COVID-19: Early Insights on Trends, Trials, and Growth Implications for Subscription Businesses

COVID-19: Early Insights on Trends, Trials, and Growth Implications for Subscription Businesses

Learn about the measured impacts of COVID-19 on subscriber acquisition, churn, and growth rates through data gathered from thousands of merchants across multiple industries.

COVID-19 has reshaped the subscription landscape, increasing economic uncertainty and volatility and either directly or indirectly impacting companies across the globe. And for subscription and recurring revenue businesses, there are unique challenges and considerations. What does COVID-19 mean for subscription businesses? How do you adapt your business to acquire, retain, and optimize subscriber revenue in this new and changing landscape? 

With a research arm spanning thousands of merchants and multiple industries, Recurly has been tracking developments and measuring the impacts of Coronavirus on acquisition, churn, and growth rates since the beginning. 

In this on-demand replay, we cover:

  • Benchmarks, trends, and impacts on acquisition, growth, and retention
  • What’s required to acquire and convert subscribers in a post-pandemic landscape
  • How to adapt your business to increase LTV and drive subscriber growth

Get actionable insights that can immediately help your organization adapt to ongoing uncertainty and future opportunities. Determine what’s next for your subscription business and how you succeed during COVID-19 and after.

On-Demand Playback

Presentation Slides (PDF)

Click here to download the slides.

About Our Expert

About Emma Clark, Chief Of Staff, Head of Strategic Initiatives

With a background in data analytics and product management at Recurly, Emma Clark focuses on identifying new and emerging trends in subscription commerce and advising businesses on effective strategies to operationalize and optimize their recurring billing and subscriptions. Prior to Recurly, Emma was an analyst and product manager at JP Morgan Chase.

Transcript

Kathy Greenler Sexton, Subscription Insider:

Hello there everybody. This is Kathy Greenler Sexton, and welcome to today’s webinar, COVID-19 early insights on the trends for impacting trials and growth implications for all of our subscription businesses. So I’m Kathy Greenler Sexton, and I am delighted Emma Clark of Recurly is with us today. Hi Emma.

Emma Clark, Recurly:

Hi everybody.

Kathy Greenler Sexton, Subscription Insider:

From today, we are going to be covering and understanding how COVID-19 has really reshaped the subscription landscape. It’s really increased the economic uncertainty and volatility of all of our companies across the globe. And for subscription and recurring businesses, specifically, we have some unique challenges and some considerations. So what does that mean for us? So today Recurly has a research arm that really spans thousands of merchants across multiple industries. And they’ve been tracking the developments and measuring the impacts of COVID-19. And that is what we’re going to cover today, specifically on acquisition, churn and growth rates since the beginning of COVID. So Emma, I want to make sure everybody gets to know who you are. And Emma is the chief of staff at Recurly, and she has a deep background in data analytics and product management. And she focuses on identifying new and emerging trends in the subscription commerce and advising businesses on effective strategies to operationalize and optimize the recurring business and subscriptions. And prior to Recurly, Emma was an analyst and product manager at JP Morgan chase. And welcome, welcome Emma.

Emma Clark, Recurly:

Thank you.

Kathy Greenler Sexton, Subscription Insider:

And I know the data today is really, really interesting. And as we go through all the data, Emma has some really good insight and recommendations for everybody in terms of what that means for all of our businesses. For those of you who do not know Recurly, they are a well known brand in the subscription industry. They manage more than 25 million subscriptions monthly for over 2,000 leading brands worldwide. They are a flexible and scalable billing platform and making it easy to manage the entire customer life cycle in one place from acquisition to conversion and retention. And they help you optimize recurring revenue, drive revenue growth and expansion to make your subscriptions very competitive. So that is Recurly, and that is what they do. For those of you who know Subscription Insider, you’ve heard me talk about this one before. But I want to make sure for all the people who are new to us, we are a information company that provides daily news, how to information to really help all of you run and operate your businesses more profitably. If you can go to the next slide.

Emma Clark, Recurly:

Yeah, of course.

Kathy Greenler Sexton, Subscription Insider:

So I would like to highlight one of our programs for you. Today, obviously our webinar is an example of the types of educational programs we offer. Our upcoming Subscription Show 2020 is going to be held online. It’s going to be held October 5, 6, and 7 and October 13th, 14th and 15th from noon to 4:30 each of those days. And we have really exciting and unique program for you, for everybody that participates. We have a 3D exhibit hall, so you’ll be able to visit leading subscription focused and dedicated vendors like Recurly in our subscription hall. You’ll be able to watch product demonstrations, you’ll be able to chat and talk one on one with everybody there. We have some amazing keynotes like Jeff Colvin who’s going to be talking about leadership through disruption and disrupted economies. And we have over 100 sessions focused on payments, retention, product strategy across SaaS, OTT, media, and publishing direct to consumer and more. So really deep content that we’re known for.

            The other things that we’ll be having at the Subscription Show that we hope you’re excited about is our coaching zone. And in fact, Recurly is going to be providing one of our coaches and they’re going to be focusing on found money, involuntary churn management or involuntary churn mitigation and revenue recovery. So you can sign up for one-to-one coaching on involuntary churn mitigation, which is really a great opportunity. We have a networking lounge and parties based on clubbing software. We are so excited for this. We’ve been testing it out and having a ton of fun. We have speed networking that’s going to be throughout the conference. And we actually have games, raffles, and funs. In fact, actually tonight we’re going to be talking to the musicians who will be performing at some of our networking events at the end of each day.

            So we have a ton of activities, and I will be at the anchor desk helping everybody move through all of that. So enough with telling you everything that we’re doing and how we do it, we’re about to get into the data and to all the great information Emma has. So you know the drill, if you’re multiprocessing, you’re not going to be able to get all the information. So if you want to get the most out of it, turn everything off and focus on what we’re about to go through. So Emma, I’m going to hand everything over to you so you can get through all this great data for everybody today.

