Industry Report
State of Subscriptions
Want to run your subscription business more effectively? This report will provide you with an overview of the trends in the recurring revenue space. You'll learn how to define your products and services, design your acquisition tools, expand internationally, and mitigate churn. We provide overall trends and insights broken out by B2B and B2C customers, and analysis across the following industries:
Business & Professional Services
Consumer Goods & Retail
Digital Media & Entertainment
Education
Software
We want to inspire you by providing comparative benchmarks for your subscription business and help you find answers to some of the key questions in growing your business:
- Should your business offer free trials, coupons, or a combination of both?
- Should your business stick to a recurring business model or offer one-time sales as well (hybrid model)?
- Which payment methods should your business offer?
- Which currencies should your business offer support for? What would be the potential revenue impact of supporting multiple currencies?
- What is the typical churn rate for your industry?
Trials and coupons
This section explores the impact of free trials and coupons on customer acquisition and retention. In particular, we focus on insights related to usage frequency, free trial length, coupon discount size, and the effect these promotional tools can have on your business.
Are companies in your industry offering free trials?
Free trials help customers make informed purchase decisions by enabling them to experience products and services before committing to a recurring subscription. We found that a large number of both B2B and B2C businesses offer free subscription trials.
Education and Digital Media & Entertainment companies were the most likely to offer free trials at rates of 69.6% and 69.4%, respectively. Businesses in these industries may use free trials more frequently due to the wide variety of content that customers can sample and experience before deciding to subscribe.
Even in Business & Professional Services and Consumer Goods & Retail, which have the lowest percentage of trials, certain sub-industry categories, like logistics and commodity consumer goods, more frequently offer free trials due to their highly competitive nature. In Software, companies that offer sales, marketing, or collaboration solutions tend to offer free trials more often than other software companies.
65.8%
Of all businesses offer a free trial
64.2%
Of B2B businesses offer a free trial
68.7%
Of B2C businesses offer a free trial
Percentage of businesses offering a free trial, by industry
80%
70%
60%
50%
40%
30%
20%
10%
0%
Should your subscription business offer a free trial?
- What are the incremental unit costs of your products and services? In other words, how costly is it for you to offer a trial?
- Are you in a highly competitive industry? Is your competition relying on free trials to attract customers?
- How does free trial cost compare to the cost of other avenues of customer acquisition? What is your acquisition model?
- Do you have mechanisms in place to prevent users from signing up for multiple trials, such as duplicate address detection?
What trial conversion rate should you expect in your industry?
Business & Professional Services has the highest median conversion rate at 39.5%. Many subscribers start using the product or service having already done lots of research, so trials can help them confirm the product or service is worth paying for.
Companies in this industry are likely to encourage rapid adoption through easy configuration, quick data upload, cross-platform integrations, or bulk user creation. B2B merchants in this industry might position the trial period as a time for their customers to ramp up before paying for the subscription.
Digital Media & Entertainment also enjoys a high conversion rate at 38.6%. As with subscribers in Business & Professional Services, many subscribers sign up to these services already knowing what to expect, such as the shows or movies they'll have access to.
Education and Consumer Goods & Retail experiences some of the lowest median conversion rates—in fact, a quarter of merchants in this industry have a trial conversion rate of less than 2%. This suggests that many subscribers have specific educational courses or physical items in mind when they sign up for the service but are not attracted to or do not realize value from additional offerings during the trial period.
Trial conversion rate, by industry
Median conversion rate
60%
50%
40%
30%
20%
10%
0%
32.2%
Overall median rate
32.3%
B2B median rate
32.1%
B2C median rate
What should you consider when analyzing your business's trial conversion rate?
- Have you worked hard to educate prospective subscribers about the content and features you offer? Or do you expect them to use a free trial for discovery?
- Does your offering have a steep learning curve that makes it difficult for your customers to quickly see the value of your offering?
- How much value are you giving in a free trial? Do you give access to your entire offering?
How long are free trials in your industry?
The median trial duration offered by Recurly merchants is just over two weeks (15.6 days).
Consumer Goods & Retail companies offer the highest median trial length of all industries (28.7 days). This extended trial period is primarily driven by “box of the month” clubs that offer a free introductory product as a part of their trial offering. Software offerings have the second highest median trial length, coming in at three weeks (21.1 days). Trial lengths in the Software industry also have a large trial length variance, ranging from two weeks to a month.
