To grow digital subscriptions for a website or an online service, it's critical to cast your net as wide as possible. Then you draw those potential customers to a point of purchase. Some of them then make a payment and initiate a subscription.
But what happens after a month or a few months? What happens if customers encounter a technical or other problem? At some point, they may cease to be subscribers, and as a consequence you will struggle to sustain growth for your business.
Customer churn is a normal part of doing business, and the reasons customers churn are diverse, but they fall in two buckets: voluntary churn and involuntary churn. Understanding the difference between the two can dramatically improve your marketing approach (with help from the right tools).
- Voluntary churn is when an end user decides to end her subscription, either by going to a website and clicking cancel or phoning customer support.
- Involuntary churn is more common. A customer doesn't want to churn, but his subscription fails—because of a payment issue or a change of email, or perhaps because an auto-renewal was never set up. Ultimately, your system cancels the subscriptions, and these users disappear.
The Sweet Spot for Customer Retention Efforts
During a customer's journey, a marketer may tempt him to subscribe with a trial period. Generally, it lasts for three months, during which people test the service—and maybe leave (voluntary churn) or stay.
A person who stays 12 months or longer can be considered a long-term customer; avoid upsetting him, and offer enhancements from time to time to keep him happy. Many customer retention service providers suggest leaving these people alone entirely, but I recommend monitoring them over the long-term. Settling for happiness today can lead to obsolescence and frustration tomorrow.
It is the period between 3-12 months that is critical for managing customer churn, especially involuntary churn, so keep a close watch on new customers in this stage.
Identify High-Risk Potential Churners
The most efficient way to manage churn is to select a customer retention solution that flags churn risks. Predictive churn systems, for example, can provide a probability (0-100%) that somebody will churn in a defined period—say, one month, three months, or one year.
You can decide whom to focus on, but a good rule of thumb is to actively target clients above 75% likely to churn within the next three months. By zeroing in on high-risk churners, you can identify why they're high-risk, and address them accordingly. Often, the reasons are simple—maybe they just turned off auto-renewal, in which case you can remind them to re-subscribe at the most propitious time.
More often than not, those at the highest risk of churning are easiest to save, especially if they are flagged as involuntary churn risks. In fact, up to 50% of churn can be reduced without even having to execute a retention campaign.
Most Involuntary Customer Churn Is the Result of Payment Failure
Involuntary churn, because it doesn't result from unhappy customers, is easiest to fix and therefore should be prioritized. Your retention solution should directly target the culprits of involuntary churn; whichever solution you choose, look for the following options:
- A card updater, which limits subscription renewal failures by refreshing credit card information. Churn often happens when banks issue new cards and the old ones on file fail during auto-renewal. A card updater prevents that from happening.
- Banks' front-end systems sometimes refuse payments out of safety concerns, often during occasions outside working hours when they don't have access to a person's real-time balance. Find a system that optimizes successful payments by avoiding such windows of time.
- Finally, check for a payment retry mechanism that attempts to get a payment through multiple times, without re-engaging the customer right away.
Simply implementing a solution with those options can reduce your churn by up to 50%.
Pre-empt Voluntary Customer Churn
If you've tackled involuntary churners, half your battle is won. Voluntary churn, however, is more complex because it has directly to do with your service.
To mitigate voluntary customer churn on an ongoing basis, stay plugged in to your editors, users, and anyone minding a consumer touchpoint. Find out when, and why, people most often voluntarily churn. It may be because they called tech support a few times for an issue. Or maybe they liked some things you offered, but not everything. A slew of factors can coalesce to produce voluntary churn.
Here are some tips for avoiding it:
- Make it easy to get help. Regardless of how much a customer is spending with you, she is entitled to assistance. Newer customers, especially those in the trial period, should have frictionless access to support without having to work too hard. Such access will make them feel valued.
- Communicate best-practices. Whether you dedicate a portion of your site to case-study or Q&A videos on how to achieve certain tasks, or you create a forum for sharing tips, help your customers to maximize the service experience on their own.
- Build feedback into your improvement process. Maybe you do so through reviews, surveys, or a special alpha test groups. However you do it, being a good listener is the key to successful software and product updates. Each improvement is a chance to address issues that your clients have flagged for you.
- Cultivate brand stickiness. Facebook research shows that users who drew seven more friends to a service in their first 10 days were more likely to be retained, so monitor your platform for much-used services or consistent behaviors—then find ways to amplify them. If you observe friction—such as people having trouble finding a given service—smooth the path as quickly as you can. Doing so ensures you slip seamlessly into the lives and rhythms of users, and make yourself easy for them to advocate.
- Monitor customer satisfaction. Ensure you have a system in place to flag problems and act on them. Did your churner call customer support three times, with no luck at solving their problem? Create avenues for them to tell you about issues like this—before they've churned.
- Analyze the context around existing voluntary churn. If you see significant drop-off in engagements accompanying a high rate of churn, it's likely customers have become disengaged.
- Re-engage voluntary churners by creating even more relevance for them. A discount may be sufficient, or you can offer a reduced long-term price for only the services they want. If your customer likes only sports content, propose a package that offers that, and nothing else.
The longer you retain customers, the more valuable they become. The longer customers have been with you, the more loyal they become. Customers who stay longer also tend to spend more over time because they are less sensitive to changing prices.
Successful companies should grow organically alongside their market. Evolving along your users—and surprising them by rewarding their loyalty—will dramatically decrease customer churn as you grow.
More Resources on Customer Churn and Retention
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