Emma Clark, Recurly:

Great. Thank you, Kathy. And the last thing I’ll say just on Subscription Show before we move on is, and Kathy didn’t even tell me to say this, but I’ve been there a few times, I’ve spoken a few times I’ve been as an attendee. And of all the Subscription Shows that we participate in and attend, it has the deepest level of content of any of them. Meaning that businesses actually come out of it really feeling including ours like you’ve learned something new that isn’t just kind of the typical presentation that you see on introduction to subscriptions. So we’re excited about it. We’ve done it for a few years now and I hope that you guys join as well, it’s really useful for all of us the whole subscription community.

            So with that, let’s do a poll real quick before we jump into content. So we’re going to do a few of these throughout. We’re going to get an idea of what industry you guys are in. So we’re going to be focusing on a few different industries in the data today. And we want to get a better idea because the way that we actually benchmark some of our research and the Recurly research that we do is based on specific industries. So as we have a better idea of who’s out there, who’s consuming this, who’s learning from it, it really helps us understand a little bit more about where are we seeing traction? Where are we seeing interest in this data, and how can we provide more of it? So I’m looking at the poll as it goes along, we have a ton of folks in digital media and publishing, which is awesome because, A, we’re focusing on some data and trends in that particular industry. And, B I think there’s a lot going on there right now, a lot of really interesting changes.

            We’ve got a decent amount, 73% of people have voted, so let’s go ahead and close that and share the results. So I think you guys should be seeing the results here. Kathy, can you just confirm that you can see that? So we have 75% of you in digital medium publishing. That’s fantastic. So we’ll keep that in mind as we go through here. We have a number in consumer goods and retail and SaaS and a little bit in streaming media as well, and I’m sure there might be some others as well from different subscription industries. So awesome. Let’s go ahead and move on to the data. So we’re going to chat a little bit about trends. We’re going to chat about some of the trends that we see in the data, and then we’re going to go ahead and move into kind of some strategies. So what are we getting from this?

            So let’s just talk a little bit about state of the subscription economy. So I think we all know right now, I’m away in an office at home like the rest of you, most of the rest of you probably at a corner of my office staying away from the kids to try to deliver this webinar. I will say, I don’t need to tell you all that we live in a very strange world right now, and there’s certainly from a commerce perspective, I don’t think any analyst would have predicted nine months ago that we would be seeing a spike in demand in anything from exercise equipments to hand wipes to baking yeast. It’s just not the world we thought we were going to live in or that we would be juggling teaching our kids on new education platforms at the same time that we’re on Zoom calls.

            So that has certainly had an impact on the subscription, eCommerce and subscription trends that we’ve seen overall. On a more sober side, we have to keep in mind the fact that we have lost 20 million jobs in the US and of course this number is ever changing as we get new updates from the government, nearly 95% of the US is under shelter in place by May. And so of course, that’s significantly changed subscription habits as well, consumption habits both on the consumer and the business side in the short term, and I think in the long term too. So we’ll talk a little bit about what that means down the road six to nine months from now. So with that in mind, just a few highlights level trends before we dig in a little bit deeper. So what we saw here was that almost 40% of new trials, this is across every industry that we’re looking within.

            And at the highest level, we looked at this period between March and June, and we’ve seen a fairly substantial acceleration actually across almost every industry in terms of both new signups, trials, and conversion. So 40% increase in new trials. Looking at the period between March and late June relative to, we looked at the two months prior to that and said, “Okay, what is a during COVID time period look like relative to a normal week pre COVID?” And look at trends to make sure we adjusted for seasonality. And we actually saw an increase of new trials, a 45% increase in trial conversions as well, so conversions to paid subscriptions. And a 46% increase in total subscription, paid subscription growth in general. So we’ll break those down a little further.

            And I think the key is these trends are accelerating, right? So for example, here, this is just one area. But stream media, about 80% of US consumers now are subscribed to at least one paid streaming media service, that’s up from 73% in the pre COVID survey. It’s not just the streaming. And digital media for those who are here, you know that stay at home orders have often probably accelerated the conversations that you’re having around moving from some more kind of traditional publisher monetization models and to try now digital subscriptions and potentially free trials and testing around with your paywalls. ELearning platforms, we’ve seen a massive spike in the use of eLearning platforms especially as schools were still in session. Calmed down a little through the summer. And I anticipate we’ll see that spike again as we move into the fall when school is back in session regardless of what that looks like, whether it’s fully in-person or remote.

            And then the non digital world, so consumer good purchasing habits have certainly shifted to accommodate for convenience, delivery at home, use of certain products that weren’t probably readily as used anymore. And while the overall industry trends indicate a pretty positive story for subscription commerce, but it doesn’t mean that automatically everyone in the space is going to win. So on the right here, you’ll see what we have to consider as well is that subscription fatigue is also up. So consumers are juggling, many of them are juggling costs and up to 39% are experiencing decreases in household income. So what does that mean for … How do subscription businesses like you continue to keep their new trialers and your new customers engaged, converting them, ensuring that your products and service is so ingrained in their day-to-day that it actually no longer moves from a nice to have and rather moves to really a must have? It’s so part of their life that it’s not part of that consideration for cancellation.

            We’ll talk about a few strategies there. So let’s do one more poll before we dig into the data. So go ahead and launch that. And then I’m going to tell you a little bit about the methodology that we use to dig into this data. Some of the trends going through these verticals and then strategies. So what is the biggest pain around handling subscriptions for your business? So is it process efficiency, converting new subscribers, so acquisition tactics, reaching your total addressable market, retaining subscribers, managing churn, reporting visibility, so looking at the data for the entire customer life cycle, driving engagement with existing customers or involuntary churn? Which you may have considered part of retaining your subscribers, but that’s a very specific type of turn that we’ll talk about that’s a little bit more operational in nature.

