Passive renewals could boost subscription revenue by 200%

Eight percent of subscribers cancel during months when they are required to take specific actions to renew, compared to about 2% who cancel during other months, according to new research by Stanford and Texas A&M University economists.

The findings illustrate why taking steps to mitigate passive churn and finding ways to reengage “sleeper” subscribers can have a significant impact on publishers’ subscriber bases and revenues. Perhaps more importantly, it also highlights the extent to which some might be relying on revenue from unengaged and inattentive portions of their subscriber bases.

Researchers Neale Mahoney, Liran Einav and Ben Klopack set out to examine what portion of monthly subscription payments are actually made unintentionally. In instances where subscriptions renew automatically, consumers who aren’t paying attention may continue to pay for services they no longer value, they believed.

To quantify the behavior, transaction-level data from a large payment card company was used to analyze consumer renewal and cancellation behavior in the context of ten popular subscription services in the U.S. (Services may or may not have been for content-based products, specifically.)

The data revealed a sharp decrease in renewal rates during months when subscribers were required to replace their cards (typically because cards expired, or were lost or stolen.) In months when subscribers were required to take a specific action to renew, they canceled about four times as often compared with other months.

The research also attempted to quantify the revenue generated by inattentive subscribers and estimated that inattention increased revenues by between 14% and more than 200%, depending on the product. Attentive subscribers remained active for an average of 13.4 months while inattentive subscribers remained active for 33.7 months, suggesting that the revenue generated from inattentive subscribers is significant for some subscription-based services.

As we’ve explored previously, relying on revenue from users who are unaware they’re paying for a product — and/or see no value in it — is a risky strategy for publishers looking to build sustainable, long-term subscription businesses.