intelligent diagramming tools, Lucidchart, Lucid Spark, and we really focus on helping people see and build the future. I focus on the systems that many teams use to help run the business. So my team's focused on marketing, sales, customer success, billing, payments, and accounting.
Over the past four years, I've spearheaded key initiatives in our global billing and payments infrastructure, focusing on scaling both direct to consumer and b to b subscription models.
My work's really centered on optimizing payment work flows, enhancing customer experiences, and reducing friction during their renewal process.
Incredible. Great panel.
I've been following all three of your companies for a very long time now and love to see the growth across the board. And you're all terribly humble about what you're doing to drive business at your company. So if you need a review, just let me know.
Alright. Let's jump into the questions, around subscription. So one of the first things that Brian highlighted was, essentially, retention is the new acquisition.
Right? 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 of our attention 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.
That makes total sense.
When you talk about value reminders, can you tell me what that is? Like like an example.
Yeah.
For example, our platform has, lots of different content, hundreds of courses, and many, many different features for helping folks learn new skills or switch their careers into tech. And sometimes, the user's journey doesn't, necessarily have them going through some of this these content features that they might find useful. So we found that reaching out to them both proactively, through emails, but also on, the cancellation flows has been super effective in terms of, surfacing some potentially relevant content and features, to those learners if they might not have encountered them, during the journey with us.
Right. That's a term that I hadn't heard before, but I'm certain that as a consumer, people are sending me value reminders all the time.
I've canceled a few subscriptions myself. I think to hearken back to what Brian said about customers wanting more personalization and customers wanting their payment methods, what they wanna pay with, when they wanna pay it, I feel like we're we're in that stage where a lot of our cohorts are essentially flexing. Right? They they they have the power or at least they they feel they have the power, and they're opting in and opting out of subscriptions pretty quickly.
Does anyone else, Brian or Steve, do you wanna add on to any shifts in your growth strategy in this shift from acquisition to retention? Or, if you don't see that in your data, tell me more.
Yeah. I'll I'll second a lot of what Avi said. You know what? At the end of the day, don't assume that your customers know what you're doing today.
Disney and Netflix might get a ton of free press, but other companies, not so much. Yeah. You've gotta have a strategy that incorporates evangelizing those value changes. Right?
If your customers canceled in the past, there was a reason for it, and you you better know that reason. Otherwise, you're gonna miss out on the chance to bring them back. You've gotta give them a reason. You've gotta show them, hey.
Here's how we change things. Here's how we are different from when you canceled. Here's the reason that you need to come back to us. All too often, I think there's an assumption that, your past or or existing customers, they know what's happening.
They're in tune with your releases and strategy. And the reality is that your company is rarely top of mind for them, so you've gotta make it top of mind. You've gotta give them that reason.
Love that. Love that. Cool.
I would also if it's our I would also add on I think data matters. Right? We talk about ideal customer profiles and things all the time. The reality is we sit in an office, we make a plan, we decide who wants our product and who it's going to be useful for, and then we launch it.
And maybe, maybe it is, maybe it doesn't. Right? But having all the data just to add on what they said, why they canceled, why they signed up, what things they're using. You know, when you blast certain communications, does usage go up?
Right? Like, where are the areas where it fits or doesn't fit? But over the last few years, and we'll get more into this as we talk about trials and all this stuff, but I think the market's shifting as more and more options are available. And so understanding what about your product your customers are actually using and what resonates with them, I think, is incredibly important.
Because the reality is somebody might be better at telling the story than you are or might be better at, you know, servicing that value that the customer is looking for in their product, and they're the ones that'll win. Right?
Yeah. For sure.
So we haven't talked about b to b versus b to c. And, Steve, I know when I look at your business, there's a little bit of both.
Anything come to mind when you think about retention and the difference between the two?
Yeah. I mean, it's it's really two completely different motions. Right? If, for example, you look at diagramming.
Right? If we're trying to target, you know, a team or a function or an organization that, you know, uses a lot of diagramming, like an engineering organization, for example, the messaging that we're putting out is very different. Right? We want enterprise grade.
We want security. We want to make sure that they can share and collaborate together. Right? If the target's more like a student going to college.
Right? And a Lucid Spark thing, like somebody is trying to create a vision board. Right? For the new year.
Right? Like they're not gonna care as much about collaboration and sharing and things like that. So the message is very different. But it's important to understand, I think, and a lot of people lose this.
