The pandemic marked a period of explosive growth for subscription commerce. However–given the economic situation, easing restrictions, and a shift in lifestyle–the tides have turned.
Subscription brands—especially media organizations—are seeing new challenges arise in both retention and acquisition. Streaming giant Netflix made headlines by losing 200 million and nearly 100 million subscribers in two consecutive quarters this year. A different strategy and renewed attention are required to expertly navigate this next phase of our endemic subscription landscape and beyond.
In this article, we delve into what’s changing in the subscription landscape and how recurring revenue businesses can adapt and flourish.
The changing sands in subscription commerce
The same factors that fueled the subscription explosion during the pandemic seem to now be shifting in the opposite direction. Our research has found a number of factors that are impacting consumer appetite for subscriptions and the overall subscription landscape:
- Shrinking expense budgets: Rising inflation and fears of an impending recession are curtailing consumers’ discretionary spending behavior. Just over 90% of subscribers say they are concerned about inflation and its impact on the cost of goods and services.
- Reduced movement restrictions: As social distancing compulsions ease, people are once again enjoying in-person shopping experiences. This movement shifts several premium-priced subscription categories from “necessities” to convenience-based “luxuries.” The impact is clearly felt in consumers’ increased cost sensitivity towards subscriptions, which has dropped from 2% in October 2021 to 22% in March 2022.
- Lifestyle changes: As travel and entertainment options resume, lifestyle shifts are happening. Statistically, 46% of consumers expressed excitement about in-person dining, 45% about domestic travel, and 43% about in-person events. This shifting preference has a natural spillover to weekends dining out instead of dining in, for example. This impacts the different “stay-at-home” subscription bundles like meal kits.
- Classic subscription fatigue: The impact of subscription fatigue is also becoming apparent. Consumers realize they are spending more on subscriptions than they need or desire. In addition, 22% suggest feeling overwhelmed with the number of subscriptions they currently own. And that clearly feeds into their decision to withdraw.
What to make of this mercurial market? It’s time for merchants to harness the above insights to intervene and adapt.
How to stabilize during this COVID aftermath
Stabilizing through the changing tides requires businesses to pivot their subscription models to increase consumer value perception as a result of their changing interests.
Here are some actionable ways merchants can adapt to changing consumer preferences:
- Help people save money: As consumers become more cost-conscious, offering subscriptions that promote saving can be powerful. As found in a Recurly study, only 20% of U.S. subscribers intend to sign up for more subscription services, while 49% plan to keep their subscriptions the same due to the rising prices. Introducing “Subscribe and save options” or providing handsome bargains for “lock-in” subscriptions–for example, securing an annual subscription at a lower monthly rate–can be helpful to reverse price-conscious unsubscribes.
- Introduce greater price flexibility: For non-essential subscriptions (the “nice-to-haves”), offering tiered packages can help mitigate churn risks. Allowing users to pay less for reduced features can fuel retention. Netflix has leveraged this by offering lower subscription fees for consumers consenting to watch ads.
- Put customers in the driver’s seat: Customers now want greater freedom, personalization, and choices as their lifestyles change and consumption patterns shift. For example, 82% of subscribers state that being able to pay with their preferred payment methods is one of the features they want most from merchants–and that’s up from 69% in October 2021. That said, offering too many options can cause analysis paralysis, so experiment with pricing and packaging to find the right balance for your subscribers.
- Help people save their time: Studies suggest 81% of shoppers wouldn’t mind continuing subscriptions if they could save time and enjoy greater convenience, despite surging inflation. Merchants offering pricier subscription bundles that help people save the value of their time can continue to triumph if they can effectively convey that value.
- Ensure excellent customer experiences: Customer experience remains paramount to successful subscriptions and even more so in the current volatile and maturing market. Allowing customers to pay easily with their preferred payment methods, access flexible renewal and cancellation opportunities, and enjoy prompt support as needed will fuel lasting retention outcomes.
- Increase win-back chances with pause options: Despite efforts toward retention, some customer segments may still be unwilling or unable to continue.. Offering them a softer alternative of pause can help to retain them in the fold and increase their likelihood to re-subscribe in the future. We’ve seen merchants that use our pause feature experience a 46% reactivation rate, demonstrating the power of this magical button.
While the pandemic accelerated the demand for subscriptions, the current correction demands a pivot to thrive in this evolving market and inflationary climate.
Subscribers continue to seek value–whether for their money, time, or both. Hitting the sweet spot requires making necessary changes to existing models or subscription bundles to adhere to the reimagined consumers’ preferences.
About the author
Theresa McEndree is the Chief Marketing Officer at Recurly, a subscription management and billing platform that maximizes subscriber lifetime value with expertise, technology, and insights for global brands.