            All right, we’ve got some more results coming in here. I’ll give it a few more seconds. What do you hear about most often, Kathy? When people come to you and ask about questions around, hey, we would love to be able to hear more tips around X and articles and interviews that you do?

Kathy Greenler Sexton, Subscription Insider:

Well, it’s all about the converting and then retention are the two big pain points related to this. These trends actually really that everybody’s seeing in here, it’s all related. Engagement is directly related to retention, your converting. It’s all about revenue and retaining earnings is where everybody is concerned about.

Emma Clark, Recurly:

So 32% converting new subscribers and 29% retaining subscribers. So not surprised there, that’s a fairly even split. We’re going to talk a little bit more about reporting visibility too because I think one of the things that you’ll realize, and one thing to note is that those are all interrelated. So reporting visibility is, do you have the data at your fingertips to actually be able to make intelligent decisions around where you’re converting your highest value customers, and are you retaining those? Can you find more of them? So before we do that, let’s dig into some data. So we’re Recurly research, what we do here as part of Recurly research, what I’m involved in at Recurly as part of my job is to work with our team of data analysts and scientists to dig into, we have more than 2,100 customers across a variety of industries and sizes. So what we do is we pull on a regular basis, we kind of pull that information, pull it from our systems related to the billing information we have on file. We anonymize it, of course.

            And we look across these different industry verticals to get a better understanding of what’s happening as a subset of the subscription economy itself. So just so you know in terms of sort of methodology, I won’t go through everything here. I’ll let you kind of read on your own, but I do want to make note of really what we’re looking at here. So the timeframe again was March 9th, which is really where quarantine across a lot of the countries started to come into play. COVID-19 started to have a fairly significant impact through June 22nd. So we wanted to keep the data fairly fresh, but cut it off so that we could process this and analyze it and make sure everything’s accurate and the trends are correct for you.

            The calculation methodology we use for these growth trends you’re going to see in particular are we took essentially a median growth rate of each industry and we’re looking at a weekly average over this period of time pre COVID. So the period of time before March since we said … Essentially it was actually more than four weeks, but we normalized back further than that and said, what does a normal day look like for these industries or normal weeks, excuse me, in terms of number of trial growth, subscription growth, and other metrics? And then we compared that to every single week in the COVID period to get an idea of these trends. So it’s not necessarily a week over week, and I’ll show you what it looks like. It’s not a, hey, what percentage growth did it grow from this week to last week? It’s looking at it during COVID versus pre COVID so we can get an idea of what these trends look like as an impact of the pandemic itself. And obviously all of the impact of that across both our personal and economic worlds.

            So consumer goods, let’s dig into this. So this is interesting because consumer goods and retail is the only category here that actually had a dip in the first week of quarantine, which I find kind of fascinating. The other one saw kind of almost an immediate increase. So this category could include things like lifestyle subscription boxes, replenishment products, home goods, nutritional products, or anything else that you might get delivered physically in a recurring basis. So in this first week of quarantine, that March 16th 22nd, we saw this decrease in new subscribers by a negative 8% relative to the weeks prior. I don’t think that’s that surprising given that when we first went into quarantine I think a lot of people were really unsure about delivery of things to their home.

            But what you’ll see as the trends progress is that we’re seeing in the end of March and April, we see the steady increase. And in mid April, we actually saw this peak of new subscribers at 147% higher growth of new subscription signups, paid subscribers relative to that period pre COVID, which is really interesting. And then you see this growth kind of calm down and even out. So the week of April, what is it, 20th, we saw that 76%, we saw the peak. And then in May, it kind of starts to trend down again. So I think what’s fascinating about this and perhaps unexpected is that 146% growth in April and May, consumer goods actually, all of these categories saw the highest growth relative to COVID, which I’ll be honest when we first started digging into this, I would not have expected that. But the more that we’re digging with our businesses and getting an understanding of what sort of promotions they’re pulling out, of how they’re engaging with customers and the trends and the purchasing trends.

            And you’ve probably seen some of them online, excuse me, about how much we’ve seen a spike in total eCommerce purchases in general, and that translates as well to subscriptions, especially those that we know we’re going to consume, replenishment type subscriptions we’re going to consume on a regular basis. Especially in April, we saw that massive spike. So I think that’s what we have for consumer goods. Let’s talk a little bit about streaming. I saw there were a few streaming services on here. So streaming media COVID-19 impact I think is really all about the story of how to leverage that try to buy experience. So overall, the entire industry customer acquisition has significantly accelerated, and that’s really delivered on this large increase in conversions as well to new subscriptions that we’ve seen more new conversions than in any other industry.

            And I think that’s also due to the fact that we’ve seen this high spike in trials. So one thing I do want to note here is that we’ll see trials and then we’ll see paid subscription. So we’re looking both at the number of free trials that people sign up for, and then we’ll look at how many of those actually converted to new subscriptions. So in the beginning of COVID-19, many of these new trials, I’d say that early March period, many streaming media companies extended their trial from a 7 to a 30-day period. And the idea was everyone’s at home, they’re really trying to try out new products and services. I know I signed up for actually three more streaming services once we were at home on the weekends and weren’t doing much else in Colorado in the middle of March when it was snowing and ski resorts were closed.

            I mean, a lot of us were in similar situations. So that meant that this new trials period spiked the week of 3/23 with 178% increase compared to the week of 3/9 pre COVID, that’s a massive increase. And then most of April, we saw anywhere between 58 and 68% increase relative to a pre COVID period. And in the end of April and early, and I would say early May, we started to see this even out and even see a little dip relative to pre COVID periods. So what I find interesting about these trends is what you’ll see. And as we all know that consumers who try out streaming media products are kind of notorious often for trying and not actually converting or they try and they don’t convert for long. So we wanted to look at what this translated to in terms of total subscription growth.

