As economic headwinds gather, subscription publishers are still growing and generating recurring revenue. The key is to double down on the user experience, offer flexibility in terms of product bundles and terms, and keep communicating the value of each subscription according to Toolkit’s latest report.
Toolkits, the subscription insights consultancy, has released its latest report entitled, “Weathering the storm” which examines in-depth the headwinds facing subscription publishers.
The good news is that the situation is not as dire as the gloomy economic headlines suggest. Toolkits readily admits that whilst converting and retaining subscribers has become more challenging, “publishers report that subscription revenues are holding up well overall”.
The majority of subscription-first publishers say they’ve seen no meaningful contraction of their subscriber bases or revenues over the past six months. Revenue can be a lagging indicator of performance, but they’re seeing nothing in their renewal rates that is causing them major concern.Tookits, “Weathering the Storm” subscriptions report
This finding dovetails with Zuora’s latest Subscription Economy Index (SEI) Report which states that subscription-based companies are continuing to grow, albeit modestly – media and publishing witnessed subscription revenue growth of 4.6% last year.
Focusing on core audiences
Despite subscriptions holding up well, Toolkits advises publishers to continue to adjust their
tactics in an effort to shore up their subscription businesses. Specifically, the consultancy recommends a number of key approaches that publishers must adopt.
It’s first recommendation is to double down on understanding audience core needs and to maximize perceived value.
This often involves a deeper analysis of behavioral data to ensure their most engaged and valuable audiences are being identified and segmented accurately, and greater investment in targeted audience research, including surveys and focus groups.Toolkits “Weathering the Storm” subscriptions report
Toolkits adds that communicating the value of each subscription is vital, “Delivering valuable and differentiated content via subscription products is moot if that value is not clearly communicated to subscribers.” The consultancy quotes research by McKinsey that found that value perception was the strongest driver for any new subscriber acquisition.
Products firmly oriented around solving simple problems or satisfying specific audience needs continue to perform well compared with those that require audiences to work to justify a purchase.Toolkits “Weathering the Storm” subscriptions report
Prioritizing revenue generation over subscriber growth
While publishers are evolving their subscription approaches to optimize existing user engagement rather than chase subscriber volume, Toolkit says this reorientation is accelerating rapidly, “Retained subscribers are typically far more profitable than newly acquired ones, especially as converting new subscribers becomes increasingly challenging and costly.”
Many publishers generate very little profit from subscribers during their first year, largely because of discounts and promotional rates, the cost of advertising and other acquisition tactics, and overheads such as customer support. These costs typically decrease in year two and beyond, however, boosting subscribers’ lifetime value and profitability significantly.Toolkits “Weathering the Storm” subscriptions report
The consultancy cites research by Bain & Co that found that increasing customer retention rates by 5% can increase profits between 25% to 95%. It also quotes Fortune’s Chief Customer Officer, Selma Stern, who says, “Subscription publishers will pay more attention to their price-volume-mix in 2023. Ultimately, paywall revenue will become more important than subscriber numbers.”
Driving retention with increased flexibility
Toolkits says that successful publishers are evolving towards more flexible product bundling and terms, for example, “Offering subscribers the ability to downgrade and pay less to access only the features they deem valuable can prove highly effective for keeping subscribers in the fold.”
Subscribers reluctant to renew on annual terms might be comfortable renewing for three months, for example, while those on three-month terms might be convinced to stay on board if they are allowed to pay month-to-month.Toolkits “Weathering the Storm” subscriptions report
Speaking to WNIP earlier this month, John Phillips, General Manager EMEA, Zuora agreed, saying, “It’s important to remember that not every subscriber wants the same thing. You can create the best bundle, with the best content and the best add-ons, but for some, this just isn’t important.”
Sometimes it’s not about maximising revenue, but about allowing people to opt-out, reduce or pause their accounts.John Phillips, General Manager EMEA, Zuora
Get it right, however, and the prospects for subscriptions publishers appear solid for 2023 despite the general economic uncertainty. Toolkits quotes FIPP President and Chief Executive, James Hewes, who wrote in the trade association’s most recent Subscription Snapshot report, “We see evidence of growth everywhere, and no sign that publishers are yet being affected by any sort of slowdown.”
Long may it continue.
To download Toolkits “Weathering the Storm” Subscriptions Report, click here.