While Education and Digital Media & Entertainment offer the shortest trials, with median lengths of about two weeks, a significant portion of these companies offer trial lengths between one week and one month. This wide range of trial lengths demonstrates that companies in this industry adapt their offerings to meet consumers' needs. For example, Education companies might time their trial lengths to correspond with the time teachers need to build and deliver content for a lesson block.
We also looked at merchants with trials that averaged less than seven days and found many of the merchants had one of the following traits:
- Products with only a few core offerings that have a shallow learning curve and are easy to adopt. This is common in Digital Media & Entertainment, especially streaming media and gaming.
- Products that naturally compel users to quickly invest a significant amount of time, data, configuration, or digital assets. An example of this in the Software industry is a photo storage product that requires subscribers to upload a lot of data and configure numerous settings; tasks users wouldn't want to do more than once.
The shorter your trial, the more important it is for you to have an intuitive onboarding process that introduces the user to key product functionality fast.
Days in average trial, by industry
Median trial length
35 days
30 days
25 days
20 days
15 days
10 days
5 days
0 days
15.6
Days in average trial across all businesses
15.0
Days in average trial across B2B businesses
16.5
Days in average trial across B2C businesses
How should you determine the ideal length of your free trials?
- How long does it take for your users to realize the value from your offering?
- How much does it cost your company on a daily or weekly basis to provide your offerings for free?
- What does your trial conversion rate need to be for you to recover the cost of offering a trial?
- Is your product easy to start using quickly, making shorter trials an option?
Should you require a payment method when subscribers sign up for a trial?
One of the important decisions a company should consider as they create a trial program is whether to ask for a payment method at signup. Requiring a payment method at trial setup adds friction to the signup process and may reduce the number of customers who initiate a free trial.
We found that most companies require a payment method at signup. By industry, it ranged from 76.1% (Consumer Goods & Retail) to 85.8% (Business & Professional Services).
We also saw some exceptions. For instance, some companies sell physical products and offer an optional subscription service as an ancillary offering to the core physical product. These companies may not view the subscription portion of their offering as a critical revenue stream. Additionally, 22.8% of Software companies do not require a credit card at signup, which likely reflects the lower incremental cost of software offerings (incidentally, these companies see a much lower trial conversion rate than other software companies). Many smaller companies in this space want to grow their user base quickly, so they may care about reducing signup friction more than other businesses.
80.9%
Of all trials were supported by a payment method
80.6%
Of B2B trials were supported by a payment method
81.5%
Of B2C trials were supported by a payment method
Percentage of trials supported by a payment method at sign-up, by industry
85.8%
Business & Professional Services
76.1%
Consumer Goods & Retail
81.2%
Digital Media & Entertainment
80.6%
Education
77.2%
Software
Should your business require a payment method for free trials?
- Is it a priority to remove as much friction from the signup process as possible?
- Does requiring a payment method impact your trial conversion rate?
- Is the subscription service a core or ancillary revenue source?
- Is the value of the trial capturing a customer's contact information, especially for marketing or consulting purposes?
What businesses are using coupons for acquisition and retention?
Similar to a trial, offering a coupon is a popular way to acquire subscribers. You can also use coupons to show appreciation to existing subscribers for ongoing loyalty and make it more likely they'll renew. Our research shows that about half of Recurly merchants use coupons to facilitate their acquisition and retention strategies.
Offering a coupon is common for Consumer Goods & Retail businesses (78.0%). We also found that this industry benefited most from offering subscribers the ability to pause and unpause their subscriptions. Many companies offering food, drink, or clothing and accessories rentals used coupons to lengthen the cyclical interest in the product offerings, leading to customers staying for longer periods of time.
Coupons are least popular with Business & Professional Services (48.4%), in particular those merchants offering B2B services in structural and software engineering, consulting, and media. In general, merchants providing services involving long implementation times, high switching costs, or both were less likely to offer coupons.
49.0%
Of all businesses use coupons
47.2%
Of B2B businesses use coupons
52.4%
Of B2C businesses use coupons
Percentage of businesses offering coupons, by industry
80%
70%
60%
50%
40%
30%
20%
10%
0%
Should your business offer coupons?
- Do your subscribers demonstrate a cyclical interest (seasonality, etc.) in your product? Are there high barriers to churn?
- How does the cost of offering a coupon to retain a customer compare to the cost of acquiring a net new customer?
