What is subscription fatigue?

Subscription fatigue refers to a potential decrease in consumer interest around subscription services over time as the number of available subscription offerings increases. With the massive growth of the subscription economy in recent years, more and more businesses have flocked to the subscription business model. Today, many consumers hold more subscriptions than ever before, for everything from their utility bills to subscription streaming services (e.g. subscription video services like Netflix, HBO Max, and Amazon Prime Video) to curated subscription boxes, meal kits, and recurring deliveries of essential household goods. 

The idea behind subscription fatigue is that such a crowded subscription landscape could lead to greater hesitancy among consumers to sign up for yet another recurring offering. In theory,  subscription fatigue could increase the likelihood that customers cancel subscriptions outright, leading to higher churn rates and decreased customer lifetime value, average order value, and customer satisfaction.

How to mitigate potential fatigue surrounding the subscription business model 

With so many subscriptions on the market today, one customer often holds subscriptions for multiple services. It’s important for subscription businesses to remember that they aren’t just competing with other brands in their vertical—they’re competing with all recurring offerings. Therefore, to stand apart from the competition and reduce the likelihood of potential subscription fatigue, a subscription business should aim to make their subscriptions as flexible and customizable as possible.

Though it might sound counterintuitive, one of the most effective strategies for reducing customer churn around subscriptions is making it easy for customers to skip or reschedule an order. By providing flexible delivery options, subscription providers can empower their customers to stay with their business longer rather than canceling altogether. It can also be beneficial to offer subscribers multiple delivery frequencies—for example, choices for monthly subscriptions, weekly subscriptions, or deliveries on a custom interval. This way, customers can customize their deliveries to fit their schedule.

What is the subscription economy?

The subscription economy refers to the increasing presence of subscription-based businesses in today’s ecommerce landscape. In subscription-based business models, companies sell products or services that recur on a set cadence, paving the way for lasting customer relationships that can lead to revenue growth and increased customer lifetime value. As subscriptions can take a multitude of forms and involve a wide variety of product offerings, many industries feed into the subscription economy, including the software industry, food and beverage industry, and more.

Best business practices for subscription services

As more and more subscription businesses enter the ecommerce landscape, subscription companies must provide their customers with ongoing value that goes beyond their products or services. By responding to consumer needs, listening to consumer attitudes, and collecting customer feedback, subscription companies can foster long-term relationships with their subscribers that lead to increased lifetime value, increased brand loyalty, and greater brand awareness. Another important strategy for subscription model businesses is to make offerings as flexible as possible in terms of product swaps, delivery dates, add-on products, and more.

What is subscriber churn?

Subscriber churn is when customers stop using the recurring products or services of a subscription business over a certain period of time. Churn rate is one of the most important metrics for subscription businesses to track, as generally, customer acquisition costs are often far higher than those for retaining existing customers. By taking steps to reduce churn and improve subscriber retention rates, businesses can set themselves up for increased revenue and customer lifetime value (LTV), as well as monthly recurring revenue (MRR). There are several ways that a subscription business can calculate churn rate, but most important is to establish a baseline for your business and measure churn consistently over time to effectively hone your strategy.

How can subscription businesses reduce churn rates? 

There are several strategies subscription businesses can use to reduce customer churn rate. One of the most effective strategies for reducing subscriber churn rate is to make your subscriptions as flexible as possible, with options for customers to manage their own subscriptions (including product swaps and the ability to reschedule or even skip a delivery). This improves the customer experience in a way that encourages your customer base to stay with your business longer, increasing LTV and revenue.

What is involuntary churn? Voluntary churn vs involuntary churn

Involuntary churn (also referred to as passive churn) refers to when customers unintentionally opt out of a subscription business’s products or services. Unlike voluntary churn, where a customer actively decides to end their service with a subscription business, involuntary churn occurs due to failed transactions, such as failed payments when credit cards expire, when there are insufficient funds in a bank account, or when a credit limit is maxed out. Both passive and active churn pose major challenges to the health of subscription businesses, who not only rely on recurring payments, but also long-term customer relationships and customer retention. 

