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Analysis

9 Ways Subscription Marketers Can Reduce Churn

Sometimes reducing churn is as simple as improving onboarding or addressing failed payments.

Marshall Lemon
September 16 2019

In our modern marketing landscape, customer retention is vital.

The latest research confirms that acquiring new customers is far more expensive than selling to those you’ve already converted. For marketers cultivating subscription-based product offers, subscriber retention is no exception. Whether you offer monthly product deliveries like Harry’s or Barkbox, or an entire suite of Software as a Service (SaaS), your success is based on selling and retaining subscriptions over the long term.

That’s why subscription churn — the rate at which customers stop paying for subscriptions — is a key metric to monitor alongside retention and acquisition. It tells you how many new subscribers are required to maintain revenue, indicates long-term profitability, and is a contingent metric when launching an IPO. Subscription churn rates can vary by industry, but one Cobloom meta-analysis suggests it should be around 5% on average. But how can eCommerce professionals lower their churn rate and boost retention? Here are a few of the most successful approaches:

More from PostFunnel on subscriptions: 
How to Build a Successful Subscription Model
Retention Lessons From Subscription Box Services
Analyzing Retention Rate for Subscription-Based Businesses

1. Improve Onboarding

Most people don’t like to learn new things — just look at the moaning when a social media site changes its interface — and that’s going to increase churn. Marketers have determined that significant percentages of lapsed subscribers leave because they don’t see value in the service or understand how to use it. Professionals must ensure that the onboarding experience is as smooth and direct as possible, and that help is immediately available if necessary. The quicker someone learns to use the product, the easier they’ll discover why they can’t live without it.

2. Offer Longer Subscription Terms

Offering discounted longer subscription options to customers locks them in for longer time periods. This technique increases subscription revenue upfront and yields a higher average revenue per user. In the long run, lengthier subscriptions allow marketers to more readily deliver the user experience that keeps subscribers coming back.

This plays out in the math, too: companies with a higher percentage of annual contracts have significantly lower churn. An independent study by subscription growth platform ProfitWell found that companies with no annual contracts have an average 9% churn rate, whereas those with 75% annual contracts have an average churn of 3%. Another study found that those with even longer contract rates had even lower churn.

This tactic also doubles as a clever onboarding method — a customer committed for a longer period is more likely to put in the work to understand how to best use a service.

3. Stay in Touch

Customers generally want to be contacted by brands they’ve already spent money with. Reminding subscribers that customer service tools exist — especially when a plan is about to expire — is an effective nudge to renew a subscription. This is the art of reducing churn by knowing when it’s coming.

These reminders needn’t just be about the subscription’s present offerings. Netflix and subscription box services have taught merchants a valuable lesson here: keep customers apprised of what’s new and upcoming with the service. Knowing what’s arriving next month can entice subscribers with anticipation.

This technique goes beyond streaming media and physical sales. Software updates can introduce new features and provide fixes to existing platforms. Keeping a service’s image alive and dynamic will keep subscribers engaged even if the benefits it offers become routine.

Retail Pulse

4. Improve Offerings

Letting customers know about service improvements and upcoming offers may retain subscribers, but marketers still need improvements and features to advertise. Telecoms are familiar with this—intensely so, because they have a reputation as the worst of the worst when it comes to customer service. But that just means they’ve got some great ideas when it comes to cutting down churn. A Hong Kong telco shrank its churn to 1.5% by investing in monitoring tech after they figured out that customers left primarily due to network downtime.

5. Learn Why Customers Stay

Marketers are starting to realize that power users and alpha customers know exactly what’s best about a given service. Polling your subscribers who are most satisfied rather than those least and correlating the results with usage statistics has helped marketers identify where their service is strongest and most utilized. That information can then be used to direct subscribers with similar customer profiles toward those features — it’s simply showing off the best they have to offer.

Today, it’s relatively easy to obtain this usage data. 61% of millennials are happy to provide more personal information if it leads to a better customer experience.

6. Prioritize Customer Satisfaction

67% of churn is preventable and much of that is attributed to bad service and poor satisfaction. Improving overall customer satisfaction takes time and is more complex than addressing churn itself. But it can have huge effects on the revenue earned from any given customer.

For subscription services, satisfaction is everything — it’s quite literally the only thing keeping customers around. Marketers trying to reduce churn should find ways to enhance their long-term value. Tying loyalty incentives and free perks to long-term subscription plans is a strategy that has worked well for subscription box marketers.

7. Give Customers Pause and Downgrade Options

Churn may be inevitable, but it doesn’t always occur because subscribers dislike the service. Perhaps they only want to discontinue the subscription for a few months or are no longer interested in premium account features. By offering alternative service options from the account interface, you can reduce churn when customers attempt to cancel their subscriptions.

If a customer doesn’t need a service all the time, letting them pause and renew a subscription over a fixed interval can retain them in the long term. Marketers have also had success in retaining customers by offering reduced subscription tiers that are easier on their wallets. While this option may reduce revenue, it’s a far better alternative to permanently losing a loyal subscriber.

8. Minimize Involuntary Failure

Sometimes payments fail involuntarily. If a subscription lapses and the customer hasn’t noticed, that’s still churn, even if unintentional. Some experts have found that 40% or more of a company’s subscription lapses were attributed to these involuntary failures.

There are a host of tools available to prevent this, such as email reminders, card update requests, or other attempts to contact subscribers before an expiration date. Whatever your approach, addressing failed payments before the membership ends is a relatively easy method of preventing churn.

9. Run Quick, Simple Exit Surveys

Try as marketers might, they can’t retain every customer. Finding out where the subscription went wrong is key to improving your service in the future. And who better to ask than a customer leaving your platform?

The key to getting this information is to provide exit surveys that are simple, direct, and quickly filled out. Exit surveys won’t usually generate highly-detailed results, but over time, they can pinpoint where a given platform is bleeding users. Even knowing which subscribers didn’t enjoy your service can help you market to best-fit customers — a key stage in reducing overall churn.

For more on reducing churn, check out these detailed strategies that focus on short-term and mid-term churn reduction. Or, join us for the PostFunnel Summit

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Marshall Lemon

Marshall Lemon is a writer, editor, librarian, and game designer. As the Content Marketing Manager at Fluid PR Group, he helps businesses craft engaging stories within the context of well-researched industry data. He lives in London, Ontario with his wife and two adorable puppers.

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