            And the trends here you’ll actually see are a little bit more evenly upwards. So what you’re seeing here in this week of 4/27, that 90% increase relative to the pre COVID period is really the translation of this 3/23 cohorts moving through trial to conversion, which is interesting. So successfully converting a number of those customers. And then March, through March 9 to the 6, we see this increase throughout. April 20, 27th, like I said, this follow on effect from trial, conversion to paid subscription. Then a fairly substantial evening out actually of those conversions that trickle through in May. So the key I think for kind of the message out of this for these streaming media companies will be as customers fatigue of having so many services, which can happen. How can they ensure they’re not on that list of cancellation? So how can they maintain both brand loyalty so they don’t get stuck in this costly cycle of new acquisition to churn, new acquisition to churn?

            We’ll talk about the subscription economics model a little bit and why it’s so important not to get caught in that cycle is that becomes very costly and is not as sustainable as it is to actually retain these customers for longer. We know the most efficient way to sustain subscription growth in general is to retain and grow your existing base. So I think it’s key not only for these companies to convert a number of their customers, to retain a substantial portion of them for economic profitability, but a lot of those we know one of the differentiators is content, is providing new content on your platforms. Recurly is a subscription management platform, we work with our customers in understanding when they have new live events coming up and when they have new content. But where we can really help and what we do with them is digging into what are the subscription management best practices that are now kind of table stakes?

            So they’re now expectations from customers. And if they’re not applied, they create this unnecessary friction. So regardless of what sort of content you have, if you have a very poor experience at renewal, you have a very poor experience that would cause a customer to churn otherwise or billing information that’s not updated, that’s frustrating for them. We’re going to talk about a few of those and how we make sure that those are top of mind as well. I’d call them kind of subscription management and operational best practices. Let’s dig into publishing because I know a number you here are in the kind of publishing and digital media space. It’s publishing, but we also are including what we consider all digital media businesses.

            This is someone like Kathy’s business producing content that people are consuming on a regular basis, mostly digitally, but some, of course, more traditional publications that both have sometimes a digital and a physical aspect. So in the publishing industry, I think this is interesting, from the very beginning of quarantine, we saw this fairly large jump in trials. We didn’t see a dip, it just immediately went up. So 56% in that first week post quarantine relative to the week before and the weeks before. And many of the largest news outlets we know either extended their trials or they played around with what was included in the pre and post paywall to both provide better access to health, government, and market news to consumers. But in the business world too, we saw a few different ones really kind of playing around with what sort of mixture of pre pa wall content and post paywall content really incentivized that conversion from trial or from I would say kind of freemium version into an actual paid subscriber.

            So the largest growth was mostly through March and April, anywhere from 45 to 60%. And then as we move into June, we start to see this flatten out a little bit, which is not surprising as people are immediately trying new things and they kind of figure out what’s a good fit. So let’s go into growth because I think the growth story is a little bit more interesting in terms of paid subscription growth. So again, that four, six time period, that’s where you see that spike in trials converting through to really a spike in total number of paid subscriptions, 198%. I think that’s the largest increase of any single week in industries that we’ve seen. So that’s pretty fascinating to us digging into a little bit more, what are the methodologies and what is that looking like for those conversion rates from trial to paid?

            And just so you guys know, we’re not actually putting this in this webinar, but we do on our website in Recurly research, you just go to recurly.com and research, it’s all free. But we put out research around conversions, benchmarks around trial, conversion to paid subscription. So you can get an idea of, hey, within my industry, what is a median conversion rate among my competitors or among my peers? And that’ll give you a better idea. You can kind of stack yourself up against that and get an idea of what else is going on in the market. So I think we have one more here that I want to address and do. All right, time check.

            So software, let’s chat a lot about software before we dig into some best practices. So lastly, this category contains a decent amount of B2B software. So categories like productivity and project management tools, Zoom like software, so video collaboration tools, chat tools, project management tools, sales and marketing. I mean all the type of stuff that you probably would you software as a service in order to run your business. A lot of those as you know, if you’re especially in the finance department or in sourcing, those are usually built on a reoccurring basis. So we have a number of those businesses that we work with. It also includes some consumer tech and mobile apps and marketplace type online software consumer tech products. So in trials here, we see, I think the story and the headline here really is a little bit more modest growth throughout.

            And a lot of that is weighed by the fact that, I think that there wasn’t this immediate swing in terms of trends. People are still doing work some of it, they’re doing more from home. That’s why we see this uptick, 40 to 50% for a very long period of time relative to pre COVID. With an almost 30% uptick in this week of March 16th as the first week, it steadily improves from that. And then throughout entire COVID-19 period, the trial conversion rate, just a side note actually stayed around 25% higher than a normal pre COVID week. So again, just a nod to kind of how we’re seeing a higher conversion rate as well. And then the subscription growth side, and we can dig in a bit here. There’s pretty steady increase. So what’s interesting if we dig deeper into talking about software purchasing trends, there are a few sub industries in particularly that are going to see pretty large gains.

            Again, we talked about collaboration software and video conferencing software, but also eCommerce. So you guys might’ve just seen folks like big commerce filed for IPO because on the backs of seeing this massive increase and number of new sales because we see a lot of subscriptions moving, excuse me, a lot of retail stores moving over to eCommerce platforms. ECommerce platforms, a lot of them are subscription based businesses. And so we’re seeing a spike in those as well as they sign up for new customers to bring them into an online community to sell their products.

            So as we enter, I think the storyline is this, we saw pretty significant growth in both new trials, solid growth in new paid subscriptions overall, and then also in conversion rates. But you might be saying, well, we’re in a global pandemic, we’ve had a fairly large economic hit and downturn, it can’t all be sunshine and rainbows. So it’s not as if every single person in the subscription economy is doing significantly better. The general trends that we’re seeing are significant growth. However, of course, there are definitely businesses that rely on foot traffic or rely on in-person contact in particular, things like gym memberships, movie theaters, theme parks. We’ve certainly seen not only a decrease but a pause completely in a lot of those. And this is something to keep in mind if you are a business that is severely impacted by foot traffic or consumer trends, purchasing trends that would have impacted you negatively in terms of number of new signups and retention is we’ve worked with a number of businesses to create goodwill with their customers and proactively pause their subscriptions entirely.

