Recurly, Inc., a direct-to-consumer subscription management and recurring billing platform, released its 2023 State of Subscriptions report. It was based on data from more than 2,200 Recurly merchants that support more than 55 million active monthly subscribers around the globe.
Citing global benchmarks and best practices, the report provides insights for subscription business growth and expansion, with chapters on acquisition, subscriber growth, payment strategies, and churn, as well as this year’s trends.
Subscriber retention remains a primary focus area for subscription-based businesses. Given that churn rates are a reflection of shifting consumer behaviour and preferences, the increase in the average overall churn rate from 6.6 per cent year-over-year to 6.8 per cent in 2022 can be attributed to economic factors, namely the pandemic and rising global inflation.
The report reveals that access to exclusive content, brand preference and discounts are primary drivers of subscription signups, while price increases and perceived decreasing value have the opposite effect. This means that subscription businesses must intentionally communicate both the value and relevance of their product or service and remain conscious of the impact which pricing decisions can have on churn.
“This report is the ideal barometer for subscription-led companies looking to navigate the ever-changing turbulent socio-economic challenges we’re facing across Europe. Particularly as Europe has seen the most significant increase since 2018, with 21 per cent growth in active subscriptions from 2021 to 2022,” said Oscar Wall, general manager EMEA, for Recurly.
Focus on retaining subscribers in 2023. “Over 40 per cent of merchants are making many adjustments to their plans in reaction to changing consumer behaviour. With merchants in the digital media and entertainment, and consumer goods and retail industries making the most plan changes in 2022.”
The three Ps – pricing, packaging and promotions
The report reveals that successful subscriber acquisition is three-fold, emphasising pricing, packaging, and promotions. In 2022, consumers took advantage of almost 35 million free trials globally from 851 participating subscription sites managed by Recurly’s merchants alone. Overall, the average site-level conversion rate was 38.1 per cent, demonstrating that consumers are more likely to try new services if those services include a discount or trial.
Flexible payment options the key
Flexible payment options are key. Debit cards are a primary form of payment across Europe and North America, accounting for 52.9 per cent of global transactions for Recurly’s merchants. Credit cards follow with 26.7 per cent of total transactions, and PayPal comes in third overall as the most popular alternative payment method (APM) worldwide. Taken together, the data reveals that consumers expect choices.
The report also found that decline rates have remained steady, but are lowest for credit cards and highest for debit cards. Furthermore, APMs resulted in a 1.5 per cent lower rate of fraudulent declined transactions when compared against credit and debit cards.
Personalisation of services and prices point boosts growth
Personalisation of plan and price drives growth. Roughly 40 per cent of Recurly merchants make plan adjustments each year because consumer-oriented industries necessitate dynamic adjustments. Recurly found that dunning emails, which are sent to customers to remind them a payment is due, are an effective marketing tactic for post-subscriber acquisition, responsible for recovering $214million in revenue in 2022 alone.
“Benchmarks and best practices are a critical part of how we partner with our customers. The State of Subscriptions report provides key subscriber insights, trends and analysis by industry,” said Dan Burkhart, co-founder and CEO at Recurly. “Subscription-based businesses can use these findings to evaluate their own performance against industry benchmarks, but also identify efficiencies and execute strategies which will help them level-up in 2023.”
In addition to teasing out broader trends, the report analyses the impact of businesses with subscription revenue by geography and sector. This includes digital media and entertainment, consumer goods and retail, business and professional services, education, healthcare and software.