Subscription services are a convenient and, often, necessary way for consumers and businesses to access goods and services. While customers are subscribing to services that provide anything from software, physical products, entertainment to continuing education, they also don’t always stick with those subscriptions. A new subscription benchmarks report by Recurly finds that subscription services across industries have a median churn rate of 7.02%.
Before exploring the highlights of the study, it’s worth noting that as this data is based on Recurly client figures, subscriptions sold via invoicing or other payment options (a typical process for large B2B SaaS products in particular) are unlikely to be included in these analyses.
Churn Rates Range from 3.35% to 12.71%
Recurly analyzed more than 900 e-commerce sites that use their subscription management platform over a 24-month period (January 2017 to December 2018) and found that with a 10.65% churn rate, the OTT industry has one of the highest such rates of any B2C industry, second only to box of the month subscriptions (12.71%). Perhaps this is not too surprising, as recent research from Comscore demonstrates that while there are many OTT services available in the US, only four (Netflix, YouTube, Amazon Video and Hulu) have more than 25% reach. Separate figures by Hub Entertainment Group on indispensable TV programming also shows that only Netflix has more than 4 in 10 subscribers stating that they would keep the service if forced to abandon the others.
Consumer goods fair only somewhat better with a 9.32% churn rate, which is still well above the overall median churn rate of 7.02% for all industries. However, prior data from Recurly found that consumer goods have a lower than average risk of involuntary churn (churn caused by factors such as failed payments or credit card declines).
On the other hand, high on the list of industries that suffer from involuntary churn is SaaS, which that prior study found at risk of losing 7.5% of customers monthly from involuntary churn. In spite of this, SaaS also boasts the second-lowest churn rate (4.90%) of all the industries examined.
Plan Length Options Vary by Industry
Overall, about two-thirds (68%) of the businesses analyzed offer the option of more than one plan length, while around one-quarter (27%) only offer monthly subscriptions and a mere 5% only offer subscriptions on a yearly basis.
Subscriptions to digital services are more likely to offer multiple plan types (77%) versus those for physical goods (64%). Furthermore, subscriptions that are offered only annually are more common for digital services (6%) than for physical goods (2%).
Breaking this down further into separate categories reveals that:
- Consumer goods subscriptions are most likely to be offered on a monthly only basis (38%), but 3 in 10 (29.5%) provide a full variety (monthly, quarterly and annual) of subscription options. Only 3% offer annual-only plans.
- OTT subscriptions see a less diverse range of plan options, with more than half (57.1%) offering monthly and annual plans, 22.7% offering the full variety (monthly, quarterly and annual), and 16% only offering monthly plans. No OTT subscription sold its packages on an annual-only basis.
- A slight majority (51.8%) of SaaS companies offer subscriptions on a monthly or annual basis, with around one-quarter (24.0%) offering monthly only plans and some 14.6% offering monthly, quarterly and annual options. Some 3% sell on an annual only basis.
One-Fifth of Businesses Offer One-Time Purchases
Some 19% of companies offering subscription services also include one-time purchase options. This is more prevalent in industries that offer physical goods (44%) than for digital industries (16%). The exception is the OTT industry, where more than one-third (38%) offer one-time purchases (usually pay-per-view events), which is only slightly fewer than the 41% of consumer goods businesses offering the same.
Considering the nature of SaaS, it should come as no surprise that very few (10%) of the businesses in that industry offer one-time purchases.
To read more, find the subscription benchmarks here.
About the Data: Results are based on an analysis of more than 900 e-commerce sites that used the Recurly subscription management platform over a 24-month period from January 2017 to December 2018.