Businesses are facing mounting pressure to adapt and innovate to meet the changing demands of consumers. A new survey from The Subscribed Institute at Zuora and The Harris Poll revealed that consumers want to be charged in a variety of ways, with 50% preferring a monthly flat fee, 40% an annual flat fee, 28% a limited free trial, 25% discounted or free access in exchange for ads, and 22% usage-based fees.

The evolving landscape of consumer preferences is pushing businesses to rethink their approach to pricing and payments. With younger generations increasingly demanding personalized options and flexible payment models, companies must adapt to remain competitive. This urgency was evident at the 2024 Subscribed Live conference in Berkeley, where industry leaders gathered to discuss the challenges and opportunities presented by this shift.

During the “Streamlining Payment Success” session, experts, including Katie Healon, senior director of treasury and payment processing at 24 Hour Fitness, broke down the complexities of managing payments in this dynamic environment. They emphasized that data-driven insights, technological advancements, and a relentless focus on the customer are key to navigating the ever-changing payment landscape.

The importance of flexibility

Healon shared her company’s journey of adapting to these changing demands. 24 Hour Fitness has been subscription-based since 1978, but the COVID-19 pandemic accelerated the need for even more flexibility in their offerings. Healon shared that 24 Hour Fitness is constantly exploring ways to be more flexible with what customers want, whether it’s through different pricing structures, billing cycles, or payment methods. 

“We’re always talking about, ‘Oh, we should do variety, we should try weekly,'” she said, emphasizing the importance of experimentation and adaptation in the subscription landscape. She noted that the company has already moved towards more flexible billing cycles and diverse membership types, necessitating a robust technological foundation. This led to their transition from a legacy Oracle system to Zuora’s platform, a move that has enhanced their flexibility and scalability.

Chris Ho, GTM VP at Zuora, echoed this sentiment, stating that part of Zuora’s vision is to “optimize and get on that supply and demand curve for every individual buyer, whether you’re a consumer or you’re a business.” He emphasized the importance of tailoring offerings to the specific needs and willingness to pay of each individual customer.

Best practices for flexibility: Subscriptions are here to stay, but consumers are interested in other options, so experiment with additional monetization models to create personalized offerings for customers and see what sticks. Using a modular monetization platform makes this a seamless experience. 

The power of data

The importance of data-driven decision making was a recurring theme throughout the discussion. Healon stressed the need to analyze customer behavior and payment data to optimize payment success rates, reduce churn, and combat fraud. “What data do you have? What data do you have access to?” she asked, emphasizing the importance of leveraging data to understand and address key issues.

Best practices for data: Customer and payment data is crucial for optimizing payment success, reducing churn, and combating fraud. Now, information directly from consumers is like gold. Use your platforms to create and foster relationships with your customers, manage that data securely, and use it to create the best experiences for them.

The challenge of churn

Involuntary churn due to failed payments remains a significant challenge for businesses in the Subscription Economy. Healon highlighted the need for a multi-pronged approach to tackle this issue, combining technological solutions with proactive customer engagement and retention strategies. She emphasized that the best way to get people to stay engaged with a fitness company is to get them to come work out, highlighting the importance of the in-person experience in the fitness industry.

Best practices for preventing churn: Customer-centricity is paramount. Proactive customer engagement and retention strategies are essential for mitigating involuntary churn. Focus on delivering value upfront to get users to engage as much as possible. The more engagement, the more likely they are to pay for products and services — and remain!

Embracing new payment methods, balancing flexibility & control

The conversation also delved into the growing prominence of alternative payment methods, particularly among younger generations. Healon acknowledged the need to accommodate these preferences while balancing risk and cost considerations. “This is the way of the future. This is the way the newer generations think about their payments,” she said, referring to the increasing popularity of options like Venmo, PayPal, and Cash App. “You can’t just walk away. You have to learn how to accommodate them.”

The discussion also touched upon the delicate balance between offering flexibility to customers and maintaining control over payment processes. Healon expressed reservations about allowing customers to store multiple payment methods, citing concerns about complexity and potential issues. However, she acknowledged the importance of enabling flexibility to remain competitive and cater to evolving customer preferences.

Best practices for balancing flexibility and control: While flexibility is important, businesses must carefully consider the potential risks and complexities associated with offering too many options.

Outlook for modernizing payments

As the subscription landscape continues to evolve, businesses must prioritize operational agility, data-driven insights, and a deep understanding of customer preferences to achieve sustainable growth and success. The insights shared during this session provide a valuable roadmap for navigating the complexities of payment processing in the subscription economy.

To watch the full on-demand version of this session, click here.