Webinar Recap: The Implications of COVID-19 for Subscription Businesses
Recently, Recurly Chief of Staff, Emma Clark joined Subscription Insider’s Kathy Greenler Sexton to discuss the impacts — both positive and negative — that COVID-19 has had on subscription-based businesses. If you missed out on the webinar, here’s the gist.
COVID-19 has entirely reshaped the subscription landscape, as well as increased the economic uncertainty and volatility of companies around the globe. Here’s some context around COVID-19 to keep in mind:
Short-term changes in consumption habits, but with long-term impacts
Consumers juggling costs, 39% experiencing decrease in household income
Devastating? Yes. But it’s not a challenge many subscription businesses are shying from. With more people at home, businesses have shifted to accommodate for convenience, at-home delivery, and access to certain products that weren’t readily available.
Subscription trends across industries
Recurly Research spans thousands of merchants across multiple industries. We’ve been tracking the developments and impacts of COVID-19 in terms of acquisition, churn, and growth rates.
Trends across every industry show an acceleration in subscription growth between early March and late June, relative to a normal week pre-COVID-19:
39.51% increase in New Trials
45% increase in Trial Conversions
46.15% increase in Paid Subscriber Growth
But that doesn’t mean all subscription businesses will flourish moving forward. While subscriptions are on the rise, so is subscription fatigue. Businesses are pressured to engage trial users and longer-term customers, further ingraining their offerings into users’ day-to-day so cancelling isn’t a consideration. (More on engagement strategies toward the end of this blog post.)
Having visibility of engagement, conversion, and retention metrics can help make more informed decisions.
Detailed Statistics Revealed Through Recurly Research
Recurly works with teams of data analysts and scientists, digging into industry information to better understand the subscription economy. Here’s a look into our research around subscription businesses before and during COVID-19.
Consumer Goods and Retail
Dip to -8% in the first week (March 16-22)
Highest growth (146%) in subscriptions in April and May compared to any industry.
Significant acceleration in conversions, delivering the largest increase of any industry.
80% of US consumers now subscribe to at least one paid streaming video service (up from 73% pre-COVID-19).
COVID-19’s impact on streaming media reflects the importance of leveraging the try-to-buy experience. Although more people are at home and willing to try out new products and services, streaming customers are notorious for trying products without converting for long, or at all.
Early March saw a 178% increase in trial signups as streaming services extended free trial periods from 7-30 days.
Early May saw a dip in sign ups as the initial spike panned out.
Overall, subscription growth for streaming media services has moved evenly upwards, with a big spike in conversions.
Publishing & Digital Media
Large jump in trials: 56% in the first week of COVID-19.
Businesses immediately extended trials or adjusted offerings.
Spike in total number of paid subscriptions 198% (the largest increase of any industry in a single week).
More people have been working from home, requiring SaaS tools, communication software, etc. Additionally, with schooling and work taking place at home, businesses, educators, and students are taking advantage of video conferencing tools like Zoom.
Trial growth has hovered consistently around 44-50% over 8 weeks.
End of May saw a slight dip in growth before spiking to 67% in early June.
Trial conversion rate remained 25% higher than pre-COVID-19 weeks.
Zoom saw a increase in new users, compared to 2019.
Strategies to increase LTV and drive subscriber revenue growth:
Identify your highest value subscribers: Leverage subscriber data to profile your most loyal subscribers. Identify the reasons your product or service is so sticky for them. Then, use that profile to go find similar prospects.
Test, learn, and iterate on pricing and packaging: Pricing has to do with the types of offerings and how they’re structured. In today’s competitive environment, a one-size-fits-all approach doesn’t work. Diversify offerings to include one-off items and monthly subscriptions, build-your-own subscriptions, as well as optionality in term commitments.
Nail “Try-to-Buy”: Of the certain types of businesses that can offer a trial, it’s crucial to ensure a seamless experience that converts free users to paying customers. The subscription model is predicated on profitability. Over time, you get closer to that payback period by more acquiring subscribers.
Explore alternative models: When the dynamics change, stop pouring money into the same model and expecting a better outcome. The lines have blurred between subscription and one-off business. Subscriptions help to regularly engage with customers, and blending subscription and one-off business can increase repeat purchases. Providing greater flexibility in plan creation and offerings delivers repeat value that drives subscriber loyalty.
Retention to drive growth and revenue: Customer acquisition is a temporary benefit to your business, unless you have the ability to retain and grow those customers. Don’t ignore metrics like cost of acquisition, payback periods, and lifetime value.
Automating revenue recovery can reduce involuntary churn. Manually handling involuntary churn is not affordable. Additionally, Recurly works with many businesses to pause subscriptions. This prevents cancellations overall and creates goodwill with customers, as they’re not charged for something they can’t use.
Want even more insight into the effects of COVID-19 on the world of subscription businesses? Check out the full webinar recording. And if you're looking for more insights, check out our Recurly Research report on subscription ecommerce.