New Zuora Data Reveals Subscriber Demand for Flexibility and Value, with Pricing Models and Packages Tailored to Consumption Habits

Rhea-AI Summary

Zuora's Understanding the Modern Subscriber study reveals that consumers, especially younger generations, seek flexibility in payment options for recurring products and services. Key findings include:

- 80% of respondents value flexibility in buying and paying
- Usage-based pricing is preferred for travel (62%), food delivery (60%), and retail (58%) services
- 48% prefer bundles for better value, while 30% choose à la carte when cheaper
- 36% have canceled and rejoined the same service within a year
- 78% are interested in temporarily pausing services instead of canceling

The study highlights the importance of affordability (51%), value for money (37%), and convenience (32%) in subscription services. Businesses are encouraged to diversify offerings to meet consumer demands for flexibility and personalization.

Positive

• 80% of respondents value flexibility in buying and paying for recurring products and services
• Usage-based pricing is gaining popularity, especially among Gen Z (32%)
• 48% of respondents prefer bundles for better value
• 78% of respondents are interested in the option to temporarily pause services
• Top benefits of subscription services are affordability (51%), value for money (37%), and convenience (32%)

Negative

• 36% of respondents have canceled and rejoined the same service within a year, indicating potential churn issues
• 57% of respondents subscribe to streaming services for specific content and then unsubscribe, suggesting retention challenges

Insights

Market Research Analyst

As a market research analyst, I find the Zuora study on subscriber preferences highly relevant for businesses in the subscription economy. The data reveals important insights that could shape strategic decisions for companies aiming to optimize their subscription models.

Key takeaways include:

• Flexibility is crucial: With 80% of respondents prioritizing flexibility in purchasing and payment options, businesses must adapt their models to accommodate diverse preferences.
• Usage-based pricing gains traction: Especially popular in travel (62%), food delivery (60%) and retail (58%) sectors. This trend is even more pronounced among Gen Z (32%), indicating a shift in future consumer expectations.
• Value-driven bundling: 48% of respondents prefer bundles for better value, with a generational divide showing stronger preference among older demographics.
• Subscription hopping: 36% of users have canceled and rejoined services within a year, while 57% subscribe temporarily for specific content.

These findings suggest that subscription-based businesses should consider implementing more flexible pricing models, temporary pause options and tailored bundles to meet evolving consumer demands. The emphasis on affordability and convenience as top benefits (51% and 32% respectively) underscores the need for businesses to balance value and user experience in their offerings.

While this data provides valuable insights, it's important to note that the study was conducted in the U.S. and preferences may vary in other markets. Companies should consider conducting similar research in their specific target regions to fine-tune their strategies accordingly.

Financial Analyst

From a financial perspective, the Zuora study offers intriguing insights that could significantly impact the subscription industry's revenue models and investor outlook. The findings suggest a potential shift in how companies structure their offerings to maximize customer lifetime value and reduce churn.

Several financial implications stand out:

• Revenue Diversification: The demand for flexible pricing models presents an opportunity for companies to diversify their revenue streams. By offering usage-based, bundled and à la carte options, businesses can cater to a broader customer base and potentially increase overall revenue.
• Customer Acquisition Costs (CAC): The high percentage (36%) of users who cancel and rejoin services within a year suggests that companies may need to reassess their CAC strategies. Implementing pause features instead of full cancellations could help retain customers and reduce re-acquisition costs.
• Churn Reduction: With 78% of respondents interested in temporary pause options, implementing this feature could significantly reduce churn rates. This could lead to more stable recurring revenue and improved investor confidence.
• Generational Targeting: The study reveals distinct preferences across age groups, particularly in bundle preferences. Companies that can effectively target different demographics with tailored offerings may see improved customer retention and revenue per user.

For investors, these trends suggest a need to scrutinize how subscription-based companies are adapting their models to meet changing consumer demands. Companies that successfully implement flexible, value-driven strategies may see improved financial metrics, including lower churn rates, higher average revenue per user (ARPU) and potentially stronger overall growth.

However, it's important to note that implementing these changes may require significant investment in technology and marketing, which could impact short-term profitability. Investors should look for companies with the financial resources and operational agility to make these transitions effectively.

REDWOOD CITY, Calif.--(BUSINESS WIRE)-- Zuora, Inc. (NYSE: ZUO), a leading monetization suite for modern business, today released the findings of its Understanding the Modern Subscriber study, which found consumers, particularly younger generations, seek flexibility to shape their payment options around their specific needs and unique consumption habits.

Today’s consumers are increasingly discerning, looking for options that align with their individual buying preferences and usage patterns. The Subscribed Institute at Zuora® commissioned The Harris Poll to conduct a study in May 2024 among more than 2,000 U.S. adults to shed light on consumer habits and preferences tied to how they’re using recurring products and services, such as subscriptions. The findings reveal that the modern consumer seeks flexibility in pricing and convenience, uncovering opportunities for businesses to embrace personalization and value to foster stronger customer relationships, and ultimately, reduce churn.