- How would offering a coupon contribute to marketing efforts, like win-back campaigns and new customer acquisition through referral codes?
What are the most popular coupon discount rates?
B2C companies generally offer smaller coupon discounts compared to their B2B counterparts. The most common coupon rates are 25% and 50% off.
An additional popular offering is 15% off, which was the most common discount rate for Consumer Goods & Retail and second most common in Software. One typical use case for this discount level is to reflect an “annual subscription” discount. As can be seen here, annual subscription plans are frequently priced by multiplying the equivalent monthly plan price by ten, providing a “two month free” offering. This discount equates to just over 15% off.
Top three coupon discount rates offered across all, B2B, and B2C businesses
Most popular discount for all businesses
Second
15% off
Third
20% off
Most popular discount for B2B businesses
Second
20% off
Third
10% off
Most popular discount for B2C businesses
Second
15% off
Third
20% off
Top three coupon discount rates offered, by industry
Business & Professional Services
Consumer Goods & Retail
Digital Media & Entertainment
Education
Software
Most popular
50% off
Second
20% off
Third
25% off
What discount rates should your business offer?
What plans (monthly, quarterly, annually) do you offer? Do your coupons match the cost structure of those plans?
Key takeaways: trials and coupons
- Companies across all industries convert about a third of their subscribers from trials. Trials can be an effective customer acquisition tool regardless of industry and use case.
- Coupons are an effective way to both acquire and retain customers especially in B2C businesses.
- When considering free trials and coupons, consider the cost of goods sold against the cost of acquisition and other business costs. While designing trials, you should determine the duration that will allow you to recover the cost of the trial with the expected trial conversion rate. When offering coupons, determine the discount that leads to retention levels that will cover the cost of the discount.
Payment methods
For subscription model companies, the payment methods you offer to customers can serve as a strategic lever. Should you rely solely on credit cards or should you diversify your payment method offerings? For instance, would adding support for Venmo help your company appeal to a younger demographic, or should you take advantage of the low processing costs and certainty of direct debit methods such as ACH?
Do subscription businesses offer more than one payment method?
Our research shows that less than half of subscription businesses offer more than one payment method. However, slightly more B2B companies offer more than one payment method (43.1%) compared to B2C companies (39.5%). Offering a variety of payment methods and allowing consumers to choose a payment method they prefer improves the user experience. This in turn may lead to improved acquisition, a more trusting relationship with your subscribers, and fewer disputed transactions.
When considering adding a payment method, it is important to understand both the potential benefits and the cost. Supporting a payment method often involves paying both a flat fee and a percentage of the transactions processed. Therefore, you should try to estimate the revenue lift you'll see by enabling a new payment method and decide whether adding that new payment method is worth it.
41.9%
Across all businesses
43.1%
Across B2B businesses
39.5%
Across B2C businesses
Should your business offer more than one payment method?
- Have customers asked for additional payment methods, or do you see high dropoff rates at checkout?
- Based on what you know about your user base, could adding a payment method help you expand your demographic and reach?
- What are the costs associated with adding new payment methods? How much volume would be needed to ensure offering these payment methods is profitable?
Do businesses in your industry offer digital wallet-based payment methods?
We found that around 20% of companies offer at least one digital wallet as a payment method, such as Apple Pay, Venmo, Amazon Pay, or PayPal. B2C businesses were nearly twice as likely to offer one of the wallet-based payment methods compared to B2B companies. We see the highest proportion of companies in the Digital Media & Entertainment and Education spaces offering wallet-based payment methods. These companies tend to attract a younger audience that's less likely to use credit cards and more apt to sign up on their mobile devices, as well as shoppers from outside of the US that often use services like PayPal.
Percentage of businesses offering wallet-based payment methods, by industry
40%
30%
20%
10%
0%
21.7%
Of all businesses
15.6%
Of B2B businesses
30.5%
Of B2C businesses
Should your business offer a digital wallet-based payment method?
- Where do most of your customers check out—on desktop, on mobile, or both? Do they tend to use particular kinds of devices (e.g., iPhones)?
- Does your target audience fall on the younger side (millennials, gen Z)?
- Do you have a lot of customers outside of the US who use a payment method like PayPal?
What impact can adding digital wallet-based payment methods have on your business?
Our research shows that B2C companies see 9.4% more Total Payment Volume (TPV) come through these payment methods compared to B2B companies.
