Subscription streaming video services’ focus on pricing, promotion and marketing are key to retaining and attracting subscribers, according to new data from Recurly, a direct-to-consumer subscription management and billing platform.
Citing research from more than 2,200 client merchants that support more than 55 million active monthly subscribers globally, Recurly found that in 2022, consumers took advantage of almost 35 million free trials from 851 participating subscription sites. Overall, the average site-level conversion rate was 38.1%, demonstrating that consumers are more likely to try new services if those services include a discount or trial.
“Benchmarks and best practices are a critical part of how [streaming services] partner with our customers,” Dan Burkhart, co-founder and CEO of Recurly, said in a statement.
The report found that flexible payment options are key. Debit cards are a primary form of payment across North America and Europe, accounting for 52.9% of global monthly transactions. Credit cards follow with 26.7% of total transactions, and PayPal comes in third overall as the most popular alternative payment method.
Taken together, the data reveals that consumers expect choices. The report also found that decline rates have remained steady, but are lowest for credit cards and highest for debit cards. Furthermore, APMs resulted in a 1.5% lower rate of fraudulent declined transactions when compared against credit and debit cards.
Roughly 40% of surveyed merchants make subscriber personalization adjustments each year. Recurly found that dunning emails, which are sent to customers to remind them a payment is due, are an effective marketing tactic for post-subscriber acquisition, responsible for recovering $214 million in revenue in 2022 alone.
Given that churn rates are a reflection of shifting consumer behavior and preferences, the increase in the average overall churn rate from 6.6% year-over-year to 6.8% in 2022 can be attributed to economic factors, namely the pandemic and rising global inflation, according to the report.
Access to exclusive content, brand preference and discounts are primary drivers of subscription signups, while price increases and perceived decreasing value have the opposite effect. This means that subscription businesses must intentionally communicate both the value and relevance of their product or service and remain conscious of the impact, which pricing decisions can have on churn.
“Subscription-based businesses can use these findings to evaluate their own performance against industry benchmarks, but also identify efficiencies and execute strategies, which will help them level-up in 2023,” Burkhart said.