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Subscription Insights: Top and Bottom Performers in Subscription Commerce

By Anna Krasnykh July 20, 2018 769 Views No comments

Subscriptions have seen tremendous growth in the recent years and, as a result, more and more companies turn to this business model. However, getting the offering right has proven to be challenging. Some say that the key is in attracting customers with new features and pricing promotions. Others say that success lies in reducing churn and making sure the customer is completely satisfied with their experience (see full report here). In this blog, we'll take a look at the specific differences (and similarities) between the Top and Bottom performers in Subscription Commerce.

A July, 2018 Study by PYMNTS.com, a platform providing content in payments and commerce, tracked and analyzed the results of over 150 merchants from different industries. They calculated index scores based on some friction-causing and friction-reducing factors in the shopping experience of subscribers. And based on these scores, they were able to point out how the top performers differed from the bottom performers across the industries.

The leaders in subscriptions seemed to be business services and SaaS companies. The ecommerce and consumer goods industry performance, overall, appeared to be pretty average. There was a large dispersion among their scores, indicating that some merchants were clearly way outperforming others, and the bottom and middle performers still had much to learn. So what were some of the findings?

The first feature this study analyzed was "the average time needed to complete a subscription" .

For top performers, the magic number was 133.8 seconds in the second quarter of 2018 and it fluctuated only slightly in the previous 5 quarters. However, looking at middle and, particularly, bottom performers, the numbers were quite dispersed. Potential explanations for this phenomenon might be technical capabilities and changes to processes. For example, adoption of new features and plan options could be to blame.

It is important to note here that while flexible options are important to the consumers, adding steps to the subscription process can have a negative impact on conversion. B2B customers are generally more tolerant of a longer process, while B2C customers are particularly sensitive to checkouts that are complex. Understanding your market better will help you achieve the intricate balance between process efficiency and options.

The category with the biggest difference was seen in Top performers providing their subscribers with flexibility to control their subscription plans . Allowing customers to easily make subscription changes, choose different plan options and even cancel their contract gave the consumers convenience and peace of mind. For the merchant, it opens up a portion of the market they would otherwise not be able to capture. The conclusion here is not to be afraid to give your customers more control, even if that means access to cancel. In addition, recent law changes protecting subscription consumers, make this a requirement in certain states.

Other features this study identified was messaging, product details and free trials. Product and service descriptions, as well as offer details, need to be clear to the consumer. The researchers also found that B2B merchants were more likely to offer free trials to their customers than B2C merchants. Free trials were also more likely to be offered by the Top Performers. Unless implementing such an incentive entails a high investment of time and money, free trials may be an excellent tool to attract consumers.

Some areas where all merchants performed relatively the same or that did not seem to have a high impact on performance were marketing opt in and social media setup. Though there were also some features that were becoming less popular and these included ratings and reviews, and rewards programs. Note that rewards programs are typically used to encourage the customer to make repeat purchases. However, a subscription program assumes an ongoing relationship by nature, so rewards may no longer be relevant. Implementing rewards in a subscription program may offer little value to the consumer and make the process more complex (remember, the easier the process the more likely they are to convert). Additionally, managing a rewards program in a way that benefits the merchant may prove difficult and can decrease the company's margins.

In conclusion , due to rising customer expectations, Subscription companies must stay highly attuned to their needs. The average subscriber has become quite sophisticated and expects value, control and flexibility in exchange for their commitment. Achieving the right balance of those for a subscription provider may mean implementing some important changes. However, merchants must be cautious during execution as any modifications may impact other factors down the road, similarly to the speed of subscription checkout example.

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