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Subscription Success Secrets: Fueling Efficient Growth Strategies

June 5, 2024

industry insights kim courvoisier

As marketers, it’s in our DNA to drive growth and achieve results. Let's play a game. Raise all ten fingers in the air. Now, put a finger down if you've experienced any of the following in the past few years:

  • Your marketing budget got slashed. 
  • Layoffs or workforce cuts took place at your company.
  • Your customer acquisition cost went up.
  • You're putting in more effort but seeing fewer results.
  • Your customer churn is on the rise.

Navigating this challenging environment has left many of us feeling frantic, less averse to risks, and in need of dependable channels to drive results. But here's the reality check — there's no magic fix. While we may be tempted by shiny new tools or promises of more leads, what truly matters is driving efficient growth.

In a business climate where budgets are often kept under wraps until the 11th hour, how do we not just survive but thrive? 

In the past, we relied on filling the sales funnel and hoping for conversions and pipeline. Now, we're focusing on what works best and scaling those efforts. We're also exploring flexible pricing models to drive recurring revenue, predict future earnings, and cultivate lasting customer relationships to maximize revenue per customer.

My name is Kim Courvoisier, and I head Content and Strategy at Chargebee. For the past 15 years, I’ve worked at all stages and sizes of SaaS startups in Silicon Valley, leading content teams to deliver high-value, world-class content. 

Chargebee is a leading revenue growth management (RGM) platform for subscription businesses. Its mission is to help companies of all sizes grow their revenue with solutions ranging from subscription management and recurring billing to pricing and payment optimization, revenue recognition, collections, and customer retention. 

Chargebee releases an annual thought leadership report covering the subscription and revenue growth landscape. For our 2024 report, The State of Subscriptions and Revenue Growth, we surveyed 318 subscription leaders in North America who work at subscription-based companies with 50+ employees and have annual recurring revenue of more than $5 million. One of the report's main themes was how companies are now growing efficiently after years of growth at all costs. As you might imagine, subscription models are at the forefront of that efficient growth. 

The future of efficient growth is subscriptions

As marketers, we’ve taken note and are embracing subscription models as scalable sources of recurring revenue. In the 2024 State of Subscriptions and Revenue Growth, 96% of leaders said they expect their subscription revenue to increase this year. This substantially increased from 75% last year, signaling a resurgence of measured optimism. Among them, 70% foresee a revenue increase of more than 20%. 

In this high-pressure environment, maximizing efficiency is crucial for growth. One vital aspect is optimizing your subscription model. Here are some key stats to consider:

  • The subscription market is growing: According to a report by Grand View Research, the global subscription e-commerce market size is expected to grow at a compound annual growth rate (CAGR) of 68.0% from 2021 to 2028. 
  • Consumers rely on subscriptions as part of their daily lives: 49% of consumers in the US have subscription services. The average US consumer has around 4.5 subscriptions across various categories, including entertainment, media, beauty, and software services. 
  • Subscriptions help increase customer lifetime value (CLTV) and decrease customer acquisition cost (CAC): Subscribers typically have a higher CLTV than non-subscribers due to the recurring revenue generated by ongoing subscriptions. 
  • Subscriptions are sticky and help retain customers: Annual subscriptions have an average retention rate of 28%, which is more than twice what seems to be the more common monthly billing model.

With the global subscription market booming, now is the time to examine how to maximize the potential of the subscription model. Whether you already offer subscriptions and want to increase retention, or you’re considering launching subscriptions to acquire more customers and increase CLTV, there's never been a better time to focus on the opportunity of predictable, recurring revenue from subscriptions.

Customer retention is more important than ever

CMOs and CEOs are shifting focus towards cultivating long-lasting profitable customer relationships rather than fixating solely on immediate acquisition costs. The key performance indicator gaining prominence in 2024 is customer renewal or retention rate, underscoring a strategic move towards prioritizing sustained value over short-term gains. 

chargebee 2024 State of Subscriptions & Revenue Growth

[2024 State of Subscriptions & Revenue Growth]

Companies are increasingly embracing a lifecycle-centric strategy, streamlining their marketing and sales funnels from marketing qualified lead (MQL) to product qualified lead (PQL) with a focus on lifetime value (LTV). CMOs are emphasizing metrics like LTV and net revenue retention (NRR) over traditional acquisition costs like customer acquisition cost (CAC), cost per acquisition (CPA), and cost per lead (CPL). 

An example is UK-headquartered Pret A Manger (Pret), which has been dedicated to serving freshly made food and organic coffee. Today, Pret is a globally recognized brand boasting a network of over 700 shops in 16 markets on three continents and over 9,000 employees worldwide. 

