Appetite for subscriptions is on the rise. As shoppers seem eager and investors are ready to back it up, the subscription business model has become more relevant today than ever.
A subscription business is different from a standard eCommerce store in the way it monetizes its user base. The subscription company is not only focused on attracting new clients, but also on motivating current clients to stick around. Put simply, growth in subscriptions is part excellence in acquisition, part quality of retention.
When companies are unable to keep subscribers on their plans, they incur what is called a high churn rate – too many users ending their paying services within a given interval. Controlling your churn rate is probably the greatest challenge as a subscription business, but there is a lot of market information here that can help you through this goal.
A lot of the time you’ll be combating voluntary churn, which happens when a customer willingly decides to end the relationship, by canceling their paid subscription or downgrading to a free trial.
Why does voluntary churn occur?
Reasons for churn fall into one of a few categories, and most of them have to do with how the user perceives their experience with the product.
- Customers are not satisfied with the product. Have you delivered what you promised the user? If not, a product redesign may be in order.
- The product is not used enough. Is it possible that your customers have changed their daily routine and this in turn has impacted their usage patterns?
- The customer can no longer afford the product. Has anything changed in your target users’ incomes or spending lately, and how does your product fit in their new pyramid of needs?
- Product value is not clearly perceived. Are users left feeling like they’re getting their money’s worth from your brand, or are you underdelivering in value?
How do you predict voluntary churn?
Prevention is one of your best tactics when it comes to churn. In order to prevent churning subscribers, you first must look at groups of customers who are exhibiting signs of dissatisfaction and understand their motivations. Analyze messages, feedback, and complaints from those clients who are constantly seeking help. Use your support department to reach out to them, collect in-product feedback, scrape public review sites where your product may have been mentioned, and look at as many sources where you can get information on these clients’ currents product attitudes.
Another user group that could provide insights for forecast are your silent customers. Invariably, some of your users will go silent, stop logging in to your product, or just reduce their use of the service. Product data can provide a rich set of information here, and you should look at login data and in-product behavior to better profile this group of customers’ unmet needs.
Customers who fail to update their payment details or who suddenly decide to switch to manual renewals are another group that could generate insights for predicting churn. Approach these customers with dedicated email campaigns or in-product messages and see if you can uncover what it is that’s missing, in terms of product experience.
How do you prevent voluntary churn?
Preventing voluntary churn requires designing the right combination of product engagement, customer experience, and perceived value. This holds true whether you’re talking about free trial users considering a paid upgrade or paying customers deciding whether to renew. The tactics you have at your disposal here include:
Get your pricing right
If you find your customers are price-sensitive and their usage patterns are infrequent, consider incorporating a usage component in your pricing. This could reduce the risk that customers who have an infrequent use of your product will churn.
There are multiple pricing models you could opt for – test and pick the one your customers are most comfortable with.
Optimize the customer experience: onboarding, service, and engagement
When customers are unable to perceive your product’s value, the onset of churn is just a matter of time. It’s essential to get their buy-in from the moment they reach your platform, and maintain it throughout product interactions.
Use approaches that make the customer feel taken care of: include product tutorials and walkthroughs, set up non-intrusive email campaigns that teach the client about the product potential, ask their opinion periodically, offer small in-product rewards when the customer reaches certain milestones, and, overall, keep your users engaged and coming back for more.
Send renewal reminders in due time
Keeping customers in the loop involves being transparent and timely, especially when it comes down to costs. Be sure to inform your user base before each upcoming payment cycle, setting clear expectations on what sums will be debited, at which date, and from which payment method.
Successful subscription businesses should even go beyond this approach, by trying to be as accommodating with renewals as possible. For example, you could consider offering discounts for an early renewal, or you could be pro-active and inform customers about soon-to-expire payment methods. These email touchpoints are another great opportunity for you to communicate the value of your product and any unique product features the client may be missing out on if they cancel.
In today’s context, when much of our attention has been hijacked by information and updates on the global context, a timely email reminder on renewal goes a long way in ensuring your brand is still top of mind among customers.
Be more vocal about automatic renewals
Enrolling your customers in automatic renewal programs can have a significant positive impact on your bottom line, with potential to even double your customer lifetime value (CLV). Incentives play an important role here – without a clear benefit emphasized, users may be less willing to take the step. Consider implementing migration campaigns, in-product messaging and notices, and, through it all, take a global approach and make sure automatic renewal messages are featured on all product update channels.
What can your business do to combat churn?
Of course, in spite of your best efforts, some customers will cancel eventually. Your approach here should be offering an effortless experience, even in these cases when users want to leave. Yes, you read that right: your goal is to have subscription cancellation options visibly featured, with a clear exist path lined up for your clients. This level of transparency will inspire more trust among your current users, who otherwise might feel like they are captives of your brand.
Other tactics you could apply in one-off situations among your user base to reduce voluntary churn include:
- Featuring a pause subscription option. Let customers pause their subscription as an alternative to canceling it entirely.
- Offering an option to downgrade. In special situations, you could choose to let customers downgrade to a less feature-rich plan, in the hopes of keeping them on board.
- Offering options to upgrade. By contrast, there may be customers seeking richer features, although they aren’t yet ready to commit to an upgraded plan. For these, you could set limited upgrades to the next plan, just so they get a taste of the extra potential.
- Offering a discount for upcoming renewals. If customers are reluctant to renew for the next period, try to get their attention with a general discount for loyal customers who renew.
And when users do churn?
As highlighted above, some level of churn is inescapable, no matter how many retention tactics you’ve employed. In these cases, you still have several tricks up your sleeve which may keep customers onboard:
- Proactively extend their subscription. Help customers out with an extension of their subscription for a limited time, if it makes sense and if it doesn’t come at too high of a cost. Some may be grateful for this outreach from you and may reconsider their intention to exit.
- Offer case-by-case discounts. You may not have deployed a discount across the board for all your customers, but you can still do it for special customers in an attempt to convince them to stay. They may incur additional product value from such an initiative and be less likely to churn.
- Collect feedback and act on it. Consider implementing exit surveys and campaigns to get a better understanding of why customers are leaving. Ask them about their reasons to cancel, ask for recommendations for better support from your side, and try to understand why the relationship didn’t work well in their case. Use this information to target dissatisfied customers with discounts and to close the gap on the features your churning customers are looking for.
Be sure to test these retention tactics until you find one that works for your industry. Some audiences may be more receptive to discounts and temporary downgrades/upgrades, whereas others may appreciate a more personal communication approach. Regardless of what your tests show you, when it comes to retention be sure to employ patience. Churn management isn’t a one-and-done process, it’s a whole iteration process where you will be continuously updating and optimizing your tactics.
By itself, the whole churn optimization process will teach you so much more about your service, customers, and even your company. You’ll find your teams have more valid, real-life inputs to work with, and you’ll be able to zoom back and focus on retention with even better approaches.
For a deeper dive into how voluntary churn can help identify areas of business development, don’t miss this exclusive 2Checkout webinar with special guest Vojtech Stribrsky, Online Sales Manager at Avast.