 Report defines the metrics of successful, direct-to-consumer subscription businesses; provides insights for driving growth and mitigating churn
Recurly, Inc., a leading direct-to-consumer subscription management and recurring billing platform, today released its 2023 State of Subscriptions report, based on data from more than 2,200 Recurly merchants that support more than 55 million active monthly subscribers around the globe. With chapters on acquisition, subscriber growth, payment strategies and churn, as well as this year’s trends, the report provides actionable insights for subscription business growth and expansion.
“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.”
Firstly, the report reveals that successful subscriber acquisition is three-fold, emphasizing pricing, packaging, and promotions. In 2022, consumers took advantage of almost 35M free trials globally from 851 participating subscription sites managed by Recurly’s merchants alone. Overall, the average site-level conversion rate was 38.1%, demonstrating that consumers are more likely to try new services if those services include a discount or trial.
Read More:Â SalesTechStar Interview with Staci Satterwhite, COO at Khoros
Secondly, flexible payment options are key. Debit cards are a primary form of payment across North America and Europe, accounting for 52.9% of global transactions for Recurly’s merchants. Credit cards follow with 26.7% 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% lower rate of fraudulent declined transactions when compared against credit and debit cards.
Thirdly, personalization of plan and price drives growth. Roughly 40% 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 $214 million in revenue in 2022 alone.
Read More:Â How Conversational AI Can Recession-Proof Your Business by Unlocking Revenue
Lastly, subscriber retention remains a primary focus area for subscription-based businesses. Given that churn rates are a reflection of shifting consumer behavior and preferences, the increase in the average overall churn rate from 6.6% year-over-year to 6.8% 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.
In addition to teasing out broader trends, the report analyzes the impact of businesses with subscription revenue by geography and sector, including digital media and entertainment, consumer goods and retail, business and professional services, education, healthcare and software.
