Subscription models refined by major players have revolutionized the landscape. Join Netflix’s Head of Payments and Dollar Shave Club’s CMO and hear how to reduce churn, turn 80 percent of declines into approvals, and more.
For subscription model companies, there are two essential questions, says John O’Brien, VP of business development at Worldpay: “How do we make more money from existing subscriptions, and how do we solve for increased complexity inherent within launching into a global market?”
In our recent free VB Live event, O’Brien sat down with two major players in the industry, Netflix Head of Payments Luis Vargas and Dollar Shave Club CMO Adam Weber, to talk about the three vital ways businesses can grow their subscriber value.
Worldpay, which processes 31.5 million transactions daily in 126 currencies and over 300 payment types, identified the three underlying drivers of increased profits: Converting users into subscribers, adapting your product and payment model for the global market, and fool-proofing your payment strategy. Here are just a few of the takeaways.
Why do users subscribe?
The fear that a subscription could turn into a Columbia Records style membership — where it’s impossible to cancel and hidden fees multiply — has largely abated, especially among millennials, says O’Brien.
If you look at the subscription economy, it’s clear that in 2016 users are less interested in ownership and more interested in the value they derive from the goods and services that they use.
The subscription model works in particular because it’s about the relationships, says Weber. “The holy grail of long-term brand building is finding an emotional bond,” he explains, “and subscriptions provide a wonderful recurring platform to provide that bond.”
That requires transparency on the company’s side and control on the user’s side. A potential member should be able to sign up easily, but unsubscribe just as easily. Zero value verification is essential as well, reducing the consumer’s hesitation to offer a payment method when signing up.
Adapting for the global market
The demand for subscriptions is rapidly expanding globally. Vargas notes that Brazil, India, and China offer some of the most promising markets, as access to the internet explodes, largely on mobile devices.
One of the keys to adding new subscribers as well as reducing churn is making it as simple as possible for a user to pay for their subscription — and that means credit cards, right?
Not so fast, Vargas says. They’re not the main player everywhere in the world. He offers the example of Mexico. “In most other markets a gift card is actually a gift card,” says Vargas. “In places like Mexico where people prefer to pay with cash, the gift card becomes a vehicle for payment.” Roughly 16 percent of new Netflix subscribers and 10 percent of current subscribers in Mexico are using this method of payment, a year and a half after the launch in that country.
Fool-proofing your payment strategy
Success in the subscription industry translates to minimal engagement from the customer but maximum transaction success. Card declines especially increased during the consumer switchover to chip cards, and when massive data breaches saw consumers closing cards.
“Payments-related churn is our number one reason for churn,” says Weber. But, he says, “We’ve implemented accounts updater and that was a massive improvement.”
Account updater services maximize transaction acceptance. Developed by Visa and MasterCard and then rolled out to other types of cards, account updater services check that a card is still valid and on file before they debit a transaction.
“This is one of the best friends for anyone who works in the subscription or recurrent billing model,” Vargas says. “We turn 80 percent of declines into approvals.”
Unfortunately, account updater services are not globally available, O’Brien notes, highlighting the importance of doing your market research as you expand globally and working with payment providers to help uncover local resources to maximize approvals.
For more insight into how Netflix tops over 81 million subscribers and Dollar Shave Club became worth more than $615 million, take a listen to our free webinar now.
Don’t miss out.
Access this VB Live event on demand here.
In this webinar, you’ll:
- Learn how to convert your users into long term subscribers for revenue you can count on
- Improve your payment system to actually increase overall revenue
- Get insight into the changing feel of a global marketplace as it pertains to your untapped subscriber base
Speakers:
- Luis Vargas, Head of Payments, Netflix
- Adam Weber, CMO, Dollar Shave Club
- John O’Brien, VP of Business Development, Worldpay
- Evan Schuman, Moderator, VentureBeat
This webinar is sponsored by Worldplay.
