State of Subscription Industry Report 2023: trends & changes

The main concern of merchants today is retaining and further monetizing their existing customer base. Now they prioritize innovative ways to do it, moving away from traditional customer acquisition methods.

In a study conducted between March 18 and April 15, 2023, researchers of Chargebee, a subscription billing software firm, analyzed the customer retention activities of over 318 leaders in the subscription business industry.

The survey shows that customer retention has become the top priority for 87% of the surveyed businesses. The report also indicates a growing trend towards customer churn. 42% of B2C companies are churning 3% or more monthly, and 16% are churning 4% or more. The average is close to 6%, nearly double the pre-pandemic average.

A tactical shift has taken place from dealing with churn by adjusting priorities and budgets to a more focused approach generating revenue from existing customers.

Respondents also report that their top concern for this year is keeping up with rapidly changing technology and the profound impact of artificial intelligence (AI) on operations.

Companies seek to remain competitive amid rising consumer demand and technological advancements across all industries.

79% of businesses forecasting growth this year. As for pricing trends, the vast majority anticipate either stability or escalation, with 92% of subscription businesses predicting their prices to rise or maintain their current levels.

The leading growth strategy involves enhancing the quality and responsiveness of customer success and support services.

According to the report, companies are showing a maturation in managing and curbing cancellations due to improvements in operational efficiencies and capabilities. In 2020, businesses spent 15% on technology and tools. Now they are spending 51%. Meanwhile, retention initiative spending went from 14% in 2020 to 32% in 2023. Among fruitful initiatives experts mention offering improved personalization, upgrade offers, proactive churn deflection, support gestures, loyalty programs to build brand loyalty and retention and anticipate growth in the next year.

Consumers tend to scale down their abilities to maintain their previous shopping patterns so retailers and marketers must adapt to falling budgets and rising costs.

Survey experts note that trends are similar over the years, but the reaction to those trends shows progress.  Companies are investing in technology and automation to improve productivity and efficiency, to improve the customer experience, and to track the right results to improve the accuracy of decision making.

B2C companies are most concerned about the impact of external forces on their business, from AI technologies like ChatGPT, which are transforming customer service and content generation, to the tight labor market and rising interest rates.

On the other hand, the subscription model is evolving, requiring companies to realign with consumer behaviors continually. More companies are innovating their business models to present new experiences for customers.