The average churn rate for subscription businesses hovers between 8 and 9% throughout the year, a new study reports. Based on an analysis of 25 million transactions throughout 2015, Recurly says [download page] that churn rates peaked in Q1 at 8.8%, before gradually declining to 8.2% in the second half of the year.
The vast majority of recurring transactions included in the sample were in the B2C category, particularly for physical goods (90% of transactions). The analysis indicates, though, that churn rates were higher for B2C (9.8-10.2% depending on the quarter) than for B2B (7.2-7.9%) recurring transactions.
Likewise, churn rates were 23% higher for physical (10.2-11.1%) goods than for digital (7.8-8.7%) ones, with this possibly reflecting the higher presence of B2B transactions in the digital goods category.
The study notes that one-fifth of the overall churn in the sample was categorized as involuntary churn such as credit card issues, where outdated information leads to payment declines. Involuntary churn was slightly higher for B2C than B2B transactions, and remained relatively constant throughout the year, slightly increasing as it progressed.
On the topic of involuntary churn, the report indicates that almost 88% of recurring transactions were successful. Of note, decline rates rose alongside price points for both B2B and B2C transactions, with more than one-fifth of recurring B2C transactions valued at $99+ being declined. On average, businesses were able to recover 11% of lost revenue, with recovery rates higher for “insufficient funds” failures and lowest for “temporary hold” failures.
A recent study from IBM Cloud Video found that 16% of subscription video-on-demand service users had lost a subscription due to receiving a new credit card and not updating their information. Almost 8 in 10 respondents said they would be likely to fix such a problem.
About the Data: The Recurly report is based on a sample pool of 25 million aggregated and anonymized subscription transactions generated throughout 2015. The sample set included paid recurring transactions only and did not include the initial subscribing transaction.