Subscription services, from monthly boxes to streaming entertainment channels to SaaS licenses, saw spikes during the lockdown. But what goes up must come down, and firms built on recurring revenue models are bracing for cancellations as “outside” becomes an option again.
The Subscription Commerce Conversion Index, done in collaboration with Recurly, observes that “the shifting economic realities of the ongoing crisis have also made it important for subscription services to deliver more value to their customers. Consumers will neither keep nor pause their subscriptions if they feel they are not getting enough value from them.”
“Providing additional subscription features can help in this regard,” the report continued. “Free trial periods, the ability to easily alter the terms of subscriptions, rewards programs and free shipping can all help enhance consumers’ subscription experiences and make them more likely to keep their subscriptions and convince new users to sign up.”
The July 2020 edition of The Subscription Commerce Conversion Index – Adding Value With Subscription Features – looks at the connection between value as consumers see it, as recurring revenue firms use new tools and tactics to manage churn and ensure continued growth.
Scores Rise, But Churn Looms
First, the good news. Since PYMNTS’ last survey of subscription services, the average Index score in Q2 2020 rose to 65.1, the highest in five quarters. “This measured improvement in merchants’ ability to convert subscribers underpins their willingness to offer features that improve overall user experience. More subscription providers are now offering product ratings and reviews, quick add-to-cart options and password authentication features on their sites than last quarter, for example,” the new Tracker states.
Less good is the news that subscription services are not just battling for share of wallet, but they also must contend with consumers who tire of even cool experiences faster than ever before.
“Approximately 167.1 million individuals currently hold streaming, education and training, digital media or consumer retail product subscriptions, but 27.4 million – 16.4 percent – report being at least ‘somewhat likely’ to cancel,” according to the new Tracker.
“Many on the verge of doing so say they are bored with their subscriptions or hold seasonal ones that involve online college courses or employee training subscriptions that they only accessed to meet their employers’ or educators’ requirements,” the report states. “Other subscribers say they enjoy their services, but temporarily cannot or do not want to continue paying for them. Approximately 8.5 percent of subscribers – 14.2 million potential cancellations – could likely be retained by including the option to pause their subscriptions.”
Recurring Revenue Secrets
Retaining hard-won subscribers is the name of the game in 2020 – and there are smart ways to play it.
“Providers that give subscribers more control over plan terms may be more likely to engage and retain them,” the Tracker states. “Our research suggests that the top 20 subscription merchants are the most likely to provide features that allow users to either change or cancel their subscriptions, for example. These merchants offer both cancellation options and features that allow subscribers to alter their subscription terms, such as upgrading or adding new items.”
Themes of optionality and control surface repeatedly in the new research, as consumers become more aware of their choices and more willing to spend with brands that “get it.”
“Having a fast, smooth and user-friendly sign-up process, supporting many different payment methods and offering features that allow users to customize their subscription experiences, are all crucial in winning over new subscribers,” the Subscription Commerce Conversion Index states. “A strong consumer engagement strategy requires merchants to provide additional features to maximize their user experiences and best combat subscriber churn.”