The prescription for subscription growth

With subscription models talk of the town, brands need to be thinking about creating a positive user experience, where short term priorities focus on reducing involuntary churn.

Oscar Wall, GM-EMEA of Recurly, looks at how to reduce involuntary churn, by leaving the consumer in the best possible place to return once they feel more financially stable.

Businesses based on a subscription model have boomed in recent years thanks to innovations in platforms, payment technology and customer self-serve features. Together these advances have made it easier for product-based businesses to launch and manage direct-to-consumer (D2C) subscription-based operations embracing everything from streaming music to gin.

Streamed subscription services are hugely popular as customers embrace connected TV (CTV) and gaming. 7 out of 10 households have access to at least one streaming platform, so there’s no surprise that businesses like Netflix, Disney+ and Twitch all have millions of loyal supporters. Whilst Amazon Prime, a tech-driven approach to subscriptions, continues to attract subscribers to its vast ecosystem offering entertainment, exclusive offers and free delivery. 

Subscribers are incredibly valuable as a guaranteed source of revenue and their potential for upsell. Recurly’s survey of more than 2,000 European subscribers shows that most (93%) spend up to £150 per month on subscriptions. Respondents are more loyal (59%) and tend to spend more money (45%) with the brands and businesses to which they subscribe. 

The lockdown period saw a huge uptake of subscriptions. According to Recurly research, more than a third of UK consumers have more subscription services now than they did in 2020-2021, with increased subscriptions for services such as streaming video (62%), retail (26%) and health & fitness (18%).

The pressures on subscription performance 

However, companies based on a subscription model are beginning to feel pressure as consumers start cutting back on discretionary spending amid the cost-of-living crisis. Inflation is driving up the cost of all goods (90% cite it as a worry) and the real buying power of wages is dropping. 

There is good news and unwelcome news emerging from Recurly’s survey in this respect: 28% of respondents said they were planning on cancelling subscriptions but on the other hand the data suggests that over three quarters of respondents will either keep their current subscriptions (49%) or sign up to more (24%).

The challenge is to engage efficiently with potential prospects and to do your utmost to tackle churn. There will always be a cycle of departures but the priority must be to reduce the rate of churn – especially amongst your highest value subscribers.

Smart businesses know retention strategies based on discounting will not power long-term growth. There is a ceiling to what subscribers will pay and increases in price are the main reason behind cancellations, according to our research (72% of respondents).

But the real game changer lies in the customer experience you provide. If you can deliver a positive experience at every touchpoint and interaction with your subscriber base, they will feel valued, are more likely to accept a price ride, look forward to brand communications and have greater propensity to renew.

Steps to improving subscriber retention 

With this in mind what practical steps can you take to improve performance on retention and churn reduction? As a subscription management and billing platform we have some insight into consumer behaviours to help.

The first step is to tackle involuntary churn. This is when a customer leaves due to simple oversight, such as forgetting to update their payment details when their debit or credit card expires. Technology can help with tracking payment dates and notifying customers a recurring payment has failed (chasing overdue payment is a process known as dunning). But the trick is to make this a favourable interaction both through the language you use and the simplicity of the process for entering and recording new details. Show understanding and remove any barriers created by embarrassment.

Voluntary churn is down to a conscious consumer decision to unsubscribe. But if someone is leaving you want them to feel goodwill towards your brand still and be top of mind when they feel more financially stable. If you are holding a party and someone wants to leave you don’t want to be the overbearing host that makes it difficult for them and causes them to miss their last train home.

It may sound counterintuitive but you need to make the cancellation process as easy as signing up. One of the main factors in driving sign ups according to our research is ease of setting up, changing, pausing or cancelling a subscription (56%). 

This means developing an unsubscribe process that does not cause confusion and friction via unethical design (known as ‘dark patterns’). There are many design features that can improve the customer experience. These range from a clear and obviously placed unsubscribe link in emails, to explaining the cancellation process plainly and early in the customer experience. 

Finally make flexibility your mantra. Some mortgage lenders offer repayment holidays for struggling customers, so see if there is a possibility of introducing a ‘pause’ in subscription payments in your service. Consumers are having to balance their budgets month by month and their wish to unsubscribe may be a very short-term blip.

The rest of the year will be hard for consumers. Show empathy and focus on customer personalisation in pricing, promotion, packaging and payment solutions. Everyone’s circumstances will be different, so the more you can adapt your service to individual needs and wants the more loyalty you will generate.

By Oscar Wall

GM-EMEA

Recurly


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