Recurly Report Examines Trends in Customer Retention Metrics for Expansive Subscription Industry
Recurly Inc., the enterprise-class subscription management platform, recently released the Recurly Subscription Snapshot, an extensive report reviewing a sample set of 25 million subscription transactions to identify key metrics for customer retention.
As more businesses adopt the subscription model, these customer retention metrics become more essential to optimizing revenue and maintain healthy growth.
“Companies of all sizes, from start-ups to global businesses, are turning to the subscription model to build healthy and loyal relationships with their customers over long periods of time,” said Dan Burkhart, CEO of Recurly. “The metrics identified in our analysis provide guidance for product, promotions, and operations to help subscription businesses better understand how to maximize customer loyalty, leading to increased growth rates and revenue.”
The report categorized the given sample comprised of 25 million recurring transactions generated throughout 2015 as either B2B or B2C. 90 percent of transactions including physical goods fell in the B2C category, representing the popularity, and variety of box-of-the-month offers in addition to consumers accepting monthly deliveries.
The digital goods involved displayed more variety, boast 25 percent of transactions actually originating with B2B companies—indicating the rise of SaaS and cloud platforms.
Since the customer retention rates are indicative of whether a recurring revenue business is growing profitability or not, the report covers three essential metrics for subscription businesses.
The three include-
- Churn Rates Decreased Over Time: Churn, or customer attrition, averaged 9.9 percent in 2015, with the highest levels in Q1, followed by steady decreases throughout the year. The B2C category experienced a higher rate of churn than B2B with an 11.21 percent average and decreased as the year progressed, indicating increasing rates of customer satisfaction.
- Credit Card Declines Rates May be Affected by Seasonality: The rate of credit card declines, or failed transactions, averaged 12.21 percent quarterly, but increased slightly over the course of the year, indicating seasonality may play a role. However, 2015 saw the rollout of EMV, or chip-and-pin, cards with new information which could impact completing a transaction.
- Revenue Recovery Increased Over Time: The businesses in our sample were able to recover almost 11 percent of revenue that would have been lost due to credit card declines or ‘involuntary’ churn. Recovering this revenue requires specialized logic which can vary based upon why a transaction fails. This may include re-submitting the transaction programmatically, or ‘re-trying’ the transaction at defined intervals.