You really have several emotions that you have to identify. One is individual. Who are those individual users who are going to stay individual? Right.
And who are those individual users that you're targeting to become, you know, business and much larger groups and users at that point. Right? And the stories become very different and the value that you're trying to surface is very different. And you have to be aware of their journey along the way.
Right? Because right now their focus is the certain thing and that's what you want to expose to them or focus on them. That doesn't mean that's what you wanna surface six months from now. Right?
That needs to evolve. Right? As you evolve your customers and, you know, your, the use of your tool for them. But, yeah, I I think they're very, very different, but there is overlap.
And, yeah, if you don't have the data to track what they're doing and how they're using it, I think you can get lost and so can your customers.
For sure. I mean, even when I think about from from what I look at all day long as payments data and retention as it relates to payments, There's even differences in how we handle, potential involuntary churn related to payments when it comes to a larger b to b enterprise software solution versus something that's a little bit more direct to consumer. So we won't go down that rabbit hole any further. I was just really curious.
Appreciate it.
Let's talk a little bit. We touched on loyalty, and, obviously, we're gonna be touching on data all day long.
When you think about subscriber engagement, loyalty data that really you're tracking to help improve retention, would anyone be willing to share, like, an example of where data's directly influenced your retention efforts?
Brian, how about you?
Yeah.
One interesting fact about our cohorts of college age students that we go for Yeah.
Is it's a very cyclical routine with them. Right? It's described near the start of the semester, and then as the end of the semester comes, they don't necessarily have a reason to stick with us. And I'm sure we'll talk more about pause and cancel options later on.
That that's a big part of our strategy there. But when we look at strategies there, we've gotta look at those specific dates that our subscribers care about to know when do we focus on acquisition, when do we say we're coming into a new semester, we need to be trying to get, new and and, returning customers coming back to us versus during the semester when we're more focused on retention strategies. Hey. Look how valuable we've been so far in the first few weeks of the semester.
You should stick around for the rest of the semester. So recognizing the data of those cycles and adjusting it every year because things don't stay static, that's a key part of that strategy. Where do you focus on which part of the funnel? Do you focus on the top?
Do you focus on, on the very bottom? Do you wanna make sure you're retaining their customers? You've gotta know your audience. Right?
And you've got it all well.
Love it. Brian, the other Brian, our Brian at Recurly, anything to add there or thoughts on that?
Yeah. I'll I'll say that every subscription company out there is focused on churn.
And if they're not, they should be, of course, but everyone is. The way the the way in which you can influence churn is through engagement. And it's I think it's very important for companies to have a measure of engagement, because it gives you a North Star to influence that metric that everyone cares the most about. You can't everyone wants to reduce churn, but how exactly do you do it?
It's engagement. I mentioned at the beginning, I've worked at three different subscription companies previously, and, at one of them, I really spearheaded engagement. But at all of them, we had a measure for it. At a wine subscription business, it's gonna be how many bottles of wine do you drink.
Right? The more wine you drink, the more likely you are to stay as a as a customer. And then everything can then ladder up to that. Like, AB testing different recommendations for wine, like, are they drinking more?
That's gonna lead to a lower a lower churn rate. For media companies, like, how much are they consuming? How much time are they spending on your platform? Those things should all have a direct correlation to churn.
Having a measurement for them and having a plan to increase them as well as, test the associated with it is is what I've seen be successful, because it's really, really hard to just move churn on its own.
For sure. For sure. Like, Avi, when I think about, Codecademy, are you looking at number of, like so I'll call them classes, but they're really, you know, short short bite sized content. Are you looking at the number that they take or the minutes that they're in overall or the classes that they actually finish and follow-up and take, like, the the next ladder up of the courses and going deeper into learning whatever programming language?
Yeah.
I think individual, users' motivations vary, but, what we do is analyze, the type of content that they're consuming, their engagement patterns with regards to how often they're visiting our platform, if they're in a subscription or not, and then that helps inform, our, strategies with regards to what content we're building and recommending to them.
And we've our use cases are sometimes quite different. For example, one of our learners might be already a software engineer who's learning a very specific, programming language, and another one of our learners might be someone who's completely new to tech and just wants to learn what coding is. And I think having a pathway that's as personalized as possible to each of those learners is important so that they we can get them to their moment sooner and get them learning. So for us, the focus really is on getting our users to discovering the content that's most relevant to them, take getting into that course, and then proceeding with learning and finding that value in our platform.