            So that’s something that we talked with a number of our customers about who’ve seen, hey, my subscribers can no longer take advantage almost at all of any of my services. So therefore they actually work to proactively pause those subscriptions until they can open it up back again. And that actually not only prevents them. It’s a smart move to be proactive to prevent any cancellations overall because that customer is still technically a subscriber, they’re just paused for a while. It also creates goodwill with customers because they’re not charged for something they’re actually not using. So for businesses and industries that we highlight here that did see significant growth, that’s just something to keep in mind, by the way, for those that may not see a trend line that’s in line with this story. But for those that have seen this significant growth, I think the next thing we want to talk about just is, what else should you be aware of?

            So the key here is how do you take that increased interest and turn that into long time subscriber, loyalty and growth? Because that’s going to be the story that we look at next, which is all right, great, you have all of these new subscribers. How do you retain them? How do you engage them? How do you ensure they’re growing with you and they’re growing both their share of wallet and their loyalty as it relates to feeling a part of your brand and a part of what you’re offering? I think before we do that, we have one last poll that we wanted to do and then we’ll dig into a few of these strategies that we want to talk through. So this one a little bit is what is your biggest area of focus?

            And I think relative to the last one, the last one was kind of pain point for your company overall, this is where do you really focus? In whatever role that you’re in, where do you focus, where are you putting your time and energy, where are you digging into the data, what maybe keeps you up at night? If you’re thinking of business, which unfortunately we probably all do even if trying to get a good night’s sleep. I’m seeing some interesting trends here. We’re seeing a decent amount acquiring new subscribers again, which is interesting. And we still see a solid amount in reducing churn as well. So we’ll wait for a few more to come in and go ahead and close that poll out.

Kathy Greenler Sexton, Subscription Insider:

I think what we’re seeing here is very reflective. So the poll is now closed, and we’re sharing it.

Emma Clark, Recurly:

So 63% acquiring new subscribers. Go ahead, Kathy.

Kathy Greenler Sexton, Subscription Insider:

Yeah, no, this is really great. I think this is very reflective of where people are focused on right now.

Emma Clark, Recurly:

Good. Well, I think that is actually really relevant for the next slide because we’re going to talk a little bit about loyalty metrics and how you turn that into acquiring new subscribers. So let’s go ahead and do that. So again, a few strategies to increase lifetime value and drive subscriber revenue growth. So this one’s around identifying your highest value subscribers, but I want to think about it in the context of acquiring new subscribers. So this first strategy sounds really simple, but it’s much harder to execute and practice. So I mentioned in the beginning that I was interested to see how many people polled visibility into my data as an area of concern. And that might not seem like an area of concern, but I know from working with a number of businesses that actually executing on this well by identifying your highest value subscribers requires visibility into your data across from acquisition, and those are marketing events and promotions and campaigns through engagement, how they’re interacting with your platform, what the upsell cross-sell opportunities that they’re taking advantage of and promotions to retention.

            When they’re looking to cancel, are you able to save all of those data points to look across to understand who your most valuable subscribers are? So this is really about how can you identify who those highest value subscribers are, understand why your product or service is so sticky for them, and then utilize that profile to go find more. So again, I think the hardest part is really having that data on a central place so that you can dig into metrics like, the how to here, really dig into metrics like cohorted and segmented revenue retention. So that’s essentially saying, how do I actually segment, I’m not even just looking at logo churn, it’s how do I retain revenue of my existing subscriber base by the cohorts either that I acquire them by, by industry cohorts, by persona cohorts? How do I look at that and figure out quarter over quarter, month over month, am I driving a higher revenue retention from those customers?

            And then on an overall basis as well to understand who’s actually delivering the highest longterm monetary value to you. Looking at average revenue per customer, which digs in a little bit deeper to as another, I would say, ancillary, another related metric to revenue retention, to really look at, are you increasing that average revenue per customer over time? If you are, for what segments? All right, how do you target more of those types of customers? And then the holy grail I call it of subscription commerce is lifetime value. So again, getting down and perfecting your lifetime value calculation so that you can really better dig into not only how many new acquisitions you had, because I’ll be honest, I know that’s always a concern for companies. But the reality is that that’s like the shiny object that we all go after.

            And then it’s about, how do you think about acquiring new customers that are going to generate the highest and longest lifetime value is really the acquisition story. It’s not the how many customers did I acquire and how much did I book them for? How much did they purchase at the get-go? And measuring your lifetime value calculation is not something, trends are not something that you’re going to see overnight. It’s a monthly, it’s almost sometimes a yearly if you’re billing on an annual basis, metric that you’re really looking at trends over time or quarter over quarter. But it’s about setting up the rigor and the structure to collect that information and to continually refine on that calculation and then saying, “These are my highest lifetime value customers, here are their attributes. This is the profile of the most loyal customers. It’s acquisition channels, it’s demographic information. Let’s target those types of customers next time more efficiently than we did last time and lower those acquisition costs,” you can reach kind of your payback period faster.

            And then finally, the next thing that we’ll talk about here, and I’ll just touch on is whatever that equation looks like, that profile looks like, how you market to those customers, how you retain those customers, none of that is ever static when it comes to pricing and packaging. And so let’s talk a little bit about that as it relates to testing, pricing, and packaging. And pricing is such a loaded word. So when we talk about pricing in the subscription world, we’re really thinking about what types of offerings are you providing is really what it is, and how are you structuring those offerings.

