More and more online revenue is being generated through subscription-based business models and it’s easy to understand why. It’s a model that offers companies more potential revenue over the long term while also appealing to many consumers looking for convenience with ongoing products and services they need.
While loyal subscribers are the obvious lifeblood of any subscription company, they can also be tricky to manage. If you can’t get everything just right from a product and support perspective, your churn rate can quickly increase, your customer lifetime value quickly decrease, and you risk losing substantial amounts of recurring revenue.
Additionally, the competition for online subscribers is still growing, which means that acquiring new customers can cost up to five times more than retaining an existing one. With so much at stake, here are the top four preventable sources of churn that you need to avoid.
Interest in your subscription is always highest right after sign up so make sure your new users get access to the value you provide as soon as possible. If there’s a learning curve to start getting value from your subscription, ensure you have a well-thought out onboarding process to teach users how to get the value you’re offering.
Interactive tutorials, videos, guides and, if necessary, live support can be incredible tools to help get your users hooked.
Sometimes subscribers have no intention of cancelling but their payment inadvertently fails, causing their accounts to be cancelled. This can be because account limits were exceeded, credit cards expired or something else entirely.
No matter the reason, you need to make sure you have processes in place to recover failed recurring payments or prevent them in first place. This can include dunning management processes that send notifications to users informing them of a failed payment and inviting them to check their information. It can also re-try the charge on a pre-defined schedule. Another option is to have an automatic credit card updater for cards that expire.
People will continue to pay for your subscription for as long as they successfully use it and they feel they are getting value from it. One of the challenges of the subscription-based model is that people become accustomed to a continually evolving and improving product. So, if you’re not responding to changes in customer tastes and expectations, you’ll likely see your churn rate creep upwards.
It’s vital to keep your recurring price in line with the value your customer’s perceive your service is worth. A lot of this will be based on what similar products in your market are priced at so continually monitor your competitors’ offerings and regularly solicit feedback from your customers on what value they are looking for.
This makes communicating new features, rate changes and the reason for rate changes extremely important.
Long-term customers provide predictable revenue and greater long-term value. But there is a cost to keep them. Exactly what will work to keep your customers engaged will differ from other companies so it’s vital to always be listening to your subscribers and looking for ways to optimize your recurring billing, onboarding, service, payments and price.
The payoff for doing so can be great: a reduction of just 5% in your churn rate can increase profitability by 25-125%.