Subscription Metrics and Recovery Tools Set Top Performers Apart

As a subscription business, performance is only as good as the metrics you measure.

That’s a prime takeaway from “The State Of Subscription Business: Best Practices And Business Performance Drivers,” a PYMNTS and FlexPay collaboration, which examines the correlation between churn, failed payments and customer lifetime value (LTV) for subscription brands.

The simple math goes as follows: subscription providers that track and optimize customer LTV are five times more likely to be top performers, “defined as those that minimize revenue loss due to failed payments. Moreover, our research finds that only two in five subscription firms even recognize the connection between failed payments and LTV.”

Put another way, among subscription companies we measured “lost an average of 9% of sales to failed payments, totaling an estimated $278 billion in the last 12 months. Top performers, however, recover 60% of failed payments that would have otherwise been lost.”

It’s a both warning sign and a guiding hand, helping subscription businesses already being scrutinized by consumers at a time of trimming to optimize operations with data.

Getting down to cases, “The State Of Subscription Business: Best Practices And Business Performance Drivers” examines the metrics top-performing subscription businesses use in their operations, finding that 58% of subscription-focused companies track either customer churn (36%), customer retention (28%) or both.

However, the study states that “top-performing firms in the subscription space — those that effectively reduce revenue loss due to involuntary churn caused by failed payments — track and analyze an average of three metrics linked to customer LTV, compared to the two metrics measured by their bottom-performing counterparts. The most measured metric among these top performers is failed payments (67%), followed by customer churn rates (40%) and customer LTV (33%).”

The issue, as revealed by the research, is that too few subscription providers fully comprehend that failed payments are a prime contributor to churn. That’s a danger when involuntary churn caused by failed payments accounts for approximately 50% of total customer churn, yet just over half (53%) of companies are monitoring involuntary churn or its causes.

In doing so, best practices include tracking customer LTV, tracking failed payments, using third-party recovery software to mitigate the situation, along with the use of multiple tools to gauge all of these, as top-performing subscription companies do 1.7 times more tools than bottom performers, on average.

Get the study: The State Of Subscription Business: Best Practices And Business Performance Drivers