End-of-Year Insights: The State of Recurring Revenue & Subscription Growth
Earlier this year, we brought you the 2024 State of Subscriptions and Revenue Growth report, which offered a comprehensive view of recurring revenue and subscriptions from the point of view of 300 subscription leaders.
We observed that the focus had shifted from a predominant customer acquisition approach to a more strategic expansion model. Leaders planned to emphasize customer retention, drive upsells, and introduce diverse product offerings and loyalty programs for sustainable growth.
Since we published the report, the narrative around recurring revenue has become increasingly intriguing. We've encountered themes like the struggle for efficient growth in times of inflation, subscriber fatigue, and the imperative for AI companies to mature by monetizing and establishing revenue streams.
This companion guide to the 2024 State of Subscriptions & Revenue Growth report shares our key takeaways from the earlier report and timely end-of-year insights that will influence 2025.
1. Subscription Prices Are on the Rise
Key Finding: Nearly 73% planned to increase prices in 2024, up from 62% in 2023.
The recent increase in planned price hikes shows the impact of inflation. Subscription-based businesses feel the pinch from rising materials, labor, and operations costs. As expenses increase, it’s becoming harder for companies to keep profit margins intact without raising prices. When the cost of providing a service rises, many have had to pass some of those costs onto their subscribers. Disney+, Hulu, Canva, and OpenAI have all made recent headlines by raising prices.
At the same time, consumer expectations are shifting. Customers demand quality and value and are more willing to switch to competitors if they feel their needs aren’t being met. This competitive pressure has forced businesses to carefully consider how they price their subscriptions. Companies must continue to balance the need for revenue growth with the risk of losing customers, making it crucial to find a pricing strategy that reflects both market conditions and consumer sentiment.
As companies continue to raise prices, they must ensure that customers see the value in their offerings. Improving services through better features, customer support, or added content can help justify higher prices. When consumers perceive that they are receiving more significant value, they are more likely to accept price increases without feeling alienated.
We anticipate more businesses raising prices in 2025, and consumers will make the all-important determination about the value these services provide. Churn may also rise in relation to costs, but not all churn is bad for your bottom line (more on that in finding #4 below).
Essential reads:
Navigating Monetization Strategies: How to Iterate Pricing While Keeping Your Customers Happy
Why is Everyone Raising Subscription Prices? Understanding the Trends and Navigating the Challenges
2. The Crucial Role of Clean Data in AI Success
Key Finding: Almost half of companies (46%) planned to invest in AI for operational efficiency, market analysis, and product enhancement.
News flash: There’s a critical factor that will determine the success of these investments: your data.
If your data isn’t organized and reliable, your AI efforts will fall short. Inaccurate or poorly entered data—often called "dirty data"—can distort your insights and hinder your growth. For businesses that rely on recurring revenue. You need a unified view of your customers, interactions, and usage patterns.
As AI becomes a key player in shaping business strategies, the companies that succeed will be the ones with high-quality data. Without it, you can’t effectively train AI models or draw meaningful conclusions. It’s essential to ensure that your systems—like CRM and ERP—are well-structured and capable of supporting your AI ambitions.
By prioritizing clean data now, you’re not just setting the stage for effective AI use but also improving your decision-making, customer targeting, and retention. Investing in a strong data foundation today will empower your business to fully leverage AI’s potential, leading to greater efficiency, improved customer experiences, and sustainable growth.
3. Balancing Acquisition and Retention
Key Finding: 86% of subscription leaders planned to prioritize customer retention equally or more than acquisition.
As many companies saw slower growth in new customers, focusing on keeping existing customers has become more important. Keeping existing customers costs less, leading to higher ROI. High-value customers often generate more revenue through repeat purchases and long-term engagement. Ensuring these customers are satisfied and consistently deliver value is essential for growth.
At Chargebee, we’re seeing more companies implement proactive retention strategies to mitigate churn and increase customer retention. Recent trends indicate that companies are turning to AI and data analytics to improve personalization efforts, tailoring experiences to individual customer preferences and behaviors.
See it in action: Optimizing Customer Retention with AI-Driven Offers
Businesses are mitigating churn and driving efficient growth by building strong relationships and meeting customer needs with personalized interactions.
