How To Reduce Customer Churn In The Subscription Management Business?
The subscription management world is a dynamic one, and customer churn is an invisible adversary that requires strategic attention. Businesses often equate success with acquiring new customers, and often don’t realize that retaining their existing customers can have a significant impact on their revenue. Effectively managing customer churn is all about retaining these existing, and valuable, customers that you have acquired with a lot of money and effort.
To tackle this, you will need to get insights into the complex behavior of your customers and how they interact with your subscription product. Where were they dissatisfied with your services? When did they decide to discontinue your services? What were the reasons behind these decisions? Addressing customer churn revolves around answering these questions and more.
Having clear insights into these areas can help reduce churn and enhance the quality of your business. Reasons for churn are often similar to hidden treasures. They that are hard to uncover and require significant work. But, before discussing the ways to tackle churn, it is important to understand some of the most common reasons behind it and why it is so important to address.
Reasons Behind Customer Churn In The Subscription Management Business
Understanding the reasons for customer churn is essential to developing strategies to curb it. In this section, we will explore some of the most common reasons behind churn.
Attracting The Wrong Customers Due To Unclear Product Messaging
Attracting the wrong customers due to a lack of clarity in the product’s offerings is a primary reason for customer churn in any subscription management business. This usually happens because of a poor customer-product fit. To address this issue, it is crucial that all messages intended for the customer are clear and focus on the problems that the product solves rather than merely listing the features.
Your Customers Are Not Solving Their Problems
Another explicit reason behind customer churn is, when the customer had a certain expectation from the product and it was not met. To prevent this, the product should clearly state the kind of problems that it is likely to solve. This way, customers have a clear understanding of the value that the product offers. They are no more misled regarding the product, and all your time, effort, and money in onboarding this customer is not wasted. Finally, when customers clearly understand the value your product brings to them, they are more likely to stay committed and will not abandon you after they begin to use your services.
Improper Support To Resolve Customer Issues
According to a survey, a majority of the customers will leave a business for poor customer service. Therefore, good customer support should be the priority of every subscription management business, or else it is likely to face severe churn issues. Proper customer support means timely assistance, addressing customer concerns, and providing proactive solutions. Adopting these measures can easily retain valuable customers on the verge of quitting. Additionally, guiding customers who are struggling with your product can make them feel at ease and easily prevent any kind of frustration. This sort of guidance to losing customers can help them reach their goals smoothly.
Your Competitor’s Product Better Meets Your Customer’s Needs
The business world is full of uncertainties and surprises, and profit drives every crucial decision. So, for revenues to flow-in, it is vital to serve your customers well so that they don’t replace you. It is only natural for them to switch to a competitor the moment they discover that this competitor can meet better their needs. Along with this switch, these customers are likely to take with them a notable portion of the revenue and market share that you’ve worked hard to build. It is only smart pricing strategies that can prevent this churn and go on to attract more loyal and long-lasting customers.
Product Is Full Of Bugs, Glitches And Downtimes
In business, to attract new customers or retain existing ones, you must offer a product that they love and are eager to engage with. Customers have little patience for subscription platforms that are riddled with bugs or errors, even minor ones. They are focused on building their own ventures and don't want to be sidetracked by any technical issues or downtime. Keeping customers informed about potential problems is crucial for retaining their trust. They should be aware of both the issue and the steps being taken to resolve it. While rebuilding your entire product may be time-consuming and costly, it is a worthwhile investment. It can significantly improve your customer churn rate and, ultimately, your revenue.
The Product Becomes Irrelevant To Your Customer’s Business
You need to stay relevant to your customer’s business for them to stick around. This means that you need to continuously keep tracking their needs and satisfaction levels, utilizing techniques like surveys and annual account reviews. This will help you understand your customer and their needs better. In turn, you'll be able to continuously improve your offerings to serve them better. You will also eventually understand how to improve yourself for them. Making them feel very much part of your process can work wonders when it comes to managing your customer churn rate.
Product Is Either Too Expensive Or Too Cheap
Pricing your product effectively plays a huge role in keeping customers and reducing churn. Being too cheap can end up in a loss of trust in your product, and being overpriced can drive away potential customers. Therefore, aligning pricing with value is essential rather than with costs or competition. This way of striking a balance in pricing can retain integrity as well as keep a long line of loyal customers.
Customers lack Any Kind Of Engagement With The Product
It is only when customers are engaged with the product that they fully understand it and appreciate the value it offers. Lack of engagement can lead to dissatisfaction as well as a lack of value for their investment. Engagement builds a sense of loyalty and trust, without which the customer may feel disconnected and lack any emotional attachment to the product. In a subscription management business, engagement promotes upsells and cross-sells, which are often seen as results of sales. The more the engagement, the more they rely on your products and services. This naturally translates into more revenue and less churn.
Why Is It Necessary To Tackle Customer Churn Or Why Does It Really Matter?
Let’s take a look at some numbers that will throw some light into why churn is so important.
• An