Customers are no longer signed up to one subscription service anymore, they most likely are paying for several, but what more can companies do to ensure they are there for the long haul?
Lina Tonk, CMO of subscription management platform Recurly, reveals the keys to customer retention, innovating in a highly competitive subscription payment landscape and how artificial intelligence is already automating this process to achieve maximum customer satisfaction.
Payment Expert: Firstly Lina, since the beginning of recurring subscription payments, what have been the most important developments for these payment methods?
Subscriptions have existed for a very long time, but with the rise of digital payments, businesses have made strides offering customers services that are both valuable and meet their needs.
Customers seek transparency – they want to know what they’re paying for, how their payments are handled, and the terms of their subscriptions. This demand has driven businesses to improve how they communicate about pricing, payment options, renewals, and any changes in their service offerings, including offering more flexibility.
This is particularly important during times of economic uncertainty, when customers need to know that they won’t be trapped into a subscription they no longer need or want to pay for. Customers appreciate the ability to easily manage their subscriptions, adjust plans, or cancel if needed without facing unnecessary barriers.
PE: On the flip side, what are some of the challenges companies are facing right now when it comes to the subscription payment process?
One of the major challenges companies face with subscription payment models today is retaining increasingly brand-agnostic customers in a highly competitive market. With more and more brands embracing the subscription model, customers have a near-endless range of options, and their loyalty is not guaranteed.
Over half (58%) of customers have started one to three new subscription services in the past year alone. However, subscribers often cancel their services within four to six months. While many consumers are signing up for subscriptions, this short lifespan underscores the difficulty companies have in securing long-term commitment from customers.
To address this issue, businesses must focus on building a strong relationship with customers during the initial subscription period. Companies need to consistently deliver on their promises to offer personalised services and adapt to evolving customer needs to maintain engagement and reduce churn.
The challenge is not just attracting customers, but ensuring they find long-term value in their subscription – key to improving retention rates and building stable revenue.
PE: Why is it critical that companies provide multiple payment methods at the checkout, and can you outline some of the more popular methods?
When customers are asked to spend their hard-earned money, businesses need to earn their trust by making the payment process as smooth and accommodating as possible.
Among Recurly merchants, the majority (79%) of transactions completed in 2023 used credit and debit cards, followed by PayPal and other digital payment methods like Apple Pay and Amazon Pay. Offering a variety of payment options addresses diverse customer preferences and can significantly expand a company’s reach to new consumers.
By prioritising a flexible and convenient payment experience, companies not only boost customer retention, but also drive business growth. It helps businesses improve their overall service, appeal to a broader subscriber base, and minimise the risk of losing customers due to payment-related issues like an expired card or unavailable payment method.
Providing multiple payment methods is essential for exceeding customer expectations and building trust to ensure long-term loyalty.
PE: Personalization is often one of the most important aspects of subscription payments to customers. In what ways can companies help maximise a customer’s personalization?
There are many ways a company can personalise a customer’s subscription experience. Personalisation is a major component of this, with 74% of customers ranking it a significant reason to subscribe.
Businesses are increasingly recognizing the value of offering tailored experiences that cater specifically to individual customer needs and preferences.
This is not just about the products or services itself, but how the subscription process itself is managed too – letting customers pick their payment date or payment method – for example, adding a level of flexibility that they find highly valuable.
Businesses need to understand their customers and offer the payment methods that best align with their preferences – otherwise, they risk losing out on potential business when a customer has too much friction between them and the payment process.
Additionally, customers want flexibility in their subscriptions. They want their subscriptions to fit in with their lives, and that might mean changing a delivery date on their meal kit subscription while travelling, or downgrading a subscription to a streaming service to a lower tier to save money while they’re temporarily between jobs.
That flexibility and level of attention to detail is something customers intentionally seek when deciding which businesses to give their hard-earned money to.
PE: Just as importantly, however, is the ability to opt in and out of a subscription. Is this aspect still often overlooked and are there other convenience issues that still could be improved?
No customer wants to feel trapped in a subscription they can’t cancel. The ability to easily opt-in and out of a subscription is crucial for subscriber retention and overall satisfaction, and is something that more and more businesses are recognising as a priority feature to offer subscribers.
Customers want to know that they have flexibility from the moment they subscribe, with 77% of potential subscribers more likely to commit to a service if they know they can easily cancel.
The psychological safety that customers feel knowing they won’t be trapped into a subscription is so important to building trust, and is absolutely critical for businesses who want to retain subscribers long-term.
PE: Lastly Lina, thank you for your time. How likely is it that we see artificial intelligence automate and seamlessly accelerate the subscription payment process?
Artificial intelligence is already automating and enhancing the subscription payment process. AI can streamline financial transactions by improving accuracy, detecting fraud, and managing payments more efficiently.
For example, AI can analyse customer behaviour to predict subscription renewals or cancellations, enabling companies to optimise their renewal strategies and reduce churn.
I anticipate it will play a powerful role in personalising subscriber experiences at scale. AI enhances personalisation by adjusting pricing and recommendations based on individual preferences and usage patterns. This tailored approach not only boosts customer satisfaction but also improves retention by creating a more relevant and engaging experience for subscribers.
As AI technology continues to advance, we can anticipate even deeper integration into the subscription payment process, leading to more efficient operations and better customer engagement. The acceleration and automation of subscription payments through AI are already in progress, with promising developments on the horizon.
