As subscription businesses look to weather the year ahead, customer acquisition poses a major challenge.
For the PYMNTS study “The State Of Subscription Business: Best Practices And Business Performance Drivers,” done in collaboration with FlexPay, we surveyed 200 executive decision-makers at companies that offer subscription-based services and products. The September study sought to understand the relationship between payments friction and customer churn as well as the strategies that most effectively enable firms to manage these challenges.
Unsurprisingly, 59% of those surveyed reported that the economic downturn is one of the relevant challenges they face in the year ahead, and a plurality (37%) listed this as the single most pressing challenge. Yet the effects of this downturn on consumer behavior loom nearly as large, posing difficulties especially when it comes to bringing new subscribers into the fold.
Nearly half of those surveyed (48%) stated that attracting new customers is one of the relevant challenges they face this year, though a smaller share (15%) cited it as their single most important challenge. Notably, subscription firms are far more concerned about their ability to reach new consumers than to hold onto the loyalty of those who are already subscribed. Only 37% reported seeing retention as a challenge this year.
There was little consensus among those surveyed as to what the most important challenges of the next 12 months will be. Aside the economic downturn, no other concern was ranked most pressing by more than 15% of the firms — a testament to the wide range of challenges these businesses face, all of comparable severity.
Eighteen percent of those surveyed were most concerned about cost increases and inflation, 10% about difficulties hiring quality employees, 14% about customer retention and 7% about securing external funding.
“This coincides with a lack of consensus regarding the key factors that drive business performance,” the study notes, “as well as a lack of data-driven knowledge about the best practices of the most successful subscription companies.”
