Customized experiences, free trials are key to growth in 2024
Recurly, a leading subscription management and billing platform, today announced the release of latest benchmarks for consumer software subscriptions, predicting an optimistic vision of growth in the coming year. The consumer software subscription industry is a beacon of resilience in a changing economy, delivering both convenience and ease to consumer lives.
For instance, modern lifestyles are increasingly hectic, creating demand for subscriptions that simplify daily tasks, and many consumers seek subscriptions that bring more than just utility. Consumers expect personalized experiences and, accelerated by rapid advances in technology, Recurly makes it possible for consumer software subscription businesses to offer targeted, personalized experiences at scale.
“The industry’s strong growth in 2023 can be attributed to the increasing demand for simple solutions in our daily lives, everything from finding childcare to scouting the best hiking trails, all at the touch of a button,” says Joe Rohrlich, CEO of Recurly. “For consumer software brands—such as AllTrails, SitterCity, Life360, FindMyPast, and Blinkist—the findings show that their understanding of customer preferences, the value of add-ons, and the adoption of flexible payment structures continued to provide high subscriber value in 2023.”
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Benchmark Insights for Consumer Software Subscriptions
Overall, subscriptions in the consumer software industry are witnessing significant growth while appealing to consumers’ needs for convenience. In fact, the average consumer has 4.1 paid subscriptions in consumer software, and that number is expected to increase by 29% over the next three years. From Recurly customer data, consumer software subscriptions are marked by a 71% surge in active subscribers since 2020—a testament to the growing demand.
Key findings and insights from 2023 include:
- The acquisition rate, defined as the percentage of customers acquired each month, remains a wealth of untapped potential, with the consumer software acquisition rate at 3% versus a subscription industry mean of 5%. Consumer software subscriptions could realize a boost in acquisition by refining targeting methods and new channels to climb closer to the industry mean.
- Trial-to-paid conversion rates stand strong at 50%, signifying effective strategies are present but ripe for innovation. A 10% sign-up decline rate signals the need to ensure a user-friendly interface to remove friction at sign-up.
- With a plan customization strategy, 45% of businesses witnessed an additional $1.1B of revenue growth, accounting for 52% of incremental revenue from all Recurly customers.
- With an overall churn rate of 4%, this points to the need for enhanced customer engagement, while an exceptionally low involuntary churn rate of 0.8% reflects an effective use of Recurly churn management tools.
- Through effective recovery efforts, businesses have managed to save 79% of at-risk subscribers, adding 272 days on average to the life of a subscription post-recovery event.
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As economic uncertainty influences buying decisions, consumers closely scrutinize value and incentives, leading them to prioritize subscriptions that can help them save money over time. As consumer software subscriptions continue to evolve, the following strategies are projected to drive future success:
- Stronger use of alternative payment methods (APMs) could increase acquisition, and enhanced sign-up strategies could reduce sign-up decline rates for consumer software subscription businesses.
- Consumer software subscription businesses are not just retaining, but also expanding their customer base. A sharp focus on capturing ideal customers and delivering ongoing value is crucial to bolster loyalty and minimize churn.
- Placing a greater emphasis on the lucrative impact of add-ons could bolster revenue in 2024, as add-ons have generated over half of the incremental revenue for Recurly’s consumer software customers.