Annual subscription billing metrics report

Annual Subscription
Billing Metrics Report

Subscription businesses of all types from B2B and B2C and all industries face the challenges of churn and declines, as well as the reality of revenue recovery.

To provide benchmark data for each of these key areas, Recurly Research compiled data from nearly 2,000 subscription sites from January 2019-December 2019.

The data contained in this Annual Subscription Billing Metrics Report provides comparative subscription billing benchmarks to help subscription businesses make strategic decisions to drive improvements across critical key performance metrics.

We've included a broad span of industries including:

Box of the Month
Business Services
Consumer Services
Consumer Goods
Education

Healthcare
Internet of Things (IOT)
OTT / SVOD
Publishing and Entertainment
SaaS

2019 Churn Rates

Every subscription business deals with the challenges of churn, or what percent of subscribers cancel each month. Different industries have different factors that affect churn. Understanding these elements can help subscription businesses formulate effective strategies to combat churn because even slight fluctuations in churn can make a significant impact on the bottom line.

Churn Rates by Industry

All Industries

5.48% MEDIAN

B2B Industries

5.15% MEDIAN

B2C Industries

6.81% MEDIAN

25%

20%

15%

10%

Voluntary Churn

Involuntary Churn

1.89%%

Different factors lead to different kinds of churn—each requiring a specific approach. Improving customer satisfaction reduces cancellations that result in voluntary churn while using decline management techniques minimizes payment declines that lead to involuntary churn.

KEY TAKEAWAYS

B2B companies generally see lower median churn than their B2C counterparts. This can be attributed to the fact that many B2B products and services require a larger dollar point of entry and thus a lengthier and more thought out vetting process.

B2B products are usually "stickier", as well, meaning it's more of a challenge to change platforms or providers.
SaaS has the lowest median churn rate of any industry and Box of the Month has the highest.

Involuntary churn (when a subscriber's payment attempt fails) tends to fall between 1.5-2% and Voluntary churn (when a subscriber decindes to cancel their subscription) is primarily between 3.5-7.5%.

Churn Rates by ARPC (Average Revenue per Customer)

15%

12%

Voluntary Churn

Involuntary Churn

1.89%%

Price has an obvious effect on churn. Higher-priced subscriptions experience less churn, possibly because the purchase is more considered. Subscribers both sign up and cancel more readily in categories with lower price points.

KEY TAKEAWAYS

Generally, the higher a business's ARPC (Average Revenue Per Customer), the lower the churn rates will be. This is especially true for B2B businesses.

This may be because a high ARPC can be associated with enterprise software which often has 'inelastic' demand. In this case, the subscriber pays whatever price is set, often because the software is critical to operating their business.

At the high end of ARPC, B2C businesses see an uptick in churn due to the higher sticker price on the subscription that subscribers are purchasing. If subscribers don't realize the value of the product or service, they can be more prone to churn.

Decline Rates (Recurring)

There are over 2,000 things that can go wrong with a credit card transaction: out-of-date or inaccurate card information, insufficient funds or temporary hold, gateway issues, and fraudulent activity, to name just a few. When payments are declined, subscription businesses can lose subscribers to involuntary churn. The better you understand why recurring payments are being declined, the more effective your decline management strategy can be, leading to higher MRR (Monthly Recurring Revenue).

Decline Rates by Industry

Industry
ARPC

20%

15%

10%

Overall

Digital

Physical

Consumer Goods

Box of the Month

Consumer Services

Education

Healthcare

IoT

OTT

Publishing & Entertainment

SaaS

< $10

$10-$25

$25-50

$50-100

$100-250

> $250

Overall Decline Reasons

Generic Decline

Insufficient Funds

Temporary Hold

Restricted Card

Invalid Card Number

KEY TAKEAWAYS

There is no variation between the top decline reasons by B2C / B2B and Overall
B2C merchants usually receive more “Insufficient Funds” and “Temporary Hold” than B2B merchants. This could be explained by subscribers in the B2C segment having lower card credit limits than B2B subscribers.

Geographical Decline Reasons

The top 3 failure types are the same across all geographic regions but each region sees a unique combination of failure types for the 4th and 5th most prevalent.

North America

01Generic Decline

02Insufficient Funds

03Temporary Hold

04Restricted Card

05Invalid Card Number

Latin America

01Generic Decline

02Temporary Hold

03Insufficient Funds

04Expired Card

05Fraud Stolen Card

Europe, Middle East, Africa

01Generic Decline

02Temporary Hold

03Insufficient Funds

04Invalid Card Number

05Expired Card

Asia-Pacific

01Generic Decline

02Insufficient Funds

03Temporary Hold

04Authorization Expired

05Invalid Transaction

80%

70%

60%

50%

40%

30%

20%

10%

47.6%

54.3%

38.2%

KEY TAKEAWAYS

B2B businesses see a higher rate of recovery across the most common failure types. This could be due to the fact that many of these companies have dedicated customer teams that manually reach out to customers to update their billing information vs relying on automated emails and outreach to do it.
Insufficient funds are the most likely top decline reason to be recovered. This is expected since most subscribers will replenish their card’s funds within several days of an “Insufficient Funds” notification, allowing the subsequent transaction to succeed.

Recurly Research