Despite the economic challenges 2022 presented for both merchants and consumers, subscription businesses showed a unique ability to weather the storm. Our recent analysis of over 15,000 subscription merchants and their subscribers found substantial year-over-year increases in several key metrics, including AOV (average order value), LTV (customer lifetime value), and MRR (monthly recurring revenue).
So—what exactly did this growth uncover? And what tactics were top-performing merchants using to achieve these results? In this post, we’ll dive into key takeaways and strategies for each of these metrics.
Read the full analysis, and explore interactive charts, graphs, and other tools to help you benchmark your business, in our 2023 State of Subscription Commerce report.
- In 2022, the average subscription merchant’s AOV, LTV, and MRR all increased year-over-year.
- Inflation appeared to be a key factor in AOV and LTV growth, but the most successful merchants made it easy for subscribers to stick with them in tough economic times.
- To foster growth in today’s climate, consider offering multiple price points, making it easy to subscribe, and finding ways to connect with your recurring customers.
Average order value
AOV increased by an average of 11% in 2022
In 2022, merchants of all subscriber count ranges and nearly every vertical saw year-over-year improvement in AOV. Overall, we found that subscription merchants’ AOV increased by an average of 11%.
Following a similar pattern to the U.S. Consumer Price index for all goods and services, this increase suggests that inflation likely played a key role in boosting AOV in 2022.
Other AOV findings from 2022 include:
- Food & Beverage merchants held the highest overall AOV of any vertical, as they did in 2021.
- Beauty & Personal Care brands saw the highest year-over-year AOV growth at 21%.
- The sole vertical whose AOV decreased slightly year-over-year at -3% was Home Goods. However, Home Goods customers made 33% more purchases over the course of the year, suggesting that purchase amounts were smaller.
- Among subscriber count groups, merchants with 50,000 or more subscribers—a category largely made up of brands for lower-priced replenishment items—saw the highest year-over-year AOV growth.
To cultivate sustainable growth in tough economic times, offer multiple price points
During periods of high inflation, when customers’ budgets are tighter, it’s crucial to make it financially accessible for them to stick with your business. One key opportunity for this is to offer versions of your products and services at multiple price points so customers of all budgets can continue to stick with you.
Introduce smaller, lower-priced options in each of your product categories while maintaining your efforts to boost AOV through product bundles, loyalty programs, and other tactics. In doing so, you have a better chance of retaining those customers, and pave the way for long-term growth over short-term gains.
“In the economic times we’re facing, it’s important to offer multiple price points in all categories.”Cindy Nichols, Founder & CCO, The Wordy Traveler
Customer lifetime value
LTV grew year-over-year by an average of 12% across verticals
Like AOV, LTV increased for all subscriber count ranges and nearly every vertical in 2022, likely due at least in part to inflation. On average, subscription merchants saw 12% LTV growth over the course of the year.
Other LTV findings from 2022 include:
- As they did with AOV, Beauty & Personal Care brands saw the highest year-over-year growth percentage in LTV: an impressive 25% increase.
- Similarly, Food & Beverage merchants led in overall LTV—nearly $100 more than the vertical with the second-highest overall LTV, Pets & Animals.
- Merchants with less than 10,000 subscribers saw higher overall LTV than those with 10,000 or more subscribers, although their year-over-year LTV growth was smaller.
To increase lifetime value, make it easy for your customers to subscribe
One of the best ways you can increase your LTV is by converting customers to subscribers. The opportunity for doing so begins the moment a prospective customer first visits your website.
Focus on making it as easy and enticing as possible for new customers to subscribe from the very first time they visit your website. You can do this by creating a subscription landing page, emphasizing the subscription option when a product is also offered as a one-time purchase, and even providing special offers where new customers receive a discount when they subscribe.
These efforts can help you attract customers that have a built-in opportunity to repurchase from you, leading to more purchases over their customer lifetime with you.
“If any of your products are replenishable, you can create a subscription model.”Ari Ziskin, Director of Ecommerce, AutoBrush
Monthly recurring revenue
MRR grew by an average of 7% between 2021 & 2022
In 2022, subscription merchants’ MRR grew by an average of 7%, showing the growing momentum of repeat purchases.
Interestingly, while Home Goods merchants saw decreased year-over-year AOV and LTV, their MRR increased well above the average by a whopping 14%.
Other MRR findings from 2022 include:
- Pets & Animals merchants held both the highest overall and highest percentage increase in MRR.
- Merchants with fewer than 10,000 subscribers saw their MRR decrease slightly on average, while merchants with more than 50,000 saw modest increases.
- Merchants with 10,000–49,999 subscribers outpaced all other subscriber count ranges in MRR with 20% year-over-year growth.
To foster relationships that lead to stable recurring revenue, find meaningful ways to engage with subscribers
One of the best ways to increase trust in your brand is to find ways to directly connect with your subscribers and provide them with value beyond your products or services.
This could come in several forms. For example, you might consider providing customers with supplementary educational content via a blog or podcast, or individually responding to customer comments on your social media accounts. You could even implement a community platform that allows subscribers to connect with you and one another, or provide rewards for customers if they offer feedback on your products.
By engaging in conversations with your subscribers, you open your brand up to one of your most valuable sources of feedback—and pave the way for more valuable customer relationships.
“Generally you’re not just signing up for a product—you’re also signing up for a relationship with the brand.”Ryan Baylis, Co-Founder & CEO, Drift
Explore the interactive report for more key takeaways
While subscription merchants saw significant growth in AOV, LTV, and MRR in 2022, the positive impact of recurring offerings didn’t stop there.
Read the interactive 2023 State of Subscription Commerce report for a full analysis of how over 15,000 subscription merchants in a variety of product verticals and subscriber count ranges performed in 2022 according to five KPIs, and how their subscribers interacted with their orders in new and exciting ways.