Optimizing payment processing to reduce involuntary churn 

One strategy subscription businesses can use to reduce involuntary churn is to communicate with customers when a credit card’s expiration date approaches. Sending the subscriber an email or automatic notification reminding them to update their payment information can help prevent payment failures before they occur, thus reducing involuntary churn and increasing customer lifetime value. Businesses can also consider using a payment processor or subscription management solution with functionality like automatic retries. Here, if a payment fails, the provider will retry the transaction on a specific cadence, often resolving payment issues behind the scenes without having to get customers involved.

What is a recurring subscription product?

A recurring subscription product is any product that is purchased on a set cadence via recurring payments. Subscription businesses’ products can be either physical, as in a curated box of tangible items, or digital, as in offerings from software as a service (SaaS) providers. To enter into a subscription agreement with customers, subscription services must first obtain consent to charge customers on a recurring basis in exchange for their purchase. Then, they must obtain each customer’s payment information, including payment details like their preferred payment method (for example, whether they prefer to make bank account or credit card payments) and billing address. If the business offers multiple cadences for their recurring products (e.g. options for weekly, monthly, or bi-monthly shipments), the customer must also select their preferred payment cycle.

What are the benefits of the recurring billing model for businesses? 

Recently, the subscription economy has been experiencing monumental growth, with more and more merchants flocking to the subscription model and an increasing number of consumers entering into subscription billing agreements. For a subscription business, a major benefit of recurring billing includes stable and continuous revenue, making processes like forecasting and inventory management easier and more accurate. The recurring nature of this business model is also conducive to customer retention and loyalty, as it allows businesses to get to know their customers over a longer period of time and apply their learnings to continually hone the customer experience.

What is an annual subscription?

In an annual subscription, a customer enters into an agreement with a business where they pay an annual recurring fee in exchange for products or services. Often, annual subscriptions fall under the access subscription model, where customers pay a recurring fee in exchange for membership or access to gated content, products, or services. Examples could include an annual plan for access to state parks, an annual subscription plan to a grocery delivery service, annual pricing for the services of a SaaS company, or a magazine subscription with an annual contract.

Annual vs monthly subscriptions & other subscription cadences

Subscription products and services can exist on any cadence. In addition to annual subscriptions, many businesses offer monthly subscription billing, weekly subscription billing, or subscriptions with a custom billing interval (for example, every third week). A subscription’s cadence all depends on the products or services it involves, as well as the preferences of the customers who purchase it. For example, a frequently-used consumable product, such as laundry detergent, may be better suited for monthly billing plans. Meanwhile, an online magazine subscription might be more suited for annual billing, which would allow annual subscribers to “set and forget” their purchase for an entire year until the next billing cycle.

What are the benefits of annual subscriptions? 

Regardless of their cadence, subscriptions offer numerous benefits for both consumers and subscription businesses. Due to their recurring nature, they allow subscribers to form relationships with brands over a longer period of time, making it possible to increase lifetime value (LTV) and customer loyalty while reducing customer churn. Subscriptions offer businesses a reliable source of recurring revenue, making processes like forecasting and inventory management easier and more accurate. For consumers, subscriptions have the potential to offer both convenience and value.

What is a yearly subscription?

In a yearly subscription (also referred to as an annual subscription), customers enter into a contract with a business where they are billed annually on a recurring basis in exchange for products or services. Many yearly subscription offerings fall under the access subscription model, with subscribers making annual payments in exchange for discounts and deals, new releases, gated content, free shipping, a membership, and more. For example, a fitness app with an annual recurring fee and a software as a service (SaaS) company with repeating yearly pricing are both annual subscriptions. 

Yearly vs. monthly subscription plans

Subscriptions can exist on any recurring cadence—not just annually. Many businesses give customers options for monthly subscriptions, weekly subscriptions, or subscriptions on a custom interval (for example, bi-weekly). The ideal cadence for a subscription all depends on several factors, including the nature of a company’s products or services and the preferences of its customer base. For example, subscribers who prefer greater flexibility in skipping or rescheduling their deliveries may prefer to make monthly payments rather than yearly ones.