            For us, I think to dig a little bit deeper into this one, there’s a few different things that we’re thinking about. The first is the how. So the how is really, how are you charging for your product? Are you structuring a mixture of subscriptions on one-time products. So we’ve seen a number of businesses that have seen success there. And in particular in the subscription eCommerce space, are you thinking about, we’ve seen some more sophisticated commerce businesses actually provide an option for customers to build their own subscription, where they get to choose the products and services that they include and bundle those together at their checkout. I kind of love that, that’s the maximum amount of flexibility that you can provide a subscriber. And it really engages them in a way that works best for them, which is all what subscriptions are about is convenience and really connecting with your customer on a deeper level.

            I think the last one here is also, are you thinking about, like I said, offering kind of hybrid offerings. So BarkBox is a customer and also someone that I subscribed to. And BarkBox the offers dog goods and toys and treats in a box every month and ships it to me. Also offers the option for me to purchase after they’ve shipped the box. Some of those items is a one-off. So I got something that I found my dog loved, some treats that he loved and didn’t love some others as much. And so I went ahead and was able to say, “Okay, I love this box. I liked my subscription, but I’m going to go ahead and order three more of that specific treat.” And the benefits to them is they can clear out some extra inventory that they may have had to readjust for in fulfillment processes. And for me is that I purchase something that I’ve already tried in the box. And for them as well, they’re increasing the average checkout price from me and increasing my average revenue as a subscriber.

            So the second piece here is really the what you’re charging for. So the how is the subscription one time mixture of both. The what is really around what is this particular item that you’re charging for? And that can be easy if you’re a subscription commerce and you’re selling a good, if you’re selling my physical product. But especially in the digital world, that might be in publishing, for example and digital media, that might be entire access to my content or only partial. That might be users get a paywall after this many articles and not this many. This is going to feature use and this is the upgrade path.

            Considerations like consumption, number of articles consumed, number of downloads if you’re in software. Or even company size or seats, number of seats that people have access to. Those are the considerations when you think about how you’re structuring that offering. And really, it’s about aligning that unit that you’re charging to or charging for with your customer’s core habits within your product or service and where they see the greatest value, which of course requires a number of, I would say, iterations to get that right. And the last piece here is when, when are you charging your customers? How long are they committing for? When do they renew? One thing that you should consider here at the bottom when it comes to optionality in term commitments is that you can play around a little bit with contracts and billing lengths.

            So many businesses actually consider offering a discount for a larger commitment. So a discount to go from monthly to annual. And the pro of that is a longer guaranteed retention, a reoccurring revenue period. The trade off is essentially lower margins on what you’re selling often. And the key I think is really when you think about whether or not you’re going to offer that, and some customers really execute well on that and are really focused on retaining customers for at least a period of time to reach their payback. It’s being clear about measuring the ‘lost’ opportunity revenue that you gave up through that 20%, 10% discount versus the benefit of that longer retention period. And that, again comes back to your lifetime value calculation.

            I think we’ve kind of two things here, but one related area I talked about in terms of pricing and packaging is around trials, so the try before you buy experience. Not everyone is going to offer a trial, I think it’s particular to certain types of businesses. But for those that are considering it, it’s crucial to ensure that experience of try to buy as pretty seamless and to understand how you might think about considering a trial. We got to go back again to that subscription economics model. And that’s understanding the subscription model itself is predicated profitability in general, is predicated on reaching a payback on the subscribers you acquire over time. So you have an upfront cost of acquiring those subscribers. And then over time, month over month, year over year, quarter over quarter, whatever your billing cycle is, you get closer incrementally to that payback period on the cost that you had in acquiring those subscribers.

            And the time to reach that breakeven point on a subscriber is your payback period. And the time to actually what the ratios look like to go past that are your payback ratios. And those are all really key to monitor. And trials play into because a trial can be a successful way of converting more customers, but it also increases that payback period because a customer is on your product, using your product with the cost of goods and services associated with it for maintaining your platform or whatever else that looks like content providing content. But you don’t start to get a payback on them until the trial period is over.

            So you just have to make sure that you’re setting this up and measuring what that payback looks like with trial subscribers and how many of them are converting. A few other things to consider testing around with things like your paywalls, trying different mixes of contents or feature offerings for different types of subscribers. That gets pretty sophisticated, but at least try testing out different paywalls and different kind of access to different types of content across your subscriber base or your trial base or freemium base first to see what actually has them realize the value and hooks them without actually decentralizing moving into that paid subscription? So that’s really key as well.

            And then one or two other things to consider on this kind of try to buy experience. The first one is if you’re considering extending a trial, which I talked about. Many businesses, especially in streaming, digital meeting, and publishing are doing, it’s about knowing how many of those customers are you actually converting during this kind of COVID period and making sure that actually has an impact to your total conversions, and the quality of those conversions too. So they might convert, but you should take a look at where are they one month or two months after, did you retain them? You’re looking for those customers who converted because they intended on using your product and they actually feel a connection and a value from that product.

            And I think for those customers who converted because they intended on using your product and they actually feel a connection and a value from that product. And one of the ways that you can test this too is looking at whether or not you’re going to set up a pay method at trial, so requiring a payment method when they start the trial and then it automatically charges them with a renewal, like a trial ending notice at the end of the trial before they convert. Or you allow them to start the trial without any billing information and they automatically convert, excuse me, they have to input their billing information before they convert to a paid subscription. Those are going to have conversion rates at different levels. So it’s about looking at the conversion rate relative to the number of subscribers that you actually have that move over into your product.

            Just two more quick kind of strategies here to talk about. The first one, just a few use cases I think are really interesting that are pretty relevant as the market shifts during this kind of COVID-19 produced moment. And I don’t have a better way for saying it of all of the implications that come out of this. Given some of these kind of market shifts that we’ve seen and talked about, some subscription companies are getting really creative with how they think about offering a subscription and what sort of perks they include in that subscription. So for example, Stitch Fix and Universal are two really good examples. So Stitch Fix is allowing customers to schedule the delivery of new items every two weeks, three weeks, a month, two months, quarter, getting really creative with the level of, I would say, convenience for customers.

