Last editedMay 20233 min read
The term subscription churn refers to the rate at which customers end their subscriptions. This can be through expiration (failure to renew) or active cancellation. A service’s rate of subscription churn can impact revenue, customer acquisition costs and customer lifetime value. With that in mind, here are some tips on how to reduce subscription churn.
What causes subscription churn?
At a micro level, there are numerous reasons for subscription churn. Most of them, however, can ultimately be grouped into one of five main categories.
Financial constraints: Customers may be forced to cancel their subscription, at least in the short term.
Changing circumstances: Sometimes customers just move on from a service. For example, if a service is for a particular life event (e.g. a wedding), then it is unlikely to be needed after that event.
Lack of engagement: Customers may decide that the service has stopped providing enough value to justify its cost.
Competition: Customers may need the type of service you provide but have come to the conclusion that a competitor has a better offering. For example, they could offer better features, pricing or customer experience.
Poor customer experience: Customers may cancel their subscription if they have a negative experience with the service itself or encounter issues with billing, payments or customer support.
The first two of these issues are outside your control. With that said, how you manage the subscription churn is very much within your control. Managing it effectively could help you to win back these customers and turn them into brand ambassadors for the service.
The last three issues, by contrast, are very much within your control. Addressing these factors can do a lot to lower your rate of subscription churn.
Five tips on how to reduce subscription churn
At the end of the day, reducing subscription churn generally boils down to two simple principles. These are to maximise value and to minimise friction. Here are five examples of what that can look like in practice.
Optimise the onboarding process
By optimising the onboarding process, businesses can create a positive first impression and build a strong foundation for long-term customer relationships. This can help reduce subscription churn by increasing customer satisfaction and engagement.
Here are four steps you can take to optimise the onboarding process:
Make it easy and quick for customers to get started: Simplify the sign-up process and provide clear instructions and guidance.
Provide helpful guidance and support: Offer tutorials, demos and other resources to help customers get started and learn how to use the service effectively. Provide a clear roadmap of what they can expect and how to get the most out of the service.
Set realistic expectations: Be transparent about what the service can and cannot do and set realistic expectations for what customers can achieve with the service.
Personalise the onboarding experience: Use customer data and insights to customise the experience and provide personalized recommendations and guidance.
Offer flexible subscription plans and pricing options
The more flexibility you can offer to your customers, the easier you make it for them to stay with you. Here are some ways to make your payment options more flexible without hurting your bottom line.
Provide a range of subscription plans and pricing options – Do your best to avoid losing customers who are willing to pay for your service. Offer them a range of options to maximise the chance that there will be at least one to suit them.
Make it easy for customers to upgrade, downgrade or pause their subscriptions – Your customers’ circumstances are going to change. That is inevitable. Recognise this and prepare for it by offering your customers ways to update their subscriptions to suit their new situation.
Simplify the cancellation process – Counterintuitive as this may seem, simplifying the cancellation process may actually encourage customers to stay with you. Essentially, they’ll have less fear of being trapped into a contract that no longer has relevance for them (or that they can’t afford).
Encourage customers to use bank debit for a seamless payment process: Payment issues are an annoyance to everyone, including customers. Using bank debit is an effective way to minimise the chances of payment friction. This makes for happier customers and less time wasted on administration for you and your staff.
Provide excellent customer service
This is simple in theory but generally takes effort to make work in practice. Hiring the right people is, of course, crucial. In the real world, however, this is only a start. You then need to ensure that these people have what they need to do their jobs properly. This will typically include training, time, tools and internal support processes.
Analyse your data to identify churn risks
Thanks to modern technology, even small businesses can utilise data analytics. This means they can track customer behaviour and engagement, as well as analyse churn patterns and trends. Data analytics can provide invaluable insights into customer preferences and needs. Businesses can then leverage these insights to develop effective customer-retention strategies.
Continuously improve your offering
Even if your customers love you, you cannot afford to be left behind by the competition. Listen to your customers’ feedback and implement their suggestions as much as you can. Implement a process of continuous improvement and update your offering as regularly as you can.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.