Let me take you down, I really wanna take you down…
By ‘you’ I mean subscription churn; that’s who I’m singing to. Don’t get it twisted!
First, what is subscription churn? We hear “churn” all the time, but let’s make sure we’re on the same page about it. Subscription churn is the number of subscribers who cancel their subscriptions in a given period of time. In other words, it is the number of people who stop paying for your subscription product or service.
Now, I know we’re all sitting here, thinking the same thing—”how can I reduce my subscription churn and in turn retain subscribers and increase customer lifetime value?”
Like any problem, the first step is to get to the root of it, then work backwards to find a solution. First, at what point in the post-purchase customer journey do you see the most churn? Once we identify that spot, we can then ask, “Why are they churning?” The answer may not be clear. There may be several different reasons why, but we can pick a few out and find ways to combat it. This is not a one-size-fits-all situation, but we’re going to tackle the two most common subscription churn problems and take them down together.
At Retextion, one of the most requested metrics has been Same Day Cancellations. Why? Because people want to know how susceptible their subscription programs are to those who finesse the system—snag the subscription discount for the single purchase and then cancel immediately (before they forget to cancel the subscription).
Though it is nearly impossible to prevent the finessers for good, we can build incremental benefits to the subscription program to make it more incentivizing for people to stay subscribed.
You may want to ask now, “Well, I need to keep a discount on subscriptions since that’s the #1 benefit for most people.” Yes, definitely keep your discount (especially in this economy with inflation and all). But you can structure your subscription program to be more rewarding the longer they stay, with free gifts or even a steeper discount.
There are many different approaches you can take but let's start with a discount that increases on the second order. Retextion has workflows so you can switch the discount on sequential subscription orders. For example, you can offer a 10% discount (or no discount) on the first subscription order, then set up a workflow to increase the discount to 15% or 20% on the second and ongoing orders. This gives customers the opportunity to try your product at a lower discount, but a discount, nonetheless, without losing out on your margins, if they end up canceling after that first order. Let’s say they stick around; then they’re receiving a great subscription benefit for becoming a loyal customer.
“What about the people who just go straight to cancel after that first (or second or third) order?” We want to focus on active subscription churn for these guys. At Retextion, we implement a cancellation flow to save as many of these guys as possible. For example, when someone hits ‘Cancel Subscription’, they’ll be prompted with cancellation reasons to choose from, and they’ll be served an offer (or a “treatment”) that you set up for that specific reason.
If someone says that it was too expensive, you can offer them a discount or a free gift on their next order. If someone says there was too much damage in transit, you can direct them straight to your customer service line for someone on your team to help them out. If someone says they have too much product, you can give them the option to skip 1, 2, or 3 billing cycles. You can also select multiple treatments/offers for a cancellation reason, and the artificial intelligence will automatically run A/B tests and shift the offer served to what performs better.
If your only subscription benefit is a discount or free shipping on every order, let’s rewind it back and define a wider range of benefits a subscriber can gain from sticking with you. The hard, straight-forward, price competitive benefits most likely come to mind first:
But what about the softer benefits?
Believe it or not, these soft benefits go a long way with a customer, and maybe even more so than the hard benefits. Why? Because they contribute to building up customers’ loyalty.
For example, I got together with Andrea, head of Growth at Buoy, to strategize a soft benefit to utilize Retextion’s Experience Engine to prevent churn. From what we’ve seen from other brands, we decided that merch would go a long way. Buoy is now designing and planning offering t-shirts on their site that would be offered for free to their subscribers on the second order. While this keeps customers from churning on that second order, this surprise and delight also builds brand affinity. Not only will the product be in subscribers’ kitchens, but it’ll also be in their closets every time they decide what to wear that day.
Let’s look at how community plays a role in reducing subscription churn. Obvi, the collagen protein (and supplement) brand for women, has built an overwhelmingly strong Facebook community where people can share their experiences, recipes, ask questions, and more. Since consistency is key with any supplements and habit-building, subscribers of the product have a space to help them stay on track and motivated to continue using the product. It puts any thought they may have had of canceling their subscription on the back burner.
There may always be a competitive product out there with a lower price point than yours, but the soft benefits are what will enhance the quality of your subscription program. In turn, less people will churn because it’s not just price they’re ditching. You’ll also retain your subscribers for a longer period of time, increasing their lifetime value because those are the benefits that customers can’t easily get elsewhere.
The bottom line for preventing subscription churn is that you need to show these customers that care about them leaving—not just from a financial standpoint, but from a community perspective as well. Think about it—it’s hard to say no to someone you’ve had a long-lasting relationship with that goes far beyond business. When you have a subscription program that offers community, non-monetary benefits such as surprise and delights, or a VIP customer service line, people feel special and it’s hard to abandon that special treatment. When you start to think about your subscription program as more than just a revenue channel, it’ll become a significant brand-building part of your business, and the revenue will flow in naturally.
And of course, you’ll likely be combatting active churn from penny pinchers and will want to utilize a cancellation flow to save them. The treatments they receive will feel tailored to why they’re canceling, which ties back into that special treatment people can’t resist loving. If someone can’t afford it, offer them a discount, even a small one, on their next order. If they didn’t like the product, offer them a different product to try. Don’t be afraid to get your people involved! Directing your customers to your customer service line for cancellation reasons that maybe a discount or a free product can’t solve will help both you and the customer. Your team will gather direct insight from unhappy customers and those customers will have the opportunity to be taken cared of by real people. Even for not-so-great situation like churn, it’s a win-win.
If you need help combatting churn for your DTC business, give Triple Whale a try.
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