Well, you you could almost have, like, different engagement measurements for different cohorts of customers.
One way that I've seen it done too is, like, early subscribers early in their life cycle. You may wanna look at some different metrics that lead up to that moment that then leads to long term engagement and and and lowered subsequent churn rates. So good point.
Yeah. Harking back to what Steve was saying earlier around customer journey and, really, the different touch points all the way.
I think the next step of that is once they hit the moment, How do you track usage ongoing? Right? Now that they're in and using, right, is it daily? Is it monthly?
Right? Is it quarterly? Can you do things that increase that? Right? And then that yeah.
I think that's important. Understanding, are they using what they purchased? Right? Because if they're not, you know, it happens the next time they see that charge on their their credit card.
Right?
Totally. Totally. It's actually what I did with my long weekend was look at all my subscriptions.
Alright. Let's talk about free trials. Something that Brian brought up earlier was that free trials are no longer as effective. I found that really interesting.
It made me reflect on what I do as a consumer, and it's true. I'm actually not engaging in free trials the way I used to, mainly because I hate getting tricked into paying at the end of the free trial.
What are you guys seeing in terms of trials being effective for you, say, in the last, you know, couple of years?
Steve, you wanna take that?
Yeah. 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, you know, 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 trials 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.
Right? You know the next payment is not gonna be successful. Right. So we're trying to understand why they're using that and what is they're trying to accomplish.
So we've seen a few things in the in the trial space.
Is anyone doing anything different?
Anyone meeting on this call, is anyone doing something different than trials to help drive acquisition? So what comes to mind for me is, a a ramp or stair step pricing where you're teasing it out at a lower price after the second month, it goes to the regular price and so on. Has anyone tried that?
And maybe layering onto that question too, like, are you using trials for specific cohorts, for example, or keeping them broad funnel?
Because trials can sometimes vary in effectiveness depending on the cohort. So is it more like different types of offers for different cohorts of customers or more of a broad approach?
We haven't tried any ramping, but I've talked to a few others in the space that have tried ramping. They're they're also trying adding alternative payment methods that, you know, have less they're less likely to to see fraud or they have lower fee structures and things like that. They're offering discounts on those, if they use certain payment methods trying to, you know, better target the types of people that sign up. And they've seen a little bit of success with that, but I don't think they have enough data yet to really tell, you know, how effective it is or not.
Yeah. I I envision a chart of, like, you know, you're offering additional payment methods, so you're seeing less fraud and you're acquiring, hopefully, but there's that you know, if you're offering a too much of a discount, then you just kinda eat up all all that you just got. Right?
Yeah.
Interesting.
Cool. Let's move on a little bit to flexibility, personalization, and all of that large topic.
It's a topic that comes up constantly in almost every subscription roundtable or dinner or event that I go to. I I'm almost tired of hearing of the word personalization, but I don't think it's going away anytime soon. So let's talk about it.
When it comes to consumers, I mentioned they're flexing. Right? They they want more flexibility. They're almost demanding it.
They want to pay in the payment method they want. They want the exact kind of plan. You know? Can you customize this?
Hold the salad dressing. That sort of thing. They're getting pretty demanding.
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 mouth all the time. Right?
You don't wanna fall into that camp because subscribers won't put up with it anymore in 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 Stibb, but now they are, because the the customer base has shifted.
Yeah. I totally agree. 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.
Yep. Avi, anything you wanna add there?
Yeah. I'll echo a lot of what Brian said. I think it comes down to two things. First, mapping your core customer needs with your subscription, packaging options and payment methods, and two, simplifying the decision making and checkout process for your users and, effectively reducing cognitive overload and decision paralysis.
On our b to c side, we've our learners, belong to three primary categories, career switchers, upscalers, and students, and our subscription packages reflect exactly that. So we've effectively simplified the selection process, for the most relevant subscriptions, for each individual user, since it's directly mapped to their goals.
In terms of billing lengths, our learners have different needs based on their use cases. For example, you might only need to, learn one course or have a longer term commitment to switching your career into tech. So naturally, learners have different levels of time periods that they're willing to commit to. We've tested flexible payment options, including monthly, six month, and annual plans, And we found that, monthly sometimes almost serves as a trial for determining longer term value, and we've seen a lot of, upgrades from monthly to annual.
And we've also found that simplifying messaging around pricing as much as possible works really well because it increases transparency and builds user trust.
