February 4, 2020 | Authored by: Kevin Cancilla
What should subscription businesses prioritize with their 2020 budgets?
With the new year now in full swing, subscription businesses should have a defined budget in place to allocate funds and plan out expenditures throughout 2020. However, there’s still time to make some last-minute changes and shift priorities toward those investments that require the most attention.
The subscription marketplace is growing more competitive with each passing year, and subscription businesses need to continually refine their services and expand capabilities to stay one step ahead of the biggest players in their markets and would-be industry disruptors.
Budgeting for the right solutions, whether they’re applications, infrastructure updates, supportive vendors, or experienced personnel, will get started on the right foot and help subscription businesses compete throughout the entire year. Don’t forget to prioritize these needs in your 2020 budget.
Expand subscription services
Many early adopters of subscription business models have been able to quickly carve out a customer base for their services. But subscription companies cannot risk becoming complacent as competition mounts, particularly from traditional consumer-facing organizations. Gartner expects three-quarters of B2C companies to offer subscription services in some capacity by 2023. Going head-to-head with organizations that have more resources and name-brand recognition could be a losing proposition for many subscription businesses.
The ongoing risk of subscriber fatigue only exacerbates the situation. Our commissioned research has shown that the average video streaming platform user in the United States has 3.4 subscriptions for these services. Each one of those subscriptions costs, on average, $8.53. That’s to say nothing of other consumer services people may use, such as video games, music, or software-as-a-service subscriptions.
People could be reaching the limit on the number of subscription services they are willing to juggle. The convenience of a comprehensive platform may become more enticing for these individuals, increasing churn rates for niche service providers.
This is a good time for subscription businesses to expand their services to keep up with customer demand and maintain steady retention metrics. That will put them in a better position to compete with larger organizations that will undoubtedly use their extensive resources to build out a comprehensive subscription platform.
For example, a video game service that specializes in creating media for younger audiences should consider adding more sophisticated games to its catalog. Eventually, its target audience will age out of its original offerings, but they can transition to more mature fare rather than drop the subscription altogether.
Invest in customer retention
Customer retention is one of the key indicators of subscription business health and should continue to be a primary concern for any organization. Investing in retention strategies throughout 2020 will help organizations generate revenue and build long-term customer relationships.
Subscription businesses can approach customer retention from various angles, and each one should be fully explored to maximize customer lifetime value metrics:
- Revamp promotional offers to reward customer loyalty. Subscription promotions often focus on bringing in new users, but it’s just as important to engage returning users who deliver the bulk of your revenue.
- Personalize the user experience for each individual. According to Epsilon, 80% of consumers are more likely to do business with a company that tailors the customer experience according to their specific preferences. Incorporate personalization in every facet of your subscription platform, from promotional offers to service bundles to billing and payment options.
- Make UI upgrades that improve navigation and usability. Ease-of-use is a major component of good UX, and customers are more likely to stick with a subscription platform that has an intuitive and straightforward interface.
- Create a detailed cancellation strategy. Cancellations aren’t always final when it comes to subscription services, so it’s in companies’ best interests to make this process as easy as possible. Reducing friction in the short term could pay off later when you win those customers back.
- Use specialized tools to prevent passive churn. Many subscriptions are canceled involuntarily due to payment failures and other issues, reducing revenue for subscription businesses. Best-in-class subscription billing and retention solutions can help reduce instances of passive churn and prevent unnecessary cancellations.
Update subscription billing solutions
Passive churn is but one of many billing issues that could impact subscription revenue. Billing plays a central role in the subscription business model, and the best subscription billing platforms ably support objectives like market expansion, service development, UX upgrades, personalization, and churn prevention. On the other hand, poor billing practices can stand in the way of those goals and prevent subscription businesses from maximizing revenue. With the right billing solution, subscription companies can continue to thrive throughout 2020.
For instance, supporting multiple forms of payment and currency, as well as accounting for local regulations, makes it easier for organizations to expand services into new markets. In addition, streamlined, easy billing processes help improve the user experience, leading to higher levels of customer satisfaction. And, as noted earlier, sophisticated billing platforms can reduce instances of passive churn through the use of subscription intelligence.
Partner with the right vendor to make 2020 successful
2020 promises to be an eventful one for subscription businesses. Anticipating emerging industry trends and continually improving subscription services and platforms will help organizations stay ahead of the competition and grow their business.
Working with experienced vendors and solution providers can be a major asset in this regard. Vindicia’s combination of leading subscription billing solutions and deep knowledge of the subscription industry make it the perfect partner for any subscription business. Our expert team is ready to help you take on whatever opportunities or challenges that 2020 presents. To learn more, contact Vindicia today.
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