Digital Media & Entertainment (23.5%) followed by Consumer Goods & Retail (23.1%) are two industry leaders in the proportion of TPV derived from wallet-based payment methods. This adoption may largely be driven by offerings that appeal to a younger demographic.
Companies in the Software industry derive the smallest proportion of TPV from wallet-based alternate payment methods (11.4%) followed by Business & Professional Services (14.4%).
Percentage of TPV processed through wallet-based payment methods, by industry
25%
20%
15%
10%
5%
0%
18.0%
Of all businesses
11.7%
Of B2B businesses
21.1%
Of B2C businesses
Do businesses in your industry offer direct debit as a payment method?
We found that B2B businesses were more than twice as likely to offer a direct debit payment method than B2C businesses. The adoption of direct debit within the US is likely higher among businesses than it is among individual consumers.
Almost a third of Software companies offer direct debit as a payment method making this vertical most likely to take advantage of cost effectiveness and decreased payment failures.
The percentage of businesses in Consumer Goods & Retail that offer direct debit is the lowest, at just 10.1%. This is likely due to the fact that US consumers generally don't prefer to pay for purchases using direct debit.
Companies taking advantage of direct debit need to be aware of the slower payment cycle and its effects on cash flow. This payment method can be risky for companies offering physical goods if the product ships before the direct debit clears and the product cannot be recovered.
20.7%
Of all businesses offer direct debit
25.7%
Of B2B businesses offer direct debit
11.0%
Of B2C businesses offer direct debit
Percentage of businesses offering direct debit, by industry
30%
25%
20%
15%
10%
5%
0%
Should your business offer a direct debit payment method?
- What is the average transaction size for your business? Would your business benefit meaningfully from lower processing costs while accommodating the asynchronous nature of direct debit?
- What are your target geo payment preferences? If you are doing business outside of the US, consider local payment method preferences. For instance, direct debit and bank transfers are the main payment options in Germany, so relying on credit cards alone might prove unsuccessful.
- Do you offer a physical product that is shipped to customers fairly quickly after they place an order? Would there be a delay between when you ship a product and when you receive payment?
What impact can adding direct debit payment methods have on your business?
The portion of Total Payment Volume (TPV) that comes in through direct debit is about four times higher for B2B businesses compared to B2C. B2C industries favor more consumer-friendly and agile payment methods. In some cases, a Digital Media & Entertainment business might find it beneficial to enable direct debit, such as offering organization-wide access to content at a scaled enterprise cost.
5.2%
of TPV comes from direct debit across all businesses
9.6%
of TPV comes from direct debit across B2B businesses
2.5%
of TPV comes from direct debit across B2C businesses
Percentage of TPV processed through direct debit, by industry
15%
12%
9%
6%
3%
0%
Key takeaways: payment methods
- Almost half of subscription businesses offer more than one payment method.
- B2B businesses see a larger percentage of their TPV from direct debit compared to B2C. B2C businesses utilize wallet-based payment methods at a higher rate. This is directly related to customer preferences, convenience, and minimization of customer friction in the sales process.
Subscription plan management
When it comes to which product and service offerings your business provides, there's no shortage of decisions to make. Should your business offer a recurring subscription plan, one-time purchases, or a combination of both? Do you want to require a minimum commitment term for your customers? How often should you bill customers for your product or service? Should you allow customers to quickly and easily pause and resume their subscriptions as their needs change?
This section will explore some of the important decisions your company will need to make as you define your subscription plans and terms. As your subscription business grows, make sure you're continuing to experiment so your offerings stay competitive and appealing.
What plan lengths are businesses in your industry offering?
The most common offerings in subscription plan lengths are monthly and annual recurring plan options. We found that the type of customer being served (B2B vs. B2C) has a minimal impact on whether or not companies provide multiple plan options. Instead, our data suggests that industry is the main determinant when it comes to whether a business offers multiple plan options.
Education companies typically offer both annual and monthly plan options for a number of reasons. These companies vary in terms of seasonality, the types of programs offered, and the target audience (students, educators, or institutions), and these factors all play a critical role in determining the plan lengths companies offer.
Consumer Goods & Retail businesses, on the other hand, are more likely to offer only monthly plan options to their customers. Many of these businesses focus on the delivery of physical goods on an ongoing basis, with customers expecting to pay for each individual shipment. In cases where an annual plan is offered, a lot of businesses offer an additional discount as an incentive for customers to commit to a longer period of time.
