High renewal rates offer data products resiliency vs recessions

One of the strengths of the business information segment is that business consumers of data products usually need access to data on a recurring basis, and they need the most current information available. That sets business information services as prime sources of recurring revenue for publishers of the service. Success in obtaining that recurring revenue can be measured through renewal rate, and data services are exemplified by high renewal rates. Data customers come to rely on data services and see them as essential tools; even in depressed economies, renewal rates show remarkable resiliency.

Looking at two research projects conducted independently by ABM and InfoCommerce last year, respondents offered benchmark results in line with these ideas, in the form of high renewal rates and long duration subscriptions. Surveying ABM members with significant data business, the research found 80 percent to 81 percent renewal rates on a unit basis, and 82 percent to 85 percent renewal rates on a dollar basis.

InfoCommerce’s research broke renewal down by company size. Almost a quarter of large companies (over $5 million in annual data revenue) reported renewal rates in the 85 percent to 89 percent range; 35 percent reported renewals in the 90 percent to 94 percent range; and 29 percent reported renewal rates in the 95 percent to 100 percent range. That means 86 percent of large companies report renewal rates of 85+ percent. For companies under $1 million in annual sales, 80 percent of small companies reported renewal rates in the 85+ percent range.

This benchmark result – that typical renewal rates for data products usually top 80 percent, and often edge even higher – is a point of congruence between the ABM and InfoCommerce research.

InfoCommerce also reports that the average life of a subscription is two to three years, and that may be an underestimate. If a subscribing employee leaves a company and his or her replacement purchases the data product, it may register as new subscription, although the company continues to use the service.

The hallmark of business information products is that they are resistant – albeit not immune – to tough economic circumstances. While marketers and vendors may perceive advertising budgets as fat to be trimmed as needed, or see events as luxuries that can be cancelled, data products are more commonly viewed as essential tools that are crucial to core business interests. Moreover, for that reason, as business conditions improve after a recession, data consumers tend to return relatively quickly to products that they had dropped when times were tougher.

For more information on this research and on trends in business information, download ABM’s free white paper, to be released at the end of the month, here.

By Michael Moran Alterio


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