How to Improve Your Subscription Business Churn Rate
Offering incentives and following up with canceled clients can significantly increase your active subscriptions.
Churn is unavoidable for any subscription-based business. Some people only have a temporary need. Some will be disappointed with your service or have an issue you can’t resolve. Some of them will lose the original motivation they had to use your service in the first place. There are plenty of legitimate reasons why people will cancel their services. That’s all perfectly fine. What you as a business owner need to do is separate out the churn coming from avoidable sources, and work to minimize unnecessary cancellations. Here are a handful of common sources of churn and what you can do to minimize them.
Having trouble with your business goals? Learn exactly what you need to put business processes in place during our online Ignite course.
1. Poke and remind people with declined cards.
One very common source of churn is expired payment information. People have their cards canceled -- or they simply expire -- so the next time you try to charge them, the transaction fails.
When this happens, take a moment to create a message. Sometimes there is a good reason a card is declined, but often times users simply forget to change their information. A simple reminder that their information has expired -- and even reminders in the months leading up to the expiration -- can spur them into action to update their info and keep their subscription going.
2. Offer upgrades to bring back canceled subscribers.
Another reason people cancel their subscriptions tends to be a relative lack of value compared to higher tier, more expensive plans. They want to use your better services, but they don’t have the budget for it, so they cancel. You can often draw them back if you send them a “sorry to see you go” message with an offer of an upgrade. A free month or two often goes a long way, or an upgrade with no extra cost.
You can see this in action if you’ve ever tried to cancel your TV or internet service. The telecoms providing it will often have a stack of offers, ranging from broader channel packages to higher internet speeds to cheaper offer rates. It’s quite effective, too. Almost everyone has a story about cancelling and coming back because the offers were too good.
3. Promise less than you know you can deliver.
One sure-fire way to minimize cancellations is to over-deliver your service. Value, you see, is a tricky thing. When people expect it, they’re going to be disappointed and angry when they don’t get it, regardless of how realistic it is in the first place.
On the other hand, if you promise less than you know you can deliver, people will be pleasantly surprised at the extra “free” value you brought them, even if the overall value you deliver is lower. It’s all about managing expectations. It’s tempting to try to build hype with promises, but it’s even better to let people rave review you when they get more than they bargained for.
Provide rewards and benefits to long-time subscribers.
Loyalty programs seem almost over-done these days, but there’s a reason for that. They’re effective at getting people to come back time and again. Providing benefits to long-time customers gets those customers to stick around, but it’s more than that. The promise of those benefits will help convince new subscribers that they want to stick around.
In order for this to work, you need to have good freebies for your loyal customers. A coffee mug, sticker or a t-shirt isn’t going to cut it. Badges on a website can gamify the situation, but are only attractive to a subset of users. The best options are free upgrades, but you need to make sure you have the budget to afford giving away upgrades to those customers first.
Be careful with communication.
Great communication is paramount, but it means you need to be consistent without being spammy. Too frequent emails can drive people to cancel just to relieve email clutter, but too few communications means people forget about you entirely. Try to make sure that your messages are always valuable and important, and if need be, dial back and combine messages into longer, less frequent emails.
So there you have it. Get these things under control, and you can dramatically reduce your churn and recover many of the people you lose.
Entrepreneur Editors' Picks
Zooey Deschanel Embraces the Word 'Quirky' and Thinks Businesses Should Too
A Simple (But Not Easy) Guide to Achieving Almost Any Dream
Making Time to Be 'Useless' Is a Vital Part of Creating Anything Valuable
A Billionaire Who Operates More Than 2,400 Franchises Knows These Types of Franchisees Make the Most Money
How Relentless Optimism Fuels Success for Hilary Schneider, CEO of Shutterfly
The Paradox of Celebrity Tequila
Social Media Was Draining Me, So I Gave It Up. My Business Has Never Been Stronger.