Digital Media & Entertainment offerings have the highest rate of annual-only plan offerings at 6.8%. Many of these companies offer yearly subscriptions to digital magazines or content, industry newsletters, and related products and services that historically have been sold as an annual subscription.
In general, 59.3% of companies in the Recurly portfolio offer both a monthly and an annual subscription offering.
Popularity of plan lengths, by industry
- Monthly only
- Annual only
- Both
100%
80%
60%
40%
20%
0%
Which plan lengths should your business offer?
- How do your business's existing plan offerings align with how customers consume the products or services you offer?
- Do your plan offerings align with those of your industry peers?
- Would offering your subscribers the option of both a monthly and annual subscription plan boost acquisition, retention, and revenue?
Do businesses in your industry have a hybrid business model (offer one-time purchases in addition to recurring plan offerings)?
Adding one-time purchases to your recurring offerings is a great way for you to diversify your products, appeal to more customers, and drive revenue.
Recurly has found that 65.4% of subscription businesses augment their recurring offerings with one-time purchases, with little noticeable difference between B2B and B2C companies.
Consumer Goods & Retail merchants offer some of their physical products as one-time purchases as a way to increase their average revenue per shipment. This industry commonly includes curated “box of the month” companies, where customers can select add-on products to bundle with a recurring offering. This results in smaller incremental shipping costs.
Software businesses and other service-based companies utilize one-time purchases extensively. Software companies can offer professional services, cloud storage, digital content, template purchases, and premium connectors as one-time offerings on top of existing subscriptions.
Interestingly, some Software companies in the design space have also begun to offer physical products in addition to their design software offerings. For example, a company distributing design software on a recurring basis may partner with a furniture or art retailer to offer one-time offerings to accompany the user's project.
65.4%
Of all businesses offer one-time purchases
66.2%
Of B2B businesses offer one-time purchases
63.5%
Of B2C businesses offer one-time purchases
Percentage of businesses offering one-time purchases, by industry
80%
70%
60%
50%
40%
30%
20%
10%
0%
Should your business offer one-time purchases in addition to subscriptions?
- Is there an opportunity to offer additional value to your customers while adding more revenue streams?
- Which products or services does or could your business offer that would make sense as a one-time offering?
- Can your business leverage partnerships to provide additional one-time offerings as an “add-on” to your existing offerings?
What impact does offering one-time sales have on subscription businesses?
Adopting a hybrid business model can have a direct impact on the bottom line. We have found that one-time purchases contribute 6.9% of total Total Payment Volume (TPV) for subscription model businesses on the Recurly platform.
B2C companies have a slightly higher rate of TPV contribution than B2B companies, with 7.5% vs. 6.6% of TPV coming from one-time transactions.
By industry, Consumer Goods & Retail businesses have the highest proportion of TPV coming from one-time purchases, at 11.6%. This makes sense, since many of these businesses provide physical goods to consumers and have many options for offerings bundles or add-on items.
Businesses in the Education industry have the lowest rate of one-time transactions, but they still see 5.4% of TPV on average coming from one-time offerings.
Regardless of your industry, finding ways to offer one-time offerings can be a great way to boost your revenue.
Percentage of TPV from one-time purchases, by industry
12%
10%
8%
6%
4%
2%
0%
6.9%
TPV across all businesses
6.6%
TPV across B2B businesses
7.5%
TPV across B2C businesses
Are businesses in your industry offering pause functionality?
Allowing customers to pause their subscriptions as their needs change is a powerful way to mitigate churn, build loyalty, and increase lifetime value. Currently, nearly one quarter of Recurly merchants utilize the Pause functionality integrated on the Recurly platform, with similar adoption between B2B and B2C merchants.
In general, the higher the seasonality in a business, the better the opportunity to use pause functionality. Consumer Goods & Retail businesses specializing in seasonal sports equipment have successfully reduced churn by allowing subscribers to pause their subscriptions during the off-season and then resume the service in the following season. By minimizing the friction involved in pausing a subscription, customers are more likely to pause a subscription temporarily instead of cancelling it outright.
Notably, Digital Media & Entertainment companies offer pause options less frequently than other industries, with just 14.3% of companies enabling this option. These companies may want to prevent customers from “cherry picking” their favorite shows by jumping on and off a subscription. In these instances, businesses might desire the additional friction that comes with having to cancel and restart service.