Key findings from Understanding the Modern Subscriber include:

• Flexibility is paramount: 80% of respondents said that flexibility in how they buy and pay for recurring products and services was either important, very important or absolutely essential. And when asked about pricing model preferences, across generations, consumers expressed interest in a variety of options.
• Usage-based pricing is an important tool, and critical for certain product categories: Preference for usage increases for certain product categories, with the highest interest in usage for travel (62%), food/restaurant delivery (60%) and retail (58%) services. For recurring products and services as a whole, 22% of all respondents said usage pricing is a preferred method, with even higher interest from Gen Z (32%).
• Cost often drives interest in tailored offerings: Consumer choices are heavily influenced by cost, with 48% of respondents preferring bundles for better value and 30% choosing à la carte offerings when cheaper than a bundle. This value-driven preference for bundles is stronger in older generations (58% of Boomers/Seniors, 52% of Gen X) compared to younger ones (43% of Millennials, 35% of Gen Z). While cost is king, personalization also plays a role, with 23% overall (and 29% of Boomers/Seniors) favoring à la carte when they only want parts of the offering.
• Subscribers like to come and go as they please: 36% of respondents have canceled and rejoined the same service within a year, while 57% of respondents said that they have subscribed to a streaming service specifically to watch a certain series or event, and then unsubscribed afterwards. Additionally, 78% of respondents said they would be interested in the option to temporarily pause a recurring service, as opposed to canceling.
• Affordability and convenience matter: The top three benefits of subscription services overall are affordability (51%), value for money (37%) and convenience (32%).

“Acquiring and retaining subscribers have always been about providing ongoing value, but businesses need to diversify their offerings to meet the strong desire for flexibility in today’s landscape,” said Amy Konary, Senior Vice President and Founder of the Subscribed Institute at Zuora. “By tailoring to ever-evolving consumer preferences, recurring revenue businesses can foster stronger customer relationships to unlock new avenues for growth and long-term success.”

To read the full study, visit here.

About Zuora, Inc.

Zuora provides a leading monetization suite to build, run and grow a modern business through a dynamic mix of usage-based models, subscription bundles and everything in between. From pricing and packaging, to billing, payments and revenue accounting, Zuora’s flexible, modular software platform is designed to help companies evolve monetization strategies with customer demand. More than 1,000 customers around the world, including BMC Software, Box, Caterpillar, General Motors, The New York Times, Schneider Electric and Zoom use Zuora’s leading combination of technology and expertise to turn recurring relationships and recurring revenue into recurring growth. Zuora is headquartered in Silicon Valley with offices in the Americas, EMEA and APAC. To learn more, please visit zuora.com.

Forward-Looking Statements

This press release may be deemed to contain forward-looking statements. Words such as "plan," “expect” and "will" and variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements involve risks and uncertainties. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release.

Information on these risks and additional risks and uncertainties that could cause actual outcomes and results to differ materially from those included in or contemplated by the forward-looking statements contained in this release is included under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024 and the Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2024, which is available on the “Investors” page of our website at https://investor.zuora.com and on the U.S. Securities and Exchange Commission’s website at www.sec.gov. Additional information will also be set forth in other documents that we may file from time to time with the Securities and Exchange Commission. All forward-looking statements contained herein are based on information available to us as of the date hereof. Except to the extent required by law, we do not assume any obligation to update these statements as a result of new information, future events, or otherwise.

© 2024 Zuora, Inc. All Rights Reserved. Third party trademarks mentioned above are owned by their respective companies. Nothing in this press release should be construed to the contrary, or as an approval, endorsement or sponsorship by any third parties of Zuora, Inc. or any aspect of this press release.

SOURCE: ZUORA, INC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240730104823/en/

Media Contact:

Margaret Juhnke

press@zuora.com

619-609-3919

Investor Relations Contact:

Luana Wolk

investorrelations@zuora.com

650-419-1377

Source: Zuora, Inc.

FAQ

What are the key findings of Zuora's Understanding the Modern Subscriber study?

The study reveals that 80% of consumers value flexibility in payment options, usage-based pricing is preferred for certain services, 48% prefer bundles for better value, 36% have canceled and rejoined services within a year, and 78% are interested in temporarily pausing services instead of canceling.

How does usage-based pricing preference vary across different product categories for ZUO?

According to the study, usage-based pricing preference is highest for travel services (62%), followed by food/restaurant delivery (60%), and retail services (58%).

What are the top benefits of subscription services according to Zuora's study?

The top three benefits of subscription services identified in the study are affordability (51%), value for money (37%), and convenience (32%).

How do different generations view bundled offerings according to ZUO's research?

The study found that older generations prefer bundles more than younger ones, with 58% of Boomers/Seniors and 52% of Gen X favoring bundles compared to 43% of Millennials and 35% of Gen Z.

What percentage of consumers have subscribed to a streaming service for specific content and then unsubscribed, according to Zuora's findings?

The study reveals that 57% of respondents have subscribed to a streaming service specifically to watch a certain series or event, and then unsubscribed afterwards.