Asking “how many users did I lose last month?” is never going to be as exciting or rewarding as looking at how many you gained. But focusing on reducing cancellations, or churn, is essential for your success.
Retaining current customers is simply more cost-effective than acquiring new ones. In fact, retaining customers is about 5 times cheaper, not to mention easier. Another study found that increasing customer retention rates by just 5% could increase profits by 25% to 95%.
Your business’s route to lower churn depends on the reasons why your users are unsubscribing. Involuntary churn, or when a customer intends to stay signed up but is unsubscribed because of a problem with their payment, is one set of challenges to overcome. But voluntary churn, when customers switch to competitors or otherwise actively cancel their service with you, can be a bit more challenging to curb.
Accordingly, there are a number of strategies you can use to make your subscription sticky so that you can retain more customers and grow your revenue.
It’s not uncommon for involuntary churn to make up 20% or more of a companies’ overall churn. With payments automatically being processed, many customers simply forget to update their payment information when it changes. Luckily, involuntary churn is a relatively easy problem to solve with an optimized recurring billing service. Customers want to stay subscribed to your service so you just have to make it as easy as possible.
1. Use a Payment Method Updater
When customers forget to update their payment information, one solution is implementing an automatic payment updater as part of your payment platform. This service checks to make sure account information is up-to-date and, if it isn’t, updates it. Most credit card issuers support this and implementing it can resolve many expiry issues seamlessly.
2. Retry the Payment
Not every payment decline is final. A credit card could be declined because either the acquiring bank or the issuing bank did not approve the transaction or because the customer didn’t have sufficient funds. Retrying on a schedule determined by the reason for the decline can drastically improve the chances of you recovering that payment.
3. Optimize Your Payment Update Process
Payments that couldn’t be recovered by automatically updating information or from retries requires getting customers to manually update their information. Informing the customer that their payment didn’t work and giving them a grace period gives them an additional opportunity make those updates. The key is to make that process as simple as possible.
Send users a friendly reminder that emphasizes what they’re missing by not updating their information and sends them directly to the update form. But in order to actually get users to complete the process, you need to make it as streamlined as possible, meaning as few fields as possible. Very importantly, your payment method update page needs to be optimized for mobile. Half of SaaS buyers update credit card information on a mobile device, so make sure yours displays well on small screens.
No matter how optimized your payment update process is, if the user isn’t seeing value in the product, they likely won’t update their payment information or they will cancel. That’s why the key to high retention is always creating a great product that users love, use regularly and would keep buying at the right price. When it comes to voluntary churn, focusing on a few key areas can make a big difference to your retention rates.
1. Find the Right Customers
It’s critical to target the customers who are most likely to continue on with your product. Many companies make the mistake of building expansions of their product in an attempt to appeal to many more potential user groups. However, this can result in a diluted product that’s not particularly valuable to anyone.
This is why you need to have a clear buyer persona while also making sure that your offering stays focused on meeting their needs well. Staying focused on what you do best can be instrumental in lowering your churn.
2. Promote Your Growing Value
Remind your customers on a regular basis the value your platform provides and what new value features you’ve added. You can do this via a regular email, social media or messages directly on your dashboard.
3. Connect With Outgoing Customers
Unfortunately, you can’t win them all. When customers can’t be convinced to stay subscribed, find out what they struggled with and create a plan to address the biggest issues.
A simple exit survey is often used to get this kind of information. This was Groove’s initial strategy with a single question (“why did you cancel your account?”) with a set of drop-down responses to choose from. However, this seemingly simple survey only had a 1.3% completion rate. To get more responses, Groove tested a few strategies and found the most successful one, with a 10.2% response rate, was an email with an open-ended question: “why did you cancel?”
Further testing ultimately doubled their response rate again, to 19%, by changing “why did you cancel?” to “what made you cancel?” Receiving these kinds of responses is invaluable when it comes to optimizing your product and reducing churn.
Making your subscription sticky involves having an optimized customer experience with every aspect of your service from payments to platform. Optimizing your subscription billing service and making sure you keep delivering the best end-to-end user experience possible will ultimately help you minimize churn. This is key to maximizing customer lifetime value and growing revenue.
Subscription businesses need a recurring billing service built to facilitate data-driven decisions. As you look to grow and scale it's crucial to consider the following and more:
Check out our video to discover how we help you manage and grow your subscription business.(1:15).