Data Suggests Brands Could Lose $129B to Involuntary Subscription Churn

The booming subscription industry, poised to hit a market value of $1.5 trillion by 2025, is encountering a formidable foe—subscriber churn. A recent survey from Recurly reveals that the industry could forfeit a staggering $129 billion to involuntary churn alone in 2025. 

In response to this churn challenge, brands are increasingly recognizing the need to fortify their subscription models to meet the needs of modern consumers.

The Rise of Subscription Culture

The shift towards subscription purchases is rooted in the modern consumer’s desire for convenience, personalization, and a seamless user experience. The subscription model aligns with the on-demand culture of today, where individuals seek instant access and tailored experiences.

Many consumers are drawn to subscriptions because of the convenience they provide. Whether it’s streaming services, meal kits, or software subscriptions, consumers appreciate the hassle-free experience of having products or services delivered regularly without the need for repeated manual transactions.

The rise of subscriptions also reflects a broader societal shift towards access over ownership. In a world where minimalism and experiences take precedence, consumers increasingly value access to services or products rather than owning them outright.

In the midst of this changing consumer behavior, subscriptions offer brands a reliable and predictable revenue stream. The steady influx of recurring payments allows companies to better forecast their financials, plan for growth, and allocate resources strategically.  So, how are brands losing a potential $129b in subscription revenue?

Involuntary Churn Looms Large

Involuntary churn poses a major potential threat to brands who rely on subscription revenue. Involuntary churn results from payment errors, such as expired or lost cards, and stands as a top challenge for subscription businesses.

Recurly’s analysis of billions of data points underscores the massive economic impact of inadequate churn management. In effect, these payment errors not only amount to substantial revenue loss, but also subscriber attrition, and a compromised brand experience.

According to Jonas Flodh, CPO at Recurly, “Subscriber churn is the enemy of every brand we speak to. Many businesses have basic, manual solutions in place to manage churn, specifically involuntary, but they don’t realize how much they can move the needle with a better strategy and automated tools.”

To mitigate revenue loss risks, subscription businesses must employ both proactive and reactive techniques, such as advanced automation and machine learning to streamline the payment experience. While some platforms use static rules, Recurly combines years of data with AI-powered transaction retry models. This allows them to continually refine and optimize automated retries for improved efficiency.

As the subscription industry grows, the battle against churn will continue to intensify, making robust churn management solutions critical for plugging revenue leaks and ensuring a seamless subscriber experience.