            You can also request deliveries on demand now, which is really interesting. That’s kind of the Amazon prime model of groceries with whole foods, like getting it on demand when you want in certain cities. And customers are charged a stylist fee for each delivery and can choose which items to purchase and then send the rest back. They’ve done that for a while. And if they keep all of those items, you receive a 25% discount on them. So I find that really interesting because it’s kind of converting, they’re using this subscription as a way to engage with customers on a regular basis. And then a few of those are actually turning into a one-time purchase. So I think it’s really interesting to see this blend of one-time and subscription used to be the subscription businesses versus subscription businesses and eCommerce businesses with eCommerce businesses.

            And it’s not like that anymore. These lines are blurred, and it’s all just about, how can you engage with your customers on a regular basis and increase the old adage of increasing repeat purchases, how many repeat purchases? Well, it all goes back to that. How often and how much are people purchasing and engaging with your brand? And then the second piece here is Universal Picture, so that’s part of NBC Universal. And as we know, movie theaters have been shut down the last few months until recently. So NBC Universal also owns the news streaming media service, I know that Kathy’s written about this, Peacock that’s coming out, and there’s been a lot of buzz around it. So they’re actually looking at a different distribution model where they’re bypassing the movie theaters and starting to go ahead and release some of their content directly on the subscription service, which I think is also really interesting.

            So people are getting creative with ways to continue to deliver value to their subscribers. And I think the key message here is the dynamics of the market have changed. And instead of pouring money, thinking about … For your business, for Recurly’s business too, what we think about is if the dynamics have changed instead of pouring money into the same model over and over again and expecting a different outcome and the same kind of dynamics, how do we get creative with other ways to engage with our customers, with other ways to deliver value that didn’t exist before? And then the last one here that I’ll touch on before we kind of do a little bit of Q&A is retention. We’ve been alluding this whole time that regardless of how many new customers that you’re acquiring or want to acquire, it only has temporary benefit to your business if you actually have the ability to retain and grow those customers.

            So again, coming back to the economics of the subscription model, which I love to use as the framework for most of the stuff we talk about, this is so crucial. Cost of acquisition and payback periods and lifetime value, those are not metrics that can be ignored. At Recurly, we work with our customers on subscriber retention overall, first breaking up the types of churn. So whether that’s voluntary churn, cancellations and how you can prevent those through things like pauses or through all of the methods we talked about here, about flexibility in your offerings and the ability to upgrade and downgrade and testing out different promotions. But then also on the involuntary side, and I won’t dig into a ton of detail on involuntary churn given the time and all the topics we’ve covered today. But the key piece here is really around automating that journey with involuntary churn caused by payment declines.

            So that’s not something that you can afford to do manually because really the resources that you want to spend focusing on customer driven cancellations and preventing those and retaining those valuable customers, it’s really about automating and setting up the right systems to be able to manage your involuntary churn overall. And if you’re interested in a little bit of also the metrics and the benchmarks for voluntary versus involuntary churn, that’s also something we have in our Recurly research as well. You can see what does a digital media and publishing business that’s B2C, what are they seeing as a median voluntary and involuntary churn rate? So that’s something that you can dig into a little deeper. And if you have questions we’re here as a resource to talk you through that.

            So lastly, just on a few kind of key takeaways and considerations, the first one is the type of product or service you have obviously determines how much you’re impacted by COVID. But I think regardless, that first kind of key strategy we talked about, which is regardless of how you’re impacted, the key here is finding those loyal subscribers, creating that profile for them, and then going out to try to identify more using that profile of how you engage with them. The second is ensuring your infrastructure can actually support the testing of pricing and promotions that you want to take a look at and making sure that your data is in a centralized place to be able to look at those metrics throughout the entire life cycle of a customer. Lifetime value not only includes churn rates and average revenue per customer, but often more sophisticated includes gross margin, includes understanding how many new customers you have coming into a new cohort. Those happen through the entire journey.

            And then last, we’ve seen a lot of subscriber growth in the last three months, new subscriber growth. But it’s really around, can you retain those? Are you focusing on those efforts? And how do you continue to increase that average revenue per customer and monetize from your existing loyal base? So that is content wise what I kind of wanted to go through. I think we wanted to ask for Q&A, Kathy, is that right?

Kathy Greenler Sexton, Subscription Insider:

Yeah. So I’ve seen a couple of questions come in as we’ve been talking, and I’d like to invite everybody right now to submit your questions so we can do them. While you’re doing that, I want to make everybody aware of something that we’re doing special for all the attendees today. And if you can go to the next slide, I would appreciate it. So for all of you attending today, we talked about the Subscription Show. If you use today’s date, July 15 as a promo code, you will get 30% off your ticket. If you’re a member of Subscription Insider, you get 30% off the member rate. You just go to the member center in Subscription Insider and claim that member discount. If you’re not a member and you just want to order directly on Subscription Show.com, you just use the promotion code as well. So we want to make this available to everybody, and we’re super excited and we hope to see you in October for that.

            So let’s get to some questions. So the first one that I see is, if you want to move to the next slide, that I think would be great. So the first question is about free trials, they don’t do free trials, but they’re a huge drop-off in monthly subscriber cohort around month two. Is that kind of the same as the trial period, and what are some to keep a portion of those subs? That’s a great, great question.

Emma Clark, Recurly:

Yeah, that’s a really good question [crosstalk 00:53:30]. It could be right is the answer I’d say, is that if you don’t offer a trial and depending upon, I think it’s from media, if you don’t offer a trial depending upon your business model, there might not be a way for customers to really understand well the value of your product until they’ve actually really interacted or the service, interacted and experienced it for a few months. So it’s possible that you’re getting a few of those drop-off on month two. However, if you consider offering a trial, which you might want to, if you’re in the consumer goods space, I understand that that is not necessarily always an option given the margin on those goods. It’s giving away free products, and the margins are very different than on a service.

