Tips from Netflix and Spotify on optimizing subscription and recurring payments.
How engrained are subscription and recurring businesses in our day-to-day lives?
I don’t know about you, but I listen to music on Spotify, store my files on Dropbox, and Netflix has certainly alleviated many arguments in my house. Birthdays and anniversaries are taken care of thanks to flower delivery service Bloomon. And of course an Uber is never more than a couple of taps away.
All this points to the steady rise of the subscription and recurring economy, which has evolved in response to the demands of today’s consumer, who want things faster, easier, and better. And businesses that address that need, are attracting loyal customers and growing fast.
Critical to success of course, is a frictionless and uninterrupted experience. And payments play a central role. If the payment works well, the customer can sign up quickly and is charged consistently at agreed intervals, stopping when the customer wishes to cancel the subscription – and not before.
To deliver an experience that keeps your customers coming back again, and again and again, we recommend the following:
Make the signup a breeze
The signup is the moment of truth, and it is vital to get it right. There are many things that can impact (both positively and negatively) on the experience.
"It is really valuable to have a payments partner with inside knowledge of the market, and the tools to help you." - Thierry Locard, Netflix.
Shoppers around the world have different payment expectations. Some prefer cash-based methods, others bank transfers, and for others it has to be mobile. Live sports streaming service, DAZN, for example reports that SEPA Direct Debit accounts for the majority of their subscribers in Germany.
It is also worth noting that you might need to adjust your business model in certain markets where local methods don’t support recurring payments. Spotify, for example, lets users in Indonesia pay using bank transfers or with cash at local convenience stores.
And of course, in this increasingly mobile world, a mobile optimized payment flow is fundamental.
Ensure an uninterrupted service
Once your customer has subscribed, you want to ensure an ongoing service, that doesn’t end until they want it to. This means minimizing involuntary churn – which is when a service is paused or cancelled without the customer’s knowledge. This can be tackled in a few ways.
"We want to provide uninterrupted service, and that is where tools such as Account Updater come in."
If a card on file is lost or expires, it can cause a payment to fail. As a solution, Visa and Mastercard provide the Account Updater service, which enables you to automatically update your customers’ stored card details. To further help you, the Adyen Account Updater maintains a centralized database of card data, and updates you with any changes.
"We want to provide uninterrupted service where payments run smoothly in the background, and that is where tools such as Account Updater come in.” Thierry Locard, Netflix.
All too often, payments fail due to an error or outage in the patchwork of legacy systems. To minimize the impact, Adyen selectively retries payment failures that are due to technical reasons. This can generate a significant uplift in successful payment requests, which translates into happy customers.
Of course we can’t do much if the customer has insufficient funds. But companies can minimize the impact by fine-tuning their billing strategy to suit each market. As illustrated by Jagex Games Studio:
“If you’re looking for one key metric to base your rebill strategy around, country is definitely the most important and where you’ll find the most consistent trends in behavior.” Alastair Morris, Jagex
Our data also reveals some interesting trends. In the U.S., for example, refusal rates peak toward the end of the month just before people are paid. And we have found that nighttime hours have a lower success rate by 2%, due to issuing banks tightening their risk systems.
The Ultimate Guide to Subscription and Recurring Payments
For more information about how to optimize subscription and recurring payments to increase loyalty and drive revenue, download our Ultimate Guide: