New Commissioned Ecommerce Research from Digital River: Customer Churn Causes Nearly 20 Percent Fall Off in Annual Subscription Revenue
Advises online businesses to maximize renewals to ensure long-term profitability with subscriptions
MINNEAPOLIS – June 22, 2017 – Digital River, Inc., a leading global provider of Commerce-as-a-Service solutions, announced the results of a commissioned study, which explores the impact customer churn, or turnover, has on the growth, profitability and innovation efforts of online subscription businesses. As subscription services filter into every major industry from software and snowboards to luxury cars and baby diapers, managing churn is a matter of business success and failure. The study, conducted by Forrester Consulting on behalf of Digital River, is titled “The Art and Science of Reducing Involuntary Subscriber Churn” and available at http://driv.ws/gn.
“Traditionally, firms focus their resources on customer acquisition. However, losing existing customers to involuntary churn is the quiet culprit of profit loss, since it costs two times more to acquire a new subscriber than to keep an existing one,” said Jason Nyhus, vice president of global marketing and communications for Digital River. “In order to more effectively manage down subscriber churn, we believe that businesses can no longer afford to focus on customer acquisition at the expense of retention. That means, at a minimum, providing a seamless payment experience from the beginning of the customer relationship throughout the entire customer lifecycle.”
Some findings of the study include:
- Companies surveyed reported that on average 62 percent of their subscription revenue comes from renewals, underscoring the importance of strong payment renewal processes.
- Organizations lost, on average, more than one-third of their subscribers to churn.
- Sixty-eight percent of respondents said replacing customers lost to churn is “very” or “extremely” challenging.
- Recurring payment failure is the primary cause of involuntary churn, driven by insufficient funds, credit card limits, credit card expiration or replacement, or technical failure of the payment processor.
- Those companies with revenue loss directly attributable to churn reported losing an average of 17 percent of their annual subscription revenue or profit.
- More than one-third of respondents blamed churn for their reluctance to spearhead new subscription pricing and packaging models, putting them at a competitive disadvantage in a rapidly evolving industry.
- Ninety-one percent of respondents cited automated credit card account updates as a way to prevent monthly declines and combat involuntary churn.
The study provided recommendations for organizations to take a proactive approach to reducing involuntary subscriber churn. Some of the recommended tactics include:
- Don’t accept that involuntary churn is a cost of doing business.
- Combine customer and payments data for better decision making and communications.
- Consider using a full-service, integrated payments solution.
- Use resource savings to invest in innovation.
For more details about the research findings, visit http://driv.ws/gn for a copy of the study or http://driv.ws/go to hear a replay of a Digital River webinar, featuring guest speaker, Forrester analyst Lily Varon.
About the Research Study
From January 2017 to February 2017, Forrester Consulting conducted an online survey of 204 senior-level executives throughout the U.S. and Western Europe responsible for their organizations’ subscription and recurring payment customer retention strategy.
About Digital River, Inc.
Backed by 20 years of ecommerce experience, Digital River is recognized as a leading global provider of Commerce-as-a-Service solutions. Companies of all sizes rely on Digital River’s cloud-based commerce, payments and marketing services to manage and grow their online businesses. In 2014, Digital River processed more than $35 billion in online transactions, connecting B2B and B2C digital products companies and branded manufacturers with buyers across multiple devices and channels, and nearly every country in the world.
Digital River is headquartered in Minneapolis with offices across the U.S., Asia, Europe and South America. For more details about Digital River, visit the corporate website, read the Digital River Blog, follow the company on Twitter or call +1 952-253-1234.
Digital River is a registered trademark of Digital River, Inc. All other company and product names are trademarks, registrations or copyrights of their respective owners.
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