The global subscription industry continues to grow with a projected market value of $1.5 trillion by 2025, but one challenge continues to plague many leading subscription companies—subscriber churn.
The complexities of recurring billing and payments can leave some companies with a proverbial “leaky bucket,” leaving a projected estimate of $129 billion on the table from involuntary churn alone in 2025.
Involuntary churn is when a subscription payment stops due to a payment error—an expired or reported lost card, gateway failure, or one of 2,000 additional reasons. It is one of the top, but manageable, challenges facing the subscription industry today. For even the largest subscription businesses, this can result in significant lost recurring revenue, lost subscribers, and a poor brand experience.
To understand the potential economic impact of involuntary churn, software company Recurly analysed billions of data points to identify its impact on the industry overall. The analysis shows that inadequate churn management can collectively lead to an estimated $129 billion loss when looking at this $1.5 trillion industry.
“Subscriber churn is the enemy of every brand we speak to. Many businesses have basic, manual solutions in place to manage churn, specifically involuntary, but they don’t realise how much they can move the needle with a better strategy and automated tools,” said Jonas Flodh, CPO at Recurly.
To minimise the risk of lost revenue, subscription businesses are having to deploy a range of strategies, including advanced automation and machine learning to remove friction in the payment experience.
A key focus of Recurly’s business model is addressing churn pre- and post-transaction and helping prevent failure before it happens. According to the firm, it derived its analysis from the average 8.6% revenue lift that subscription businesses experience when implementing its data-driven churn management solutions.
It added that subscribers have a better consumer experience when other best practices are implemented like backup payment methods, dynamic gateway routing, and customised dunning strategies.
