Two-Thirds of Subscription Businesses Do Not Measure Churn

Subscription businesses looking to boost their performance may need to get more granular about data.

By the Numbers

For PYMNTS’ recent study “The State Of Subscription Business: Best Practices And Business Performance Drivers,” created in collaboration with FlexPay, we surveyed 200 executive decision-makers at companies that offer subscription-based services and products. We found that most of these businesses did not collect key metrics.

Even the most commonly measured performance indicator, churn, was only tracked by 36% of those surveyed, leaving 64% without this data. Yet monitoring churn is correlated with success: top performers over-indexed, with 40% tracking the metric, while bottom performers under-indexed, with only 23% doing so.

The Data in Context

Subscription businesses are facing a difficult time, with many consumers, feeling the pressures of the current economic climate, paring back their spending.

Findings from the November edition of the Subscription Commerce Conversion Index study, “The Subscription Commerce Conversion Index: Subscribers Seek Affordability and Convenience,” created in collaboration with sticky.io, which draws from a survey of more than 2,100 U.S. consumers, reveal that the average number of subscriptions is on the decline. In the September, the most recent month on record, the figure was down 29% from the previous survey in July.

In fact, in an interview with PYMNTS, Matthew Berk, CEO and co-founder of direct-to-consumer (D2C) coffee company Bean Box, which offers both subscriptions and products available for one-time purchase, argued that companies that depend on the former will need to rethink their business model.

“Based on what I’ve seen around new services and new technology to help consumers identify and limit subscription risk for themselves,” Berk said, “I think in 2023, you’re going to find that direct-to-consumer companies that do not also sell under other modes — say a la carte or gift-based — are going to have a hard time maintaining subscription revenue.”

As subscription commerce weathers these challenges, firms will be all the more impacted if they do not equip themselves with actionable data insights and adapt accordingly.