            But if you do consider it, it will be really interesting to see whether or not you continue to see that drop-off at month two. Suggestions for keeping a portion of those subscriptions. One of them is you really have to dig into the journey on month zero, month one. So what is that journey from the time they first start interacting and that experience in month zero when they start and month one? That’ll help you answer the question on, are they just not getting it? Are they not actually interacting enough with the product to really understand the value? And so a few drop-off who weren’t ever going to really stay on with you, or is it that there’s something more systemic about the way that they’re interacting with your product or service and the experience itself that they’re then staying off month two like that’s not really worth it to me anymore.

            And that will dictate whether or not trial is even going to make a difference. That might be more about your onboarding journey, that might be more about your kind of first run experience. So those are the things that we tend to look at at the very beginning if we’re seeing cohorts that drop off after stage is really that kind of first run experience, that first experience with your brand. And then again, coming back to digging into the customers that are retained for longer than that two months whatever data you can get around those customers specifically, and how they might differ from those that are dropping off at month two will also help you dig into what you might be seeing there.

Kathy Greenler Sexton, Subscription Insider:

That just really underscores the importance of data. Utilization, if they’re not utilizing it, boom, you need to address that. If they are utilizing it and they’re turning, that’s a separate issue. Maybe there’s an operational issue. Looking at those cohorts and seeing how they changed from month to month is really going to help you. So Emma’s message, if you saw me nodding, get that data, measure it, track it because it’s really going to help you point to product, operational, and conversion issues. So that is really, really great. There’s a lot of questions about the data, and so I think you’re going to suggest to people to look at recurly.com. Year over year, the data that you saw, that you presented, year over year, does it look like there’s growth or the percent of conversion? So we saw the conversion rate based on that month prior to COVID impacting, is the conversion of those trials to paid, was there any significant, interesting data to share on that?

Emma Clark, Recurly:

Yeah. From those trials starting pre COVID to post COVID, is that what you’re thinking? Are you thinking just like-

Kathy Greenler Sexton, Subscription Insider:

Yeah.

Emma Clark, Recurly:

Nothing that I can think of top of head for that specific period. That’s a really interesting question because I think where it’s coming from is, hey, someone’s trialing in the middle of all this chaos going on, are they less likely to convert? We’ll have to dig into that. In terms of year over year looking at this time period, we also did look at this time period last year to make sure there weren’t any seasonality impacts. So when we compared the data, the COVID period data, March 9th to June 22nd, the week of March 9th to June 22nd, we looked at that same period last year to make sure that our data wasn’t biased towards January and February as a comparison.

            And we use that January, February time period as a marker of a kind of a normal week. And that was in line, we did check to make sure that was in line with the year before. So yeah, the data there is really just using a time period as a proxy for a regular week and then double checking, we make sure that that data actually is consistent with what we’re seeing in terms of the year before. Of course, I’d say overall what we’ve seen in terms of looking at churn benchmarks, for example, on a year over year basis is that we’ve actually seen … I was looking at our customer base, the 2,100 customers is that they have actually gotten better at reducing churn over time, both in voluntary, that’s a little where Recurly really plays a part of, but even their voluntary churn. So when we did the study in 2018 versus 2019, the rates in 2019 actually were lower, which was really interesting. I think subscription businesses are getting more sophisticated at really digging in there.

Kathy Greenler Sexton, Subscription Insider:

Well, that’s great because we all need to be. We are getting towards the end of the hour. I want to get one more question in here. I have a final question for you, but this is a question, it’s specifically about SaaS, but I think we can talk about it across all the different models across the subscription economy. It’s the concept of, is it more effective to get back those who were churned or trying to retain them before they turn?

Emma Clark, Recurly:

Usually the answers to questions are like it depends, but this one is not it depends, it is definitely more effective to try to retain them before they churn. It ends up being more costly when they do churn. And then often what ends up happening in your data set as well is that if you’re not careful, they show up as a new customer, it actually skews your data. So there are very real reasons on a cost percentage and also some kind of operational data issues that you have to be aware of as well. So if you can really dig in what I’d call post cancellation pre-churn, if you set it up that way, allow them to [inaudible 01:00:04] the billing cycle and be pretty immediate around those cancellations and like, oh, they’ve had a cancel button, they might not churn out fully until the end of the month, how do we get ahead of this? How do we really look at retaining them. And even pre-cancellation of course, but that’s another way to kind of manage what you’re thinking about.

Kathy Greenler Sexton, Subscription Insider:

A lot of details. I mean, subscription business is a lot about our operational details and tracking things. So as we wrap up today and for anybody who does have a question that we haven’t gotten to, put it in the chat because we’ll be looking at those questions and assuming you didn’t submit it as an anonymous person, we can get back to you after this webinar today and answer your questions. So don’t be shy if you have any question whatsoever. So Emma, as we’re moving through COVID and hopefully moving past COVID, looking up and reading the tea leaves of the data, what recommendations do you have for us as we’re kind of looking to get beyond where we are today?

Emma Clark, Recurly:

One liner for me is that shifting the focus, it’s really about any of the growth we’ve seen here, shifting into a mode of post acquisition engagement. That’s where businesses really should be making sure they’re putting a lot of focus. It doesn’t mean of course that you’re not always focused on engaging with new prospects and potential new customers and really digging into kind of your marketing metrics there. But the story given this data is that we’re now going to really start to dig into and understand how are you engaging with that new set of customers in kind of a new normal. Shifting to that longterm plan from the short term plan of what we’ve seen in this data. So that’s going to be really important.

Kathy Greenler Sexton, Subscription Insider:

Yep. I think that’s important. Just in thinking about it and listening to you, I’d encourage people to think about the reasons why people convert are not necessarily the same reasons why they might stay with your subscription. So you need to really dig in and understand that and work that into your plan. So with that, Emma, thank you so much today, really great.

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