Overall, I found that it's best not to offer too many different plan lengths because that can then, lead to some decision paralysis and make it harder to pick one. On the b to c b to b side, I found that, offering direct purchase options and invoice generation has really helped, reducing the, friction involved with taking our business customers, to purchase a plan, and in parallel, always offering a free trial for anyone who needs it. So, overall, offering flexibility with targeted solutions is important, so to give your customers more choices. But those choices should be targeted, and not add confusion with plan type and payment method, selection options.
Cool. Super helpful.
Let's talk about returning subscribers. So this is a topic that definitely had our Brian in in data science. I'm super excited. It's really interesting to see the data.
Let's pause. Hold on. Let let me mute and let my husband get down the ladder. Pause.
Hopefully, he's stepping down the ladder and not falling down the ladder. Right?
Yeah. He is he is stepping down the ladder. We, during COVID, we've outfitted our attic and turned it into a second office so that he could work from the office upstairs, and and I could do that. There we go. Alright. Sound is done. Great.
So let's talk about returning subscribers.
And, really, the topic for us, it relates to pauses and reactivations and, really, how do you get those subscribers back? How do you market to them? How do you message them? How do you do the value reminder?
I'm in a cycle right now because, of course, just in the last few days, I just wait a couple of subscriptions, and I'm now in their cycle of we need to reacquire you as soon as possible. What can we do?
From my point of view, I'm just interested in their strategy, and I may I may succumb to the strategy.
What are you guys doing in terms of pause, in terms of reactivation, and what are your thoughts there? Brian, let's start with you.
Yeah. We've given our customers the option to pause and and restart their subscription for a number of years now. And with our inherent seasonality, it's proven very effective. Right?
Customers will come. They'll sign up for a semester. Maybe they take the mess the next semester off. Maybe they're taking easier classes.
When a customer goes to cancel, we do make sure to mention to them, hey, we do offer the ability to pause. Are you interested in doing that instead?
That small bit of friction has gotten a pretty a pretty decent cohort of customers to say, yeah, I'm interested in pausing instead.
Let me let me just put this on hold for now.
And so it's it it is Can I ask you a question on that notion?
Do you do anything to make the pause seem more appealing than canceling and coming back?
We we do. We offer a value prop there. Right? We say, here's the benefits of doing it.
It's gonna make it easier for you. You can restart whenever you want. There's no pressure to do so at any specific time. Again, going back to that theme of flexibility and ease.
Right?
And trust and trust. We're not gonna do anything with your billing info until you're ready to come back. There's gonna be no hidden fees for going into this pause.
Yep. Yep. We do turn off some of our marketing materials, for customers that are in a pause 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 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.
So buying ways to entice people to pause instead of cancel, right, offered as an off ramp from the cancellation flow definitely helps, and give them reasons to come back, but don't be too pushy about it.
And and engage I'll add to that too because engagement becomes very important here. Right? You're not gonna get them to pause, and you're not gonna get them to come back if they weren't engaged in the first go around and got value from your service. So we talked about that, and there's there's usually a direct relationship between engagement and the rate at which, subscribers come and go.
So Yeah.
Makes a lot of sense. I mean, at the end of the day, you need to provide value to your end customers or you don't have a business at all. Right?
Let's talk about, we've been talking a lot about trust. Let's talk about fraud and the lack of trust.
So we're seeing fraud increase. We are not surprised by this. Really pretty much every year, we've seen fraud increase. I remember working with different companies that were brand new to direct to consumer, and they would say, what am I gonna care about in a year? And the first answer was always fraud.
And it it surprises people, but it's it's there and it is increasing.
What are some payment strategies that you guys are seeing that are helping to reduce fraud in in your business?
Steve, you wanna take us in?
Yeah.
Fraud prevention's constantly evolving challenge. Right? The fraudsters seem to be moving just as fast as the tools that are being developed to to stop them. Right?
So, I think there's a few things that I've seen that have, you know, led to success. The first is, like, doing some sort of an internal check. Right? We've talked a lot about personalization, our product, how are people using it.
You should have a good feel for your customers and what normal behavior is. Right? If you understand that on the payment side, it can help identify anomalies that pop up or when things happen like, hey. On average, you know, if you're a b to c business, let's say, hypothetical numbers, you sign up a thousand people a month.
All of a sudden in one day, you had, you know, four thousand people sign up. Like, that's a really bad sign. Right? You should be monitoring those things on your own.