23.1%
Of all businesses offer pause functionality
22.3%
Of B2B businesses offer pause functionality
24.8%
Of B2C businesses offer pause functionality
Percentage of businesses offering pause functionality, by industry
30%
25%
20%
15%
10%
5%
0%
Should your subscription business offer pause functionality?
- Do you provide a seasonal or cyclical offering that would cause customers to want to pause and then resume their subscription?
- Could using pause functionality help your business retain customers at risk of leaving, thereby reducing voluntary churn?
- Does your business want to use the pause function to extend customer lifetimes, even though it might reduce predictability of revenue?
- Does your business have a strong marketing function that can take advantage of paused subscriptions with a win-back campaign?
What effect does pause functionality have on revenue?
A common misconception is that enabling pause functionality will negatively affect revenue. In order to explore the impact of the Pause feature, Recurly looked at the percentage of Total Payment Volume (TPV) contributed by subscribers who paused and subsequently resumed a subscription.
We found that subscription businesses generated 3.7% of their TPV from previously paused customers. This suggests that the ability to pause a subscription is a revenue driver, since customers would have otherwise cancelled their subscriptions entirely. This positive impact was much stronger with B2C offerings, with 4.9% TPV contribution rates, compared to 1.7% in the B2B space.
By industry, Consumer Goods & Retail benefits the most from the Pause functionality, with 10.4% of TPV contribution coming from previously paused subscriptions. Any business that has a seasonal business model, offerings of food/beverages, or rentals of clothing/accessories would be a fantastic candidate for the Pause feature.
Companies operating in-person venues such as movie theaters, concerts, theme parks, and event spaces found great benefit in the Pause functionality during the COVID-19 pandemic. Recurly merchants were able to quickly pause their customers' subscriptions in light of pandemic-related closures and subsequently resume those services once their businesses were able to re-open. The Pause functionality saved many businesses from having to reacquire their customer base through marketing and outreach activities, enabling a quick return to normal operations (and pre-pandemic revenue).
Digital services relating to televised sporting events and related seasonal offerings also benefit greatly from the Pause functionality. Many consumers subscribe to a service specifically for a seasonal sport or show, but have no desire to remain on the service during the off-season. Offering the Pause functionality allows customers to join and leave the service with minimal friction. This can increase customer retention and satisfaction, compared with services that require subscribers to repurchase every year.
Percentage of TPV from unpaused subscriptions, by industry
12%
10%
8%
6%
4%
2%
0%
3.4%
TPV across all businesses
4.9%
TPV across B2B businesses
1.7%
TPV from unpaused subscriptions across B2C businesses
Key takeaways: subscription plan management
- Whenever possible, offering customers flexibility is the best way to maximize revenue over time.
- Offering both a monthly and an annual plan offering is the norm, not the exception to the rule.
- Utilizing one-time (non-recurring) purchases can help businesses boost revenue. Two-thirds of Recurly merchants use one-time purchases, generating 6.9% of their TPV from those purchases.
- Giving customers an easy way to pause and unpause their subscriptions improves overall satisfaction and could potentially increase your business's average customer lifetime value. 3.7% of revenue is generated by customers who have paused and later resumed their subscriptions.
Retention and churn
Subscription businesses need to have a solid grip on both voluntary and involuntary churn to ensure healthy and consistent revenue numbers. Voluntary churn occurs when customers decide to leave, whether they're dissatisfied, no longer need the product or service, or do not see value in continuing the subscription. Involuntary churn happens when a customer's payment fails and neither the customer nor the merchant is able to resolve the issue.
What do churn rates look like in different industries?
B2B has a 2.1% lower median churn rate compared to B2C, mirrored in both voluntary and involuntary churn. It is likely that B2B purchases are more measured and involve a multi-step approval process; they also tend to involve payment methods with lower decline rates, such as direct debit. Software has the lowest churn among all industries with 3.7%, while Consumer Goods & Retail has the highest churn at 7.1%, split nearly evenly between voluntary and involuntary churn.
25% of companies in the Consumer Goods & Retail industry have a voluntary churn rate between 3.5% and 11.4%. This relatively high churn rate, combined with a wide variance, likely demonstrates how hard it is for companies in this industry to gain long-term customer loyalty. Many of these companies with higher churn rates provide products that could be classified as niche (for example, dietary supplements or gear for a specific sport) or nonessential, such as luxury apparel and alcoholic beverages. Some Consumer Goods & Retail companies that offer goods with seasonality or a limited lifespan, such as wedding and school supplies, inevitably face higher voluntary churn.