Operating in the high-velocity food and beverage industry, Pret constantly fine-tunes the subscription cancellation experience and tailors promotions to different customer segments. Those reconsidering their subscription receive well-timed promotions with varying discounts, a development introduced in April 2022. Combining the power of personalized retention and effective targeting, Pret redirected over 44% of users who initiated the cancellation process, a striking threefold increase compared to industry norms. This, in turn, resulted in an increased CLTV.

This pivot from superficial metrics is substantiated by the fact that 86% of businesses consider retention as vital as, if not more than, acquisition. This underscores the trend towards investing in churn reduction and retention management, with 83% of companies now setting a company-wide churn target, an increase from 71% in 2023. 

Successful customer retention hinges on fostering loyalty, minimizing cancellations, and deploying value-oriented strategies such as pauses, discounts, or incentives. Companies that prioritize customer satisfaction and tailor their offerings to meet customer needs are poised for sustainable growth and a reputable market presence.

Condé Nast, best known for its popular titles, including Vogue, Wired, and The New Yorker, has shaped cultural narratives for decades. The publishing giant recently underwent a digital transformation. ​​Condé Nast undertook a strategic narrative shift, placing the spotlight on the inherent value of their subscription content rather than just discounting the subscription or primarily relying on the free gifts included. 

"Today's subscribers demand trust, transparency, and rich benefits. We're focusing on clear communication of subscription terms—explicit renewal policies and the freedom to cancel anytime," states Adam Lifshitz, Senior Product Director of Subscriptions. Condé Nast is granting subscribers even greater flexibility when it comes to their subscription plans to continue the positive momentum. 

Lifshitz explains, "We now offer more manageable subscription options, such as shorter, monthly intervals, as opposed to the traditional annual commitment. This allows subscribers to opt out after a few months rather than being tied to a full year's subscription upfront. We found that even though they are not tied to a long commitment, they tend to stay as long, allowing us to keep healthy retention rates, with more subscribers through the door."

Types of subscription models for businesses

While there are clear benefits to choosing a subscription model, it’s important that you choose the right one for your business. Some popular options are:

  • Subscription as a service: Commonly referred to as SaaS, this is a software delivery model where software is centrally hosted on a cloud and licensed on a subscription basis. It uses cloud infrastructure, which offers many benefits, like providing businesses with a self-service option so they don’t have to worry about on-site maintenance. Some examples of SaaS companies are Slack, Dropbox, and Adobe.
  • Subscription boxes: A subscription box regularly delivers curated and personalized products and physical goods with monthly or annual charges. The range of products offered here is vast, spanning essentials, hobby supplies, luxury goods, meal kits, and even collector’s items. Some examples of subscription boxes are HelloFresh, BarkBox, and Stitch Fix. 
  • Publications and newsletters: This option is the tried-and-true method of sending customers information about your business via an email newsletter. A can’t-miss example is G2 Tea, which may be how you’re reading this article in the first place!
  • Media subscriptions: This type of subscription is typically through video or audio, think Netflix or Spotify, where businesses charge a recurring subscription fee in return for video and audio streaming.

Ultimately, businesses choose subscription models for two reasons: the demand of their customers and the evolution of technology as digital transformations happen across various industries. As new technologies that may bring forth new subscription model options emerge, your business's chosen model could evolve.

The subscription model your business adopts will depend on your target market, how big or small your business is, what industry you operate in, and, of course, your prospective customer base.

Wrapping up

Companies are 4x more likely to prioritize efficient revenue growth over cutting operational costs to fund their businesses and achieve profitability. For marketers, subscription models and their predictable, recurring revenue offer a promising path forward. These models present opportunities to innovate, centering on customers and fostering a culture that embraces sustainable and efficient growth.

Learn more about the five subscription metrics your business needs to be tracking.

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Subscription Success Secrets: Fueling Efficient Growth Strategies Kim Courvoisier, head of Content and Strategy at Chargebee, explains how businesses can have growth through subscriptions and retain more customers. https://learn.g2.com/hubfs/G2CM_FI1001_Learn_Article_Images_%5BIndustry_Insights_leverage_subscriptions%5D_V1a.png
Kim Courvoisier Kim Courvoisier is a seasoned content leader and strategist with over 15 years of experience in content marketing, specializing in the SaaS B2B and B2C space. Her mission is to craft compelling, engaging, and data-driven content that fosters awareness, conversion, and retention across diverse customer segments and personas. https://learn.g2.com/hubfs/1702334731455.jpg https://www.linkedin.com/in/kim-courvoisier-517b945/

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