According to a recent study conducted by Stripe, the majority of German companies expect an increase in revenue through subscription models, despite the current economic situation. Subscription models rely on international expansion, flexible pricing, and minimizing declined payments. As a result, they remain one of the biggest trends in e-commerce in 2023, even in the face of economic uncertainties.
The recent report by Stripe examines the impact of economic uncertainty on subscription and billing management. In Germany, businesses are less affected by negative consequences compared to other countries. Accordingly, 62 percent of German executives indicated that there was no significant customer churn, and 63 percent also expect no increased churn for the current year. Globally, only 46 percent and 41 percent of respondents share a similar assessment. Additionally, 83 percent of German respondents anticipate that their recurring revenues will continue to grow (compared to 78 percent worldwide).
The importance of recurring revenues is increasing as they are considered more predictable during potential economic downturns. Companies are seeking ways to retain their customers in the long term. Internal data from Stripe shows that subscription models are growing faster than the overall online business. The volume of recurring payments processed by Stripe is increasing 16 percent faster than one-time payments. Stripe emphasizes flexible pricing models, international expansion, and automated tools to reduce customer churn as crucial for future growth.
Not price reductions, but optimized pricing strategies
Given the high inflation, price reductions are not seen as an option for most subscription services. Only a quarter of executives plan to respond to customer churn with price cuts. Instead, 40 percent of companies intend to adopt more flexible pricing strategies to maximize revenue growth through subscription models. Currently, most businesses still rely on simple flat-rate pricing rather than tiered or usage-based pricing. However, two-thirds of respondents (67 percent) believe that more flexible pricing models will gain importance in the future.
Subscription models promote international expansion
With the decline in the tremendous growth experienced during the pandemic, subscription providers are increasingly focusing on international markets in order to continue acquiring new customers. Moreover, over half of the respondents are planning international expansion in the next twelve months.
Furthermore, companies are well aware of the significant differences in regional payment preferences. In fact, a striking 71 percent of respondents have plans to introduce at least one new payment method in the next year.
Tools for minimizing declined payments
Simultaneously, companies are actively investing in tools to retain their existing customers. To this end, they are implementing mechanisms that prevent unintentional subscription cancellations resulting from faulty payment information. Furthermore, machine learning algorithms are being employed to determine the optimal timing for retrying failed payment attempts. In addition, the process of updating expired credit cards with new payment details can be automated.
The automated revenue protection features provided by Stripe have proven to be highly effective, generating an impressive additional $3.8 billion in revenue for companies utilizing Stripe in 2022. Notably, two-thirds of the respondents are already leveraging such tools to enhance their revenue protection strategies, while one-third still have room for optimization.
Dyn Media relies on Stripe for payment processing
A subsidiary of Axel Springer SE, Dyn Media, has chosen Stripe’s financial infrastructure platform for payment processing. Dyn is a streaming service that brings together sports beyond football and offers monthly or annual subscriptions. Besides Dyn, several other German media houses, including Handelsblatt and Der Tagesspiegel, as well as streaming services like Joyn, also rely on Stripe to reduce their reliance on internet advertising revenue.
“Through the partnership with Stripe, we can focus on delivering high-quality content and services while providing our users with a seamless payment experience. With Stripe, we save valuable development resources and can fully concentrate on our digital offering,” added Andreas Heyden, CEO of Dyn Media.