Benefits of annual subscriptions

Regardless of their cadence, subscriptions offer great value for both consumers and merchants. For businesses, subscriptions provide a reliable source of recurring revenue. By automatically charging a customer’s debit card or credit card on a recurring basis for a fixed price, businesses can eliminate the mental workload for customers of remembering to purchase certain products or services. Additionally, subscriptions often come with discounts, providing financial incentive for customers to sign up.

What is the subscription business model?

In the subscription business model, businesses sell their products or services on a recurring basis. Subscription services can include subscription boxes, software as a service, gated memberships, and more. The subscription revenue model is becoming increasingly popular for both merchants and consumers, with the subscription economy projected to reach nearly $500 billion by 2025.

Benefits & risks of subscription business models

Because subscription businesses benefit from a reliable recurring revenue stream, they can also experience greater ease with key business processes like forecasting and inventory management. Additionally, the recurring nature of a subscription product or service has the potential to form strong customer relationships over a long period of time, increasing customer lifetime value.

However, customer acquisition costs can be high for subscription businesses. This makes it especially important for these brands to focus on their retention strategies, and balance their customer lifetime value with customer acquisition cost. Depending on their product offerings, certain businesses may also risk subscription fatigue on their customers’ part, increasing the likelihood of churn. This can be mitigated by conducting proper data analysis and collecting customer feedback to ensure the right balance of products is offered. 

Subscription model success strategies

To set themselves up for success, subscription model businesses should be sure to make their offerings as flexible as possible. Enabling subscribers to manage their own orders by skipping deliveries and swapping products can improve business performance by reducing customer churn and increasing customer loyalty. To increase average order value and improve customer satisfaction, subscription services can also offer one-time purchases alongside their recurring offerings.

What is a monthly subscription?

In a monthly subscription, a customer enters into an agreement with a business where they pay a recurring monthly fee in exchange for products or services. This might involve a monthly box of physical products, a monthly membership, or access to gated content that renews on a monthly basis. Though monthly subscriptions are among the most popular cadences for subscriptions, many businesses also offer options for a weekly, bi-weekly, or quarterly subscription service. Some businesses also offer annual subscription services, as well as subscriptions on a custom interval. 

What types of monthly subscription boxes exist? 

A monthly subscription box can take many different forms. Some fall under the curation box subscription model, where the merchant selects an assortment of products for monthly delivery. These often take the form of a themed box, such as a monthly summer clothing box, a monthly box of natural beauty products, or a monthly, seasonal box of self-care products. Other monthly box subscriptions may fall under the replenishment model, where the same products—like razors, fresh flowers, or coffee—are sold with each delivery. 

Monthly subscription box success strategies

Regardless of their cadence, the best subscription boxes balance convenience and flexibility with value for their customers. This convenience and value can come in many forms. Some boxes will price their offerings at less than retail value, or offer a “subscribe-and-save” option that provides a discount for recurring purchasers. Other services might include a discount on a customer’s first box, or a free monthly surprise in each delivery. In terms of flexibility, businesses can offer customers options to swap products in their order or skip or reschedule deliveries—strategies that are shown to help reduce customer churn and increase satisfaction.

What are subscriptions?

Subscriptions involve the selling of products or services on a recurring basis for a specific period of time, rather than as one-time purchases. Subscription prices can either be paid as a lump sum upfront for a specific subscription period (i.e. an annual subscription to a magazine), or as recurring payments that are made on a regular cadence (i.e. a monthly subscription for a gym membership). There are three main subscription business models: curation subscriptions, replenishment subscriptions, and access subscriptions.

What is an example of the subscription life cycle?

Let’s put the subscription life cycle in more concrete terms with an example. After seeing that a subscription coffee company offers a free trial period for new customers, a customer decides to sign up for a subscription. They select their desired subscription products and delivery frequency, then enter their payment method details, shipping address, and other required information. On the billing date, their credit card is charged, and they then receive a delivery of their chosen subscription product. This cycle continues on the next billing date unless the customer decides to cancel their subscription. 

