Subscription Commerce

NEW STUDY: The Four Secrets To A Successful Subscription Offering

Subscriptions are seemingly available for anything, from the more established Software-as-a-Service (SaaS) offerings like the latest iteration of Microsoft Office to video-streaming services like Netflix. In recent years, subscription services have come to encompass dinner, children’s books, clothes, even bones.

It’s no wonder there are all sorts of subscription plans out there — it’s a business that’s getting more robust as subscription providers realize creating a seamless customer experience process directly translates into better sales. PYMNTS’ latest Subscription Commerce Conversion Index (SCCI) reflects the industry’s health, rising to 63.2 points in the first quarter of 2018, up from 61.5 points at the end of 2017. A score of 100, of course, would be perfect.

The Index measured friction in digital shopping experiences for customers across a range of subscription-based services. PYMNTS examined 47 features across 178 merchant websites representing nine industry groups, judging each on how they reduce and increase friction — basically anything that makes it harder for a customer to shop. The analysis was done for each merchant twice. The most relevant factors in compiling the Index included messaging capabilities, time, plan options, cancellation options and product details. Through all this analysis, PYMNTS identified four features that made for successful subscription offerings.

Time

There’s little more important to a digitally driven consumer than time. Last quarter’s data was eye opening: The average time to navigate a website to set up a subscription with an online service leaped 43 percent from the prior quarter to 159.5 seconds. The first quarter of 2018 showed an easing from that high, although the current average of 152.9 seconds remains relatively high compared to past surveys. B2B services were the worst offenders, clocking in at 174.5 seconds in early 2018, their highest-observed time to date. By contrast, consumer-focused subscriptions trimmed more than 12 seconds off their average time, coming in at 141.8 seconds. Every single second it takes to convert a consumer into a paying customer increases the odds that conversion will never happen. Based on the SCCI data, it was presumably a pressure felt more acutely by consumer-facing services compared to business-facing services that might face less direct competition for the unique offering they had.

Password Implementation

Given the emphasis on time, it might seem contradictory that implementing a password was another hallmark of top performers, but it was. Every single streaming video on demand (SVOD) and over-the-top (OTT) provider had a password requirement, making it the best among the nine industry sectors covered in the quarterly index. Compare that to Internet of Things (IoT) and Dardware subscription services, in which only half had passwords, making it the worst among business sectors. PYMNTS data also revealed that all the top performers, regardless of sector, required passwords too. The idea is simple: Passwords deter multiple, unpaid users while protecting the integrity of customer data and service preferences, which PYMNTS noted was the case in the video game industry.

 


Plan Options

The variety of subscriptions on offer was an area where the industry varied most widely in the SCCI. The best performing group was the SaaS/Cloud Computing group, in which 86 percent of providers offered multiple flavors of subscriptions. At the other end of the spectrum was the Consulting & Financial Services group, where less than half (42 percent) had more than one subscription type, according to PYMNTS research. As with password implementation, every top performer identified this quarter embraced plan options. There was barely any difference between B2B and B2C companies here.

Free Cancellation

Like passwords, free cancellation can seem at first like a negative to a seller. Ideally, merchants want to lock in forward sales as much as possible. Yet consumers are wary of committing to something for more time or money than they need to. Quite simply, free cancellation is a pillar of good customer service. Every top performer in the Subscription Commerce Conversion Index offered free cancellation, and the SVOD/OTT industry led all sectors with a 90 percent free cancellation rate, followed by Education, where 81 percent of companies participated in free cancellation. The worst-performing sector was Consulting & Financial Services, where less than half (47 percent) offered free cancellation. IOT/Hardware at 50 percent and Business Services at 57 percent were also laggards.

The SCCI was compiled by PYMNTS in collaboration with Recurly, a subscription management company. The full Subscription Commerce Conversion Index report is available here.

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