The biggest Subscription Trends

What subscription trends will shape markets, customers and businesses? We asked our Billwerk+ colleagues.

Flexible billing / Usage-based Billing / Metered Billing

“One of the recurring themes within subscriptions is usage-based billing because it caters to a wide range of different customer budgets and requirements without alienating them due to fixed pricing (and offers).” (Sushant Chavan, Product Manager at Billwerk+)

Metered or usage-based billing is probably the most popular of these price models and is simple: subscribers only pay for what they use. This concept is not particularly new when it comes to certain business models. The provision of cloud-based servers is usually tied to a pay-per-use billing model and allows companies to scale depending on their activities.

But depending on your subscription model and your customer usage behavior, you can use different forms of metered billings for subscription boxes, SaaS, media libraries, etc.

• Per-unit billing
• Volume-based pricing
• Tiered usage billing
• Overage based billing

Circular Economy / Sharing Economy

With climate change, inflation, and limited resources for production, it’s up to consumers and companies to find alternative ways to produce, purchase, and use products and services.  

As of 2018, only 9,1% of the world economy was circular (Circle Economy via IISD and SITRA, PDF)

Many subscription business models support a more sustainable thinking – consciously or as a side-effect. Businesses offer shared resources or enable customers to only pay for and use what they really need. Even product subscriptions can offer adaptive models where customer control the frequency and amount based on their usage.

Read in our subscription industry report #4, how circular principles and subscription business models can be aligned.

Tokenization

“The tokenization of cards will also be big in 2024 when it comes to subscriptions. I am still talking to merchants who are unaware of this function, and they are AMAZED when I tell them about it.” (Mikkel Thor, Sales Executive at Billwerk)

Tokenization is a secure way for recurring credit card payments that is safer than the traditional storage of credit card information and causes less friction if and when a credit card is updated or renewed which is especially relevant for subscription service providers. The token acts as a secret handshake between the merchant, acquirer and credit card bank to recognize the customer’s credit card even if it might have changed its expiration date after a renewal.

According to Visa (2022), tokens can reduce fraud by 28% and increase approval rates by 3%.

Merchants usually just pay a minor additional fee but are able to massively reduce the support and escalation workload when it comes to failed payments due to credit card changes. Visa states that some pilot merchants saw an uplift of tens of millions of dollars due to the higher authorization rates (Visa, 2021).

Even better, customers don’t have to deal with the fallout of failed payments (e.g., the pause or cancellation of a service) and they are less likely to take this disruption as “inspiration” to cancel the subscription.

You can read more about tokenization and how it works in our blog article.

Data Analytics

Are data analytics really a new trend when it tops the trend lists every single year? Yes, because companies are only slowly uncovering the many different benefits and uses of centralized, structured and connected data.

Subscription businesses usually have no shortage of data but unfortunately often find themselves lacking in actionable insights that provide new information and key recommendations to grow their business.

Things like revenue and cash forecasting can be gamechangers in planning and budgeting, whereas churn and customer lifetime value predictions (supported by AI) can maximize ROI. It’s already a big topic and will only grow in importance.

(David McGuinness, Chief Product Officer at Billwerk+)

One of the major advantages of subscription-based business models is the constant customer/user engagement over a much longer period of time. To use this data, companies need the right tools and KPIs to actually measure and analyze it.

If successfully implemented, these KPIs and tools can provide amazing insights into a wide range of customer behavior based on:

• Seasons, months, weekdays and daytimes
• Demographics (age, gender, job, location, etc.)
• Free trials, discounts, and vouchers
• Conversion, retention and churn behavior (and potential signifiers for all these states)
• Customer Lifetime Value
• Different pricing strategies, subscription plans and markets
• Features and add-ons
• Layout & Design
• Messaging
• etc.

Add-ons to enrich the subscription experience

In many subscription fields the competition is rising, and the subscribers are stagnating or declining. Streaming platforms are a good example to show how user growth alone can’t possibly be the only way to increase long-term revenue, especially as soon as other (bigger) players are entering the market to get a piece of the market share and share of wallet.