Customers can also take actions to manage products in their subscription. For example, a merchant might enable customers to skip a delivery or pause payments and deliveries for a set time period—a strategy that both improves satisfaction and reduces unnecessary customer churn. Merchants might also enable customers to upgrade their subscription to a more premium version (upselling), or add on complementary one-time purchases to an existing subscription (cross-selling).

How do subscription business models benefit merchants and consumers?

Consumers are drawn to subscriptions for their convenience. They can sign up and input their payment information once, “setting and forgetting” their subscription service to receive their favorite products and services. Additionally, the subscription business model often provides a huge value draw for shoppers, as businesses will often offer discounts for recurring purchases as opposed to one-time purchases. This can be seen in the “subscribe-and-save” (replenishment) subscription model, but businesses often also offer free trials or other price discounts to incentivize subscribers to sign up.

For brands, subscriptions offer a reliable source of recurring revenue, which enables more accurate forecasting. Due to their recurring nature, they facilitate customer relationships over a longer period of time, allowing businesses to collect valuable product feedback and hone their product offerings to improve customer satisfaction. When subscriptions are seamless and flexible, businesses benefit from higher LTV and AOV.

What is subscription commerce?

Subscription commerce is a business model where businesses offer products and services on a recurring basis. Subscription services and businesses can include SaaS companies, subscription box companies like meal kits and pet food companies, streaming services, recurring memberships, and more. Subscription commerce revenue is frequently calculated in terms of monthly recurring revenue (MRR) and/or annual recurring revenue (ARR).

Why do consumers love subscriptions? 

Subscriptions offer a multitude of benefits for both consumers and businesses. From a user experience perspective, customers benefit from its convenience, as they only have to input their payment information upon signup to receive recurring deliveries of their desired products or access to certain services. Often, subscription products and services also offer subscribers a discount for their repeat purchases (“subscribe-and-save”), as well. 

How do businesses benefit from the subscription business model?

For brands, subscriptions create a dependable source of revenue that recurs on a set cadence. This not only makes forecasting revenue easier, but also streamlines ecommerce processes like inventory management. Additionally, subscriptions have the potential to increase average order value and customer lifetime value across verticals and categories, as we found in our latest State of Subscription Commerce report. Particularly when coupled with customizable product offerings like cross-sells and upsells, as well as flexible checkout and delivery options like skipping an order or swapping products, subscription model businesses can improve customer retention and loyalty, reduce churn rate, and optimize the overall customer experience.

What is subscription management?

Subscription management is the overseeing and handling of all subscription lifecycle operations for your customers. It includes all the ways that a company handles various aspects of their customers’ subscriptions—including all the ways they allow subscribers to manage their own orders. These include not only automated processes like recurring billing, but also manual processes like enabling product skips and order swaps, editing key customer data (like a mailing address), and making mid-cycle changes to a customer’s service.

What is a subscription management platform? 

A subscription management platform (also referred to as a subscription management solution) is a type of software. It combines multiple different tools that work together to help merchants serve the unique needs of their subscribers. 

The best subscription management software for your business all depends on a variety of factors, such as your stage of business growth, your previous experience with subscriptions, and the types of products or services you offer. 

How can subscription management software benefit my subscription business? 

Subscription management software can greatly benefit both businesses and subscribers. When customers are empowered to manage subscriptions themselves, they can typically meet their needs more quickly and easily. When merchants facilitate the subscription management process in this way, it can lead to higher levels of customer satisfaction and loyalty. 

For subscription model businesses, having a solution with all the subscription management tools needed to streamline operations can pave the way for continued growth and reduced support needs. It can also allow a business to get the most value possible out of recurring billing and subscription pricing models, even empowering the business to support multiple pricing models. This can help facilitate higher monthly recurring revenue (MRR), customer lifetime value (LTV), and retention of existing customers.