4. Churn Isn’t Always a Bad Thing
Key Finding: 60% expected their churn rates to increase, a slight decrease from 64% in 2023.
An increasing number of subscription businesses have been prioritizing retention for several years now, and companies have become increasingly educated and sophisticated in how they measure and manage churn. As a result, we've also seen the emergence of new legislation protecting consumer rights and landmark legal action against leaders such as Adobe who make it hard to cancel.
While the anticipated churn rate has slightly decreased from last year, proactive retention strategies remain critical. Consumers have become more selective with spending, and subscription fatigue continues to make headlines. However, we see companies having an epiphany that not all churn is bad and that, in some cases, churn can be good for your bottom line.
What’s particularly interesting is that businesses are willing to accept significant churn rates of 20% or more in their quest for greater profitability and sustainability. When executed correctly, this strategy of raising prices—especially by introducing product and service enhancements that cater to loyal customers willing to pay more—can help distinguish between valuable and less valuable customers.
Customers who pay higher prices contribute to increased annual recurring revenue (ARR) and higher customer lifetime value (CLV), and they tend to stay longer with more predictable retention rates. In contrast, price-sensitive customers who are hesitant to pay more often generate disproportionate support requests, seek costly returns or chargebacks, leave negative reviews online, and are more likely to cancel their subscriptions voluntarily (“strategic churn”).
Flexibility is the name of the game when it comes to retaining subscribers. Condé Nast, the publishing giant, is granting subscribers even greater flexibility when it comes to their subscription plans to continue the positive momentum. They now offer more manageable subscription options, such as shorter, monthly intervals, as opposed to the traditional annual commitment. This allows subscribers to opt-out after a few months rather than being tied to a full year's subscription upfront. The publisher found that even though its subscribers are not tied to a long commitment, they tend to stay as long, allowing Condé Nast to maintain healthy retention rates with more subscribers through the door.
5. Continued Optimism Toward Recurring Revenue Growth
Key Finding: 96% expect subscription revenue to grow in 2024.
In early September, the U.S. Federal Reserve lowered interest rates by half a percentage point, marking the first reduction since its earlier hikes to tackle decades-high inflation following the pandemic. Typically, such rate cuts signal a more favorable economic outlook. This positive shift should continue to foster cautious optimism among businesses and consumers, leading to a greater willingness to spend in Q4 and into early 2025. However, many will remain careful in their choices.
According to McKinsey & Co., “37% of respondents say that stabilizing inflation has made them feel more optimistic about the economy, up from 31% in the previous quarter.”
This continued confidence may translate into increased investment in subscription-based services as businesses and consumers feel more secure in their financial decisions.
This shift creates growth opportunities for companies with recurring revenue models. As consumers become more willing to spend, businesses may experience higher subscription renewals and upgrades, boosting revenue by year-end. However, consumer caution highlights the need for companies to deliver real value and build trust. Keeping this momentum will rely on how well businesses adapt to changing customer needs.
Wrap up: Embracing Change for Future Growth
As we wrap up the last quarter of 2024, recurring revenue and subscriptions present challenges and opportunities influenced by current events. Businesses that focus on keeping their customers happy, invest in solid data to make the most of AI, and communicate openly will be in a stronger position for success.
Embracing technology and prioritizing customer needs will set the stage for sustainable growth. This will help companies adapt to future challenges while maximizing revenue and profitability. Ultimately, those who stay proactive and flexible will lead the way.
Reserve Your 2025 Report Now
Reserve your copy of the 2025 Recurring Revenue & Subscription Growth Report today. The 2025 report will combine insights from subscription leaders and consumers, providing a complete picture of recurring revenue and subscriptions through the lens of businesses and consumers.
With ongoing inflationary pressures, geopolitical uncertainties, and economic fluctuations, businesses and consumers have a lot to think about. The marked shift from a past of “growth at all costs” to a sustained focus on efficient growth and strategic pricing is crucial. Our 2025 report explores how recurring revenue and subscription-based businesses—both B2B and B2C—navigate these challenges, with a special emphasis on pricing strategies and consumer insights.
Don’t miss the valuable insights that can help you adapt and thrive. Save your copy today to stay ahead of the curve.