Add-ons – if done correctly – are a great way to keep “basic” customers happy and offer more demanding customers and requirements further features. However, these features need to add actual value to the user experience and fit the product or service.

• addressing a pain point/requirement
• aligned with the overall product strategy
• possible to develop
• realistic in regards the ROI

Self-service to scale and empower the customer

Efficient self-service offers are about transparency and independence to enable customers and take pressure from support and sales teams.

„We experience a huge shift in customer and consumer behaviour caused by a new generation of users and buyers. In the past, the personal service provided by the company was the most relevant factor for a great customer experience but nowadays customers love to do things on their own and be an active part of the process.“ (Silke Hoersch, VP Marketing at Billwerk+)

And customers do like it – when it works. According to data from Higher Logic (formerly Vanilla Forums), 79% of surveyed customers expect self-service as a standard. 77% even view companies more positively if self-service is offered as one of the support options.

For subscription business models, self-service usually involves some crucial features that benefit both companies and customers: payment methods and details, contact details, and contract management. Additionally, self-service usually includes a wide array of enablement material to make better use of the product and service.

Loyalty programs for long-lasting relationships

Queue-it states that 50% of the most loyal customers usually actively recommend brands to others, therefore providing free and organic marketing and reach. 84% are more likely to stay with a company that offers loyalty programs and 60% see these programs as something that “transcends the transactional.”

Loyalty programs can have many different forms and reward customers depending on your services and products as well as your general customer base. For example, many loyalty programs simply work with point-systems that can be exchanged for vouchers, freebies or discounts.

But you could potentially also offer exclusive (digital) events, special support, access to beta products, or even a “vote” when it comes to future product or service features.

(Involuntary) Churn prevention

The biggest enemy of many industries and businesses is a high churn rate. Studies have shown that many customers don’t really give you a heads-up before they churn. However, to quote the communication theorist Paul Watzlawick said: you can’t not communicate.

As such, most customers do give off subtle (and sometimes not so subtle) warning signs which – if documented, identified and tracked – can be used to create prediction models that help your sales and support teams to intervene – sometimes even before the customer even thinks about cancelling their subscription (aka churn prediction).

However, churn prevention is not just about finding unhappy customers and turning their frown upside down. It’s also about identifying touchpoints across the customer journey that constantly cause frustration and support issues and transforming them into positive (or at least frictionless) experiences.

To be able to identify these touchpoints, data analytics are just as important as for churn prediction and necessitate a centralized data overview that allows a customer view across the entire subscription lifecycle.

Comeback of the USP

Nowadays, nearly every single subscription service or product has a mind-boggling number of competitors which makes it incredibly difficult for users to choose any of them – which could even lead them to choose none of them.

An overabundance of choice – as has been proven (PDF) – can actually lead people to opt for the easiest one: not choosing any of the options to avoid the stress.

Subscription businesses can make the decision process much easier by communicating truly unique selling points (USPs) which can range from product features to service to more cultural topics such as CSR (Corporate Social Responsibility) and ESG (Environmental, Social, Governance).

For example, the Danish Wardrobe Collective (Det Kollektive Klædeskabet) combine thrifting, love for fashion and sustainability within their business and community concept.

AI everywhere

Especially when it comes to predictive analytics, AI can support businesses immensely by analyzing existing, historic data and generating forecasts based on probability. For subscription businesses, this could be predictions of seasonal spikes, next-best offers, cross- and up-selling recommendations and even “ideal” customer profiles to target in sales and marketing campaigns.

But that is not all. Predictive analytics can be extended to perfect price and offer calculations which can be a huge help for sales teams to define personalized pricing plans that benefit the customer and still create enough revenue to meet sales targets.

To stay ahead in the world of subscription business, you need a solution that can help you automate, optimize and innovate.

Sign up for a free Optimize trial (no credit card required for the registration) or set up a demo meeting with one of our experts.