Education experiences the second highest voluntary churn percentage (3.4%) and faces similar challenges as companies in Consumer Goods & Retail. Limited lifespan products such as test prep and subject- or grade-specific tools experience high voluntary churn.
Software has the lowest voluntary churn percentage (2.1%), influenced by the heavy presence of B2B companies in this industry. Many of these software companies offer critical enterprise software, such as ERP, CRM, reporting, and data transfer solutions. The risk of financial impacts and significant business disruption make for a high barrier to churn.
4.4%
Median churn rate across all businesses
3.6%
Median churn rate across B2B businesses
5.7%
Median churn rate across B2C businesses
Churn rate, by industry
Median churn rate
Voluntary vs. involuntary Overall quartiles
15%
12%
9%
6%
3%
0%
How should you evaluate your business's churn rates?
- How does your business compare to industry averages for involuntary and voluntary churn?
- Are there barriers to churn in your product or offering, such as product “stickiness”?
- Are your offerings seasonal or cyclical?
- Is your customer base transient or relatively stable?
What do payment decline rates look like in your industry?
B2C and B2B businesses had almost identical median payment decline rates, but B2C businesses show a wider range of decline rates. This suggests that companies serving individual subscribers can expect a greater degree of variability in payment success.
Education shows the highest median decline rate (8.9%), possibly influenced by the peculiarities of these companies' target customers. Many tutoring and learning-related subscription services are utilized by customers who tend to have a limited ability to pay, such as students and teachers.
Software has the lowest average payment decline rate at 6.3%, following the pattern of B2B customers experiencing less churn.
Interestingly, the second lowest payment decline rate is in Consumer Goods & Retail (6.6%). Many of the companies in this space that see low payment decline rates offer luxury goods; subscribers to these products may have a higher-than-average income and be more disciplined with their payments.
6.5%
Median decline rate across all businesses
6.3%
Median decline rate across B2B businesses
6.7%
Median decline rate across B2C businesses
Decline rate, by industry
Median decline rate
15%
12%
9%
6%
3%
0%
What should you consider when evaluating your business's decline rates?
- How do your company’s decline rates compare to your peers in your industry?
- Who is your target audience? How financially stable is your average subscriber?
What are the common reasons for declined payments?
There are over 2,000 reasons for declines within the credit card processing industry. The top five decline reasons include Declined, Insufficient Funds, Temporary Hold, Fraud/Stolen Card, and PayPal Account Issue.
39.4%
Declined
23.8%
Insufficient funds
8.7%
Temporary hold
4.5%
Fraud/stolen card
2.8%
PayPal account issue
Which declined payments are more likely to be recovered?
An “Insufficient Funds” decline is most likely to be recovered via dunning and automated retries, as the card balance gets replenished or a pay day passes after several days of the initial failure. The “Restricted Card” decline reason has a lower recovery rate due the nature of this failure type: this decline typically occurs when the bank deems the card (e.g., a corporate credit card) not appropriate for the intended purchase (e.g., a personal purchase unrelated to business operations).
Median recovery rate, by decline reason
80%
70%
60%
50%
40%
30%
20%
10%
0%
How should your business use the information about recovery rates?
- How does your recovery rates compare to those of Recurly merchants?
- Are you utilizing all possible techniques to retain your customers, from payment failure retries to personalized dunning campaigns?
Key takeaways: retention and churn
- It is important to note that higher payment decline rates don’t always equate to higher churn. Decline rates simply indicate the likelihood of a recurring payment to be declined initially. Once a subscriber’s payment is declined, Recurly applies sophisticated dunning and retry strategies to reduce involuntary churn.
- Even though the Business & Professional Services industry has the highest median payment decline rate, it has the second lowest involuntary churn rate due to the high rate of recovery seen in this industry.
Doing business globally
In order to understand how businesses are transacting beyond the United States, we analyzed how many currencies are enabled and the amount of revenue generated in non-USD currencies.
Are businesses in your industry enabling multiple currencies?
