Recurly, a direct-to-consumer recurring billing and subscription management platform, has released its Status of subscriptions 2023 report, based on data from over 2,200 Recurly merchants that support over 55 million active monthly subscribers worldwide.
Retaining subscribers remains a priority area for subscription businesses. Since churn rates reflect changing consumer behavior and preferences, the increase in the average global churn rate from 6.6% year-over-year to 6.8% in 2022 can be attributed to economic factors, namely the pandemic and rising inflation.
The report reveals that access to exclusive content, brand preference and discounts are the main drivers of subscription sign-ups, while price increases and decreased perceived value have the opposite effect. This means that subscription businesses must intentionally communicate both the value and relevance of their product or service and stay aware of the impact that pricing decisions can have on churn.
“This report is the ideal barometer for subscription businesses looking to navigate the turbulent and ever-changing socio-economic challenges we face across Europe. Especially since Europe has seen the biggest increase since 2018, with a 21% growth in active subscriptions from 2021 to 2022,” said Oscar Wall, EMEA Managing Director of Recurly.
Focus on retaining subscribers in 2023, the report notes: “More than 40% of merchants are making numerous adjustments to their plans in response to changing consumer behavior. Merchants in digital media and entertainment, as well as consumer goods and retail, will make the most plan changes in 2022.”
The three Ps – price, packaging and promotions
The report reveals that successful subscriber acquisition is three-fold, focusing on pricing, packaging, and promotions. In 2022, consumers enjoyed nearly 35 million free trials globally across 851 participating subscription sites operated by Recurly merchants alone. Overall, the average site-level conversion rate was 38.1%, showing 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 essential. Debit cards are the primary payment method in Europe and North America, accounting for 52.9% of global transactions for Recurly merchants. Credit cards follow with 26.7% of total transactions, and PayPal ranks third as the world’s most popular alternative payment method (APM). Taken together, the data reveals that consumers expect choices. The report also revealed that decline rates remained stable, but were lowest for credit cards and highest for debit cards. In addition, APMs led to a 1.5% decrease in the rate of fraudulent transactions declined compared to credit and debit cards.
Personalization of services and prices boosts growth
Customization of plan and price drives growth. About 40% of Recurly merchants make plan adjustments every year because consumer-driven industries require dynamic adjustments. Recurly found that follow-up emails, which are sent to customers to remind them that a payment is due, are an effective marketing tactic for post-subscriber acquisition, responsible for recovering $214 million in revenue. in 2022 alone.