Rise in Subscription-Based Services During COVID-19

A number of industries have sustained massive blows during the coronavirus pandemic, but subscription-based companies are on the rise. In June, Zuora, Inc., the leading subscription management platform provider, released the newest edition of its Subscription Impact Report.

A number of industries have sustained massive blows during the coronavirus pandemic, but subscription-based companies are on the rise. In June, Zuora, Inc., the leading subscription management platform provider, released the newest edition of its Subscription Impact Report.

This report is designed to measure the economic impact of COVID-19 on subscription businesses from March 1 - May 31, 2020.

The report found that half (50%) of companies are still growing but have not seen a significant impact to their subscription growth rates amid COVID-19, while 18% experienced an acceleration. Furthermore, while 17% of companies experienced slower growth, they are still growing; only 14% of the companies analyzed experienced a contraction in subscriber growth.

“If the Subscription Economy is about anything, it’s about a fundamental return to customer relationships. It’s the agility of the subscription model that uniquely positions businesses to adapt quickly to customer needs and provides them with consistent, ongoing value - regardless of economic climate,” said Zuoro co-founder and CEO Tien Tzuo.

Other key findings from the study include the following:

  • OTT video streaming subscriptions grew 7X in March 2020 compared to the previous 12 months. Meanwhile, the annual subscription growth rate for Sports-related services fell significantly.
  • Digital news and media subscriptions grew 3X, as did E-learning.
  • Communication SaaS offerings, such as video conferencing or online collaboration tools, saw a spike in subscription growth rate by 1.4X,
  • Software for small businesses fell by half and B2B Software remained mostly unchanged.
  • Consumer memberships, including for gyms, travel, and clubs, experienced a slowdown. It fell to two-thirds its growth rate compared to the previous 12 months.
  • Consumer IoT and Business IoT both saw slowed subscription growth rates, experiencing one-third and half the growth rate, respectively, from the previous year.
  • Worse were travel and hospitality subscriptions, which fell dramatically in March.

Tzuo elaborated in an interview with ZDNet, saying, “We've seen many of these companies offer free trials and other extended services to make content available to a broader audience. Zoom, for example, lifted the 40-minute meeting limit on free basic accounts. These strategies, in turn, allow companies to broaden the funnel and quickly capture the time and attention of new subscribers.” 

“On the other hand,” Tzuo said, “sectors with slower subscription growth rates included business and consumer IoT, software for small businesses and memberships (think gyms, clubs and more). However, it's worth noting that while these sectors experienced slower growth rates, they are still growing.”

These findings may raise the question of how subscriptions came to be so popular. According to ProfitWell, the reason is that “Instead of committing to a product, customers can try out different items and find what they like best through subscriptions, and companies using the model capture recurring and predictable income from customers. It’s a mutually beneficial system.” According to McKinsey, 49% of shoppers currently use a subscription service. 

Additionally, the MarTech 5000 market map from 2018 reveals that almost every company (out of 7,000) in marketing technology uses a subscription-based model. These subscriptions range from Dollar Shave Club to Netflix to Salesforce. Subscriptions appear in all aspects of life. During a time where contact is minimized, it is reasonable that subscription-based models have grown in popularity.

While subscriptions can be beneficial to both consumers and businesses, there are also dangers accompanied with them; customers oftentimes don't realize when or how they’re being charged. If your business does not properly monitor subscription cycles, including when you’re being charged, there can be issues when analyzing your expenses. Luckily, SwipeSum offers free consulting services to businesses regarding payments- whether you’re a nonprofit, SaaS, or B2B. Visit SwipeSum’s website to take the first step in saving your business money today.

Izzy Gillman

Izzy is a rising senior at Washington University in St. Louis studying Creative Writing and Psychology. She has been working as a Content Marketing Intern at Swipesum since June of 2020. In her free time, she enjoys journaling, running, and reading memoirs.

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