This is a strange time. Many businesses are dealing with dramatic declines in revenue, and many families have lost their jobs. Even people and organizations with surplus are cutting back on spending.
One segment of the market that is proving to be particularly resilient is businesses that use subscription pricing and prioritize long-term relationships over individual, large, lumpy transactional revenue. The best of these businesses have systems in place that optimize for retaining customers once they’ve done the hard (and expensive) work of attracting them in the first place.
Here are some of those best practices.
1. Make churn “everyone job” It’s not customer support (success)
2. Be a detective to understand the drivers of the churn. Be hypothesis driven. Use logic AND data. And remember, when someone says “I can’t afford it” or “I just always forget to use it even though it’s great”—what they really mean is that your offering is not longer worth their limited time and money. Even if you lower the price, you might not get them back if the product isn’t valuable to subscribers.
3. Be open to churn drivers across the organization, not just “renewals/retention” team. Churn can be reduced by improving your marketing tactics to attract the right people and correctly set their expectations. It can be reduced by improving your onboarding experience, establishing subscriber habits that will maximize their value and increase their likelihood of staying–some subscribers cancel before they’ve even experienced your offering fully. Churn can be driven by the product team making the product too hard to use, or being buggy enough to make subscribers “give up”. And churn can be driven by a support team that waits until subscribers reach out with their problem, rather than proactively solving those problems.
4. Make sure you have the right metrics. Go beyond acquisition, retention and average recurring revenue (ARR). Track engagement–recency, frequency, depth and breadth of usage. Engagement metrics tell you whether the subscriber has made your offering a habit, and also whether they are expanding or contracting in terms of usage–that data can provide an early indicators of whether your subscribers are getting value, and value drives retention. Finally, use some kind of regular satisfaction tracker–the Net Promoter System is popular, but there are other tools as well to ask customers how likely they are to refer others, to continue subscribing etc. NPS/satisfaction. Make it easy for your subscribers to give feedback. None of this needs to be fancy and you don’t need lots of tech for this information. It starts by asking the right questions and then seeking the data to answer those questions.
5. Consider churn by cohort—does churn vary by any of the following: calendar month of purchase; source of acquisition, months of subscription. Do your subscribers churn differently in January than June, like many weight loss programs? Or do the new subscribers referred by existing subscribers stay longer than those who come for the signup offer? One organization that supported startup entrepreneurs found that everyone canceled at month 7, regardless of source or time of year, because that was the time when the customer felt like they had either gotten the business off its feet or failed– and didn’t see value with the membership for going concerns. As a result, the organization extended the content they offered to serve established businesses as well as startups.
6. Differentiate between acceptable and unacceptable reasons for churn, and then segment the unacceptable reasons, to address one by one. Acceptable churn is when the subscriber leaving wasn’t meant for your offering. That subscriber never should have signed up, or their situation has changed such that the subscription is no longer for them. For example, if someone cancels their dating site membership because they found their soul mate, that’s acceptable churn. Unacceptable means that you are confused/surprised/disappointed that this particular subscriber left–often because the product didn’t work as intended, the subscriber never really understood or properly realized the value, or the subscriber just didn’t see enough value to stay, despite the fact that it did what you promised. Unacceptable churn should be broken down by driver and then each driver should be fixed, one at a time.
7. Shut the door on passive churn. Passive churn happens when a subscriber doesn’t do anything but the subscription is canceled–this usually happens when the customer’s billing option no longer works. If the card issuer adds a new feature and sends new cards (with a chip for example) that have a new number, the old card gets de-activated and if the customer doesn’t proactively update that information, the subscription is canceled. Companies can fix this by asking for a backup payment option, by extending the grace period between payments (this only works if the variable costs of the company are low or zero–otherwise the company risks real out of pocket fraud ). There are many many vendors that help with passive churn, and you’ll quickly be able to tell of the ROI makes sense for your organization.
8. Adjust your communication to filter out “bad fits” before they sign up in the first place. You can mitigate acceptable churn by not attracting the wrong people to begin with. Many organizations disagree with this idea, believing that there is no harm in a big top of funnel, and then letting people self-select out. However, there are a couple of issues. One, you’re paying to acquire subscribers that aren’t likely to stay. Two, you’re clouding your data and making it harder to understand true churn of the right subscribers. And three, someone who comes for the wrong reasons, if they leave, might say something bad about you, and if they stay, their feedback will be inconsistent with that of the best members, and could result in a product that almost meets everyone’s needs but actually meets no ones needs. So what do you do? Consider communicating more clearly who your offering is for, and maybe even creating some friction to join.
9. If the issue is that they don’t use the product or see the value (when you’re confident that they would have loved the product if you had been sitting beside them, guiding them) improve onboarding. You can onboard in many ways. Onboarding new subscribers through a series of emails dripped over a period of days or weeks is very common. So is a ‘welcome’ call to help answer early questions and ensure that a new subscriber is happy. You can also modify the product experience itself, so that every new subscriber establishes habits for long-term engagement.
10. Consider changing your product itself to resolve Product Churn. Product fixes are among the most expensive changes, in comparison with changing the marketing messages or the customer support/success protocol. So you always want to start by seeing if a change around the product (rather than inside) can fix the issue. But in the long-term, the most elegant and lasting way to build deep relationships is within the offering. The best product teams are increasingly taking responsibility for the entire value delivery and moving away from a “feature orientation”. But there are still a lot of product people who focus too much on a specific feature and not enough on the overall customer experience and engagement.
You’ll note that none of the suggestions I provide are at the point of cancellation. Usually, by the time the subscriber asks to cancel, it’s too late to “save” them. Some organizations offer a discount to people who threaten to cancel. The risk with offering a discount to save someone is that you’re effectively teaching subscribers to complain. So people who don’t complain are treated worse than those who do. It used to be hard for consumers to compare notes, but today, a post on twitter is all it takes for the whole world to be taught that a quick call to cancel will save X%.
A pause button can be effective at this point, to make it easy for them to return when they’re ready. The risk with a pause button is that you give up a key driver of stickiness which is that some customers don’t want to give up their history or customization. If they pause, they keep their system the way it always was, whereas if they cancel and then come back, they have to start over again. However, by making it easy to pause, you keep the door open.
Easy go, easy come…which brings me to my last point. If you make it easy for subscribers to cancel, when they actually want to cancel, they may return. The last memory they’ll have of working with you won’t be the 6 pages of cancel steps or the requirement to call on a Tuesday between 9-10AM Eastern. It will be a quick and easy push of the cancel button.
Many of the reasons people cancel are not permanent. If you fix the problem with the product, or the customer’s situation changes, they might return. So leave the door open. And periodically, reach out to your lapsed subscribers (both the ones who’ve paused and who’ve canceled) with news of the changes and improvements you have made. You may be pleasantly surprised!
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