Subscription services are big business. Not only are consumers adding onto their streaming video services subscriptions, but nearly 6 in 10 participate in online retail subscription programs that require an annual fee. Here’s a look at some subscription business benchmarks from Recurly.
1. 2 in 3 Subscription Businesses Offer Free Trials
Giving customers the option to try out a subscription service before paying a fee is popular across businesses. Some 66% of the more than 2,000 subscription businesses on the Recurly platform analyzed for the report offer a free trial. By industry, an above-average share of Digital Media & Entertainment (69.4%) and Education (69.6%) businesses offer free trial subscriptions. Furthermore, B2C businesses are more likely than B2B businesses to offer a free trial (68.7% and 64.2%, respectively).
2. Trial Conversion Rate
Although subscription offerings in the Business & Professional Services category are the least likely to offer a free trial, these businesses have the highest median trial conversion rate at 39.5%. Digital Media & Entertainment businesses also see a median trial conversion rate (38.6%) well above the 32.2% overall median trial conversion rate. On this measure, there is little difference between B2B (32.3%) and B2C (32.1%) subscription businesses.
3. Average Number of Days of Free Trial: Roughly 2 Weeks
On average, the free trial period of subscription programs offered by the businesses analyzed is a little more than 2 weeks (15.6 days). Customer Goods & Retail companies offer trial periods closer to one month (28.7 days), while Software businesses have an average trial period of 3 weeks (21.1 days). Overall, free trial periods tend to be slightly longer for B2C (16.5 days) than B2B (15 days) businesses.
4. Few Offer Multiple Payment Methods
Only 41.9% of subscription businesses offer more than one method of payment, with B2B businesses (43.1%) being more likely than B2C businesses (39.5%) to do so. Although the use of digital wallet-based payment methods like Apple Pay, PayPal and Google Pay looks to be increasing, only a little more than 1 in 5 (21.7% of) subscription businesses offer this type of payment method.
5. 3 in 5 Offer Monthly and Yearly Plans
The majority (59.3%) of subscription businesses analyzed offer both monthly and annual subscription plans. However, most Consumer Goods & Retail companies opt for monthly only plans (61.1%), while the majority of Digital Media & Entertainment (66%), Education (73.9%) and Software (65.2%) businesses tend to offer annual only subscriptions plans.
6. Fewer Than One-Quarter Offer Pause Functionality
Offering the ability to pause a subscription has only been adopted by about 1 in 4 (23.1% of) subscription businesses, with Consumer Goods & Retail subscription services being the most likely to offer this functionality. Recurly notes that subscriptions businesses may be hesitant to offer pause functionality because it will have a negative impact on revenue. However, the data shows that previously paused subscribers accounted for 3.4% of total payment volume generated, and previous research indicates that half of at-risk B2C service subscribers would choose to pause their plan instead of canceling it.
7. Churn Rates Vary by Industry
The data indicates that the median churn rate across all subscription businesses is 4.4%. Consumer Goods & Retail (7.1%), Education (6.6%) and Digital Media & Entertainment (5.4%) subscription businesses experience the highest median churn rates, while Software (3.7%) sees the lowest.
Overall, median churn rates are considerably higher for B2C (5.7%) than B2B (3.6%) subscription businesses.
8. Payment Decline Rates Also Show Variance
When it comes to payment success, the median decline rate across industries is 6.5%. Decline rates are lowest among Software (6.3%) and Consumer Goods & Retail (6.6%) subscription companies and highest with Education (8.9%) subscription businesses.
9. Insufficient Funds Declines Have Highest Rate of Recovery
Of all of the reasons analyzed for payment decline, subscription businesses are most likely to recover insufficient funds, with a median recovery rate of 62.1%. On the opposite end of the spectrum, the median recovery rate is lowest for restricted cards (30.8%).
10. 1 in 6 Businesses Offer Multiple Currencies
Only 16.6% of all subscription businesses have multiple currencies enabled. Education companies appear more likely to see the benefits of allowing payment in multiple currencies, with 28.6% of these companies enabling multiple currencies.
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About the Data: Findings are based on an analysis of more than 2,000 subscription businesses processing on the Recurly platform from Q3 2020 to Q2 2021.