How Do Subscription Companies in EU Differ from Those in the USA?
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Originally published: July 19th, 2019
Subscription and SaaS ecosystems have popped up–and flourished–everywhere in the past few decades. While the United States continues to dominate when it comes to the subscription economy, Europe in particular is enjoying an upswing in the past few years spurred by the ecosystem getting injected with talent coming from the European headquarters of U.S. tech companies.
The problem is, looking at Europe as one block is a bit tough.
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The U.K., Western Europe, Eastern Europe, and Scandinavia all act a bit differently, particularly in what they prioritize within their companies. For instance, Eastern European companies tend to be very efficient and resourceful, a result of dealing with older equipment in the post-Soviet era, while the Nordics are very much focused on design and experience.
You see these differences pop up when comparing net promoter scores, a measure of customer satisfaction. Note that while NPS has gone down across the board, U.K. NPS tracks essentially spot on with U.S. NPS, Northern European subscription companies tend to see 20% higher NPS, and Eastern European companies see 15% lower NPS.
You see a similar relationship when comparing retention numbers as well. Gross revenue retention across Europe is actually much worse than subscription companies in the United States, with Eastern European companies seeing roughly 25% higher churn, the Nordics and Western Europe seeing roughly 15% higher churn, and the U.K. tracking at about 5 to 10% higher than their U.S. counterparts.
Further, the differences also exist when looking at the growth of company average revenue per user, which is an individualized proxy for how good or bad a company is at extracting value from their target customer base. Note that across the board, ARPU remains relatively flat, with the U.K., Nordics, and Western Europe seeing some gains, but they’re very minimal, and Eastern Europe actually seeing their collective ARPU decrease over time.
So is Europe doomed as a subscription and SaaS ecosystem? Well, of course not. We need to keep in mind that while Europe has been around for much longer than the United States, the subscription and SaaS markets are much younger than American ones, resulting in Europe being slightly behind the times when it comes to the tactics and strategies needed to grow a subscription business.
Sure, the internet reduces those barriers considerably, but the talent gap is where the impact truly exists. With time this will continue to close and I’m sure these numbers will look much cleaner as we continue to march into the adolescence of the subscription economy.
Want to learn more? Check out our recent episode on How Australian Companies Differ from US Companies and subscribe to the show to get new episodes.
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You've got the questions,
and we have the data.
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This is the ProfitWell Report.
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Hey, Neil.
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This is Chris from Visibly,
and I would like to ask, how do
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EU subscription companies
differ from the US?
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Welcome back, everyone.
Neil here from ProfitWell.
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Subscription and SaaS
ecosystems have popped up and
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flourished everywhere in
the past couple of decades,
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riding the wave of
interconnectedity brought by
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the Internet and social media.
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While the United States
continues to dominate when it
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comes to the
subscription economy,
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Europe in particular is
enjoying an upswing in the past
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few years spurred by the
ecosystem getting injected with
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talent that's strafing off
from the US tech company,
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European headquarters.
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Let's explore how European
subscription economies stack up
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to their US counterparts by
looking at the data from over
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five thousand
subscription companies.
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Looking at Europe as one block
is a bit tough because the UK,
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Western Europe, Eastern Europe,
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and Northern Europe all
act a bit differently,
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result of dealing with older
equipment in the past Soviet area,
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while the Nordics are a bit more
focused on design and experience.
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You see these differences pop
up when comparing net promoter
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score, a measure of
customer satisfaction.
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Note that while NPS has gone
down across the board, UK NPS
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tracks essentially
spot on with US NPS.
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Northern European subscription
companies tend to see twenty
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percent higher NPS,
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and Eastern European companies
see fifteen percent lower NPS.
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You see a similar relationship when
comparing retention numbers as well.
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Gross revenue retention across
Europe is actually much worse
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than subscription
companies in the US,
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with Eastern European companies
seeing roughly twenty five
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percent higher churn,
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the Nordics in Western Europe seeing
roughly fifteen percent higher churn,
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and the UK tracking at about
five to ten percent higher than
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the US counterparts.
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Further, the differences also
exist when looking at the growth of
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average revenue per user,
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which is an individualized
proxy for how good or bad a
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company is extracting value
from the target customer base.
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Note that across the board,
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remains relatively flat
with the UK, Nordics,
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and Western Europe
seeing some gains,
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but they're very minimal,
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and Eastern Europe actually
seeing their collective ARPU
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decrease over time.
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So is Europe doomed as a
subscription and SaaS ecosystem?
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Well, of course not.
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We need to keep in mind
that while Europe has been
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around for much
longer than the US,
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the subscription and SaaS
markets are much younger than
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most of the US,
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resulting in Europe being
slightly behind the times when
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it comes to the tactics and
strategies needed to grow
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subscription business.
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Sure.
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The Internet reduces those
barriers considerably,
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but the talent gap is where
the impact truly exists.
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With time, this this
will continue to close,
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00:02:39,165 --> 00:02:41,405
and I'm sure that those numbers
will look much cleaner as we
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continue to march into the adolescence
of the subscription economy.
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Well, that's it for now.
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If you have any questions,
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send me an email or video
to neil at profit well dot com.
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If you got value today
or any other report,
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00:02:53,050 --> 00:02:55,635
we appreciate you sharing
on Twitter and LinkedIn because
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that's how we know
to keep going.
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Thanks, and I'll
see you next week.
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This week's episode is
brought to you by MasterClass,
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00:03:04,160 --> 00:03:06,960
online class taught by the
world's greatest minds.
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MasterClass dot com.