So internal checks where you can understand when, you know, behavior goes well outside of a norm. Right? Next thing is a third party tool. Right?
They have this is what they do all day, every day, unless you have a team of, you know, fraud experts on your own. Right? This is what they do. And they have access to way more data and much larger datasets than you do and tools to to consume that.
Right? So have a good third party tool. We can take a look at that. And then the last piece is, you know, your payment gateways, you know, Stripe, Brain Tree, whoever you may use, a lot of them have, you know, fairly robust fraud tools as well.
And they also have access to a lot more data. And they're also hurt just as badly. Well, probably not as badly, but they're also hurt pretty badly when the Sprout stuff happens to you. Right?
So they're incentivized to ensure this stuff doesn't happen. But something that's important to note is you refine your fraud prevention strategy. It's important to consider the impact of false positives. Right?
Or cases where legitimate transactions are mistakenly flagged as fraudulent.
Overly aggressive fraud rules can inadvertently lead to a significant number of false positives. And when you're looking at your day, you're like, oh, look, we're catching a lot more of these fraudulent payments. Like we're doing a great job. In reality, you're catching legitimate customers.
And while you think you're doing a better job, what you're doing is significantly hurting your bottom line. Right? And an example of that's payment retries. Right?
If a customer fails their payment due to insufficient funds, they transfer money into their account. Then they go try to repay that invoice immediately because they want access to the service again. Right? Or they don't want that invoice unpaid.
The funds might not have settled yet, so they hit pay and it fails and hit pay and it fails. And then they do it seven times in a minute. Now your system goes, oh, this is a velocity thing. They're trying to open two things.
This must be a fraudster. And then it ident identifies that account as fraud. Right? So anyways, I guess that some of the three things we found are, you know, have some sort of an internal check, understand your customer's behavior so you can see when things are happening you shouldn't, and be somewhat targeted in that.
Right? If you notice frauds coming out of certain, you know, use cases or areas of the world, focus more on those areas. Right? Utilize the payment gateways and that third party tools while making sure that you're not actually preventing your real customers from being able to pay by being overly aggressive and worrying them out from.
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. 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 they don't want us to go 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 they could accomplish, but I imagine it'd be pretty fantastic.
No. It's a lot. It's a lot. Great.
Let's talk about give me a 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 a 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 important. 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, the 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?
Yeah.
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 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 customers 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 expectations.
You can't just present the same choices you did five or even three years ago around payment options and subscription flexibility, and you've gotta try and remove as much of that intentional friction and limitations as possible, or the customers are it's gonna go somewhere else where it's easier.
Okay. Alright. I I think the slightly different approach on your question, I think the companies that are going to be successful in the next ten years are the companies that do the best job at meeting their customers where they are. Right?
That's around immediate value, need changes, whatever that may be. And that comes with data. Understanding how do I identify where my customers are? And then within your product, understand what value do I provide?
And that's the second piece. The companies that provide the most value to their customer, not perceived value, but actual value. Right? So the people that are able to meet them where they are and then the ones that are able to understand value, right, I think those are the ones that'll be the most successful.
And I I see a lot of things being prod in the industry. I know some big companies are piloting, usage based subscriptions now. So instead of charging you a flat fee, they charge based on consumption. So, like, hypothetically, Netflix would come and say, oh, you watch seventeen hours, you know, this month.
You get this much. You watch seven hundred hours. Your bill is this month. And that's based on usage and value you're getting out of that.
And that's more trying to meet the customer where they are, understand the value proposition, and then focusing your offering on, you know, what it is they want and need. And customers, I think, are gonna appreciate things like that. I think it's still to be seen whether or not that's effective. Right?
But, anyways, those would be my things. I think those to meet the customer where they are and then provide the most value.
I think it's like a everything comes around all the way. Like, what you're describing usage makes me think of the auto rental industry.
Who wants to rent a car and pay for every single mile that you use versus unlimited? Right? That that that moment for that industry where they were like, wait. We really need to offer both because there really are people that just wanna do it by miles.
Yeah. Lessons to be learned.
Thank you so much for your time. This has been super fun for me. I've learned a lot. I hope you guys have as well.
Brian, thanks for summarizing the insights from the data, and we hope that you ask questions and keep the conversation going. And maybe I will take you up on that, Brian. I'll call you in a year and tell you if your predictions happened.