Across the board, 16.6% of all subscription businesses have more than one currency enabled, with a very slight variation between B2B and B2C. However, breaking this data down by industry reveals higher variability. In Business & Professional Services, just 6.5% of companies have multiple currencies enabled. Many of these companies offer financial and legal services, which may not be applicable in foreign markets. Alternatively, these businesses may face regulatory hurdles that limit profitable expansion.
Conversely, nearly a third of companies in the Education industry transact in foreign currencies, outpacing all other industries. This is likely due to the rise of online education platforms and services that cater to students globally.
Enabling multiple currencies can help companies reduce transaction costs while also providing a convenient experience for non-US customers. Recurly currently supports over 140 currencies.
16.6%
Of all businesses have multiple currencies enabled
16.7%
Of B2B businesses have multiple currencies enabled
16.3%
Of B2C businesses have multiple currencies enabled
Percentage of businesses with multiple currencies enabled, by industry
30%
25%
20%
15%
10%
5%
0%
Should your business offer multiple currencies?
- Is your existing subscriber base spread out across multiple countries and regions? If not, do you expect to see this kind of geographical expansion over time?
- Are you doing business in countries where the customer base is highly likely to prefer paying in the local currency?
- Would enabling multiple currencies help you optimize transaction processing costs?
What is the business impact of offering multiple currencies?
Overall, about a fifth of all businesses generate Total Payment Volume (TPV) in currencies other than the United States Dollar. The B2B sector sees a 5.9% higher contribution compared to B2C. Transacting in multiple local currencies potentially benefits B2B merchants more, as they are likely to have custom higher-priced offerings that need to be resistant to currency value fluctuations. B2C companies are slightly more likely to have lower price points, so customers may not be as sensitive to currency value fluctuations.
Digital Media & Entertainment and Education companies have the highest percentage of TPV from non-US currencies, at 26.8% and 25.8% respectively. For Digital Media & Entertainment businesses often provide highly localized content in different regions, so supporting multiple currencies is another way to localize the experience. Similarly, for companies in the Education industry where the offering has appeal to audiences across the globe, subscribers are likely to prefer transacting in a local currency.
Percentage of TPV from non-US currencies, by industry
30%
25%
20%
15%
10%
5%
0%
19.4%
TPV across all businesses
21.6%
TPV across B2B businesses
15.7%
TPV across B2C businesses
Key takeaways
- Even though only 16.6% of businesses enable multiple currencies, 19.4% of TPV on the Recurly platform comes from non-US currencies. This means that many companies find it worth their while to offer local currency support.
- Business & Professional Services had the lowest percentage of companies that have more than one currency enabled; however, this vertical is in the top 3 of industries who get a high proportion of TPV in non-USD currencies. This is likely due to enterprise-level custom solutions provided to international customers.
Methodology
This study sampled from over 2,000 subscription businesses processing on the Recurly platform. The study period was from the beginning of July 2020 (Q3 2020) to the end of June 2021 (Q2 2021).
All data was aggregated and anonymized; no personally identifiable data was used in the study.
Metrics are rounded to the nearest tenth of a percent unless otherwise noted.
Trials
Trial conversion was determined by taking the number of trials that converted during a period divided by the number of trials that started during that same period.
Coupons
Any coupon that had a discount percent equal to 100% was removed from this study. For the purposes of this report, a merchant had to have run at least one coupon campaign with an associated discount rate of less than 100%. Coupons with 100% discounts were treated as a free trial for the purposes of this analysis. Coupon discount rates were rounded to the nearest five percent.
Payment Methods
Wallet-based payment methods include Apple Pay, Venmo, Amazon Pay, and PayPal.
TPV generated outside the United States is determined by using the country code of the bank associated with a specific transaction.
Churn rate
Definition: The number of canceled (or expired) subscriptions divided by the number of active subscriptions over the study period.
In order to be included in this study, a business had to have over 500 active subscriptions during the study period.
Decline Rate
Definition: Initial declined transaction count divided by the overall initial transaction count.
In order to be included in this study, a business had to have at least 1,000 transactions over the study period.
Industry Definitions
Digital Media & Entertainment - Companies producing or curating premium digital content.
Consumer Goods & Retail - Companies selling physical goods directly to individuals or companies.
Software - Technology companies providing a digital platform as a service.
Education - Organizations facilitating learning by individuals or groups through physical or digital platforms.
Business & Professional Services - Companies that provide customized, knowledge-based services to clients, including finance, marketing, and legal firms.
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