What subscription trends will shape markets, customers and businesses? We asked our Frisbii colleagues.
TL; DR: A summary of all current subscription trends #
- Usage-based billing supports more flexible revenue streams such as AI-features while providing transparency and control to your customers
- Sharing economy will increase in importance, providing access to otherwise expensive products and services and reducing the carbon footprint.
- Credit card tokens are one of the easiest ways to reduce involuntary churn and failed payments due to credit card updates.
- Data analytics and predictive analytics are the future of predictable recurring revenue and will support your business to make the right decisions.
- Self-service options will help you scale customer demands and provide 24/7 support. Give your customers control over their subscription plans and payments to increase loyalty.
- Loyalty programs ensure long-lasting customer relationships and increase engagement which in turn will increase the perceived value of your brand and product in your customers’ lives.
- Churn prevention is one of the biggest levers to ensure a high customer lifetime value and keep your revenue forecasts accurate.
- In a sea of competitors, it is crucial to know your unique selling points and communicate them clearly to your audiences.
- AI makes it easier to add features and services to your portfolio but can also overwhelm you if you don’t focus on AI projects that have a proven positive business outcome.
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 Frisbii)
Many SaaS (and other subscription-based) companies currently struggle to find the right pricing balance with AI-features. Given that usage and outcome is very different depending on the user, a fixed price for AI-offers can easily decrease revenue.
At the same time, many customers don’t want to experience “bill shock” at the end of the month when they suddenly see a huge pricing increase due to their AI usage.
We therefore suggest adding usage-based pricing to allow for a more control and transparency. Communicate your usage-based models to your customers, be clear when additional fees will be incurred and provide a clean invoice to increase trust. Additionally, we have seen outcome-based pricing to be particularly successful, e.g. only billing a customer if the output was valuable to them.
Example:
A B2B company uses your service software to streamline and automate their self-service options. Included in the offer is an AI chatbot to reduce tickets for your support team. The customer will only be billed for every ticket the chatbot solved thus justifying any costs with a clear and desirable outcome.
Read more about the different usage-based pricing options the Frisbii recurring billing platform offers you and see in our on-demand usage-based billing webinar how to apply them to your products.
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.
Tokenization #
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 Frisbii)
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 KPI can provide amazing insights into a wide range of subscription data:
- Failed payments, successful payments, popular payment methods
- Retention, customer lifetime value, churn
- Popular subscription plans and average lifetime (value)
- Up-grade, downgrade and cancellation rates
- Seasonal and market differences
Predictive Analytics
Aside from performance analytics, which can show you the past and present of your payments, subscriptions and customer health, there are also options to leverage predictive analytics for forecasting.
Predictive analytics will use your historical data to make predictions about future events such as churn behavior, expected customer lifetime value, or campaign success.
How does it work at Frisbii? Watch our webinar and take a peak at our early iteration of our revenue insights prediction labs:
Self-service #
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, CMO at Frisbii)
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.
Chatbots have become a useful tool to offer interactive support 24/7 and even provide customers with an easy way to make changes to their subscription plans, gain access to their data and solve other, smaller tasks. However, make sure that your chatbot is compliant and knows how to deal with sensitive data (e.g., when a customer adds their phone number, so a support agent can contact them).
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Last but not least: evaluate and optimize your chatbot, so it will get better. Business cases have shown that a chatbot with a limited service offer can often provide more and better help than a chatbot that is supposed to help with everything.
Loyalty programs #
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.
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 with their business and community concept.
AI everywhere #
With the surge of GenAI tools, it is now easier than ever to add AI features to your subscription services across different stages of the customer journey and for different uses. However, comparatively speaking, GenAI is still in its baby shoes and for many companies, the true value that provide reliable revenue has not yet been found.
We advise all of our customers to take a look at their pain points and opportunities before using AI for AI’s sake. This will focus any AI projects that have a positive business outcome and also make sure that budgets can be properly allocated.
In fact, our Head of Data Science Erik Mathiesen-Dreyfus explains the basics of successful AI project planning in our webinar:
Ask yourself: what processes, workflows, data and manual tasks are currently costing you a lot of work and money? What information do you lack to reach your goals? What are big pain points of your customers?
The biggest key to use AI efficiently is to know what you actually need it for and apply, test and measure it.
We combined these and other trends in a comprehensive report for you to download and share. Read all about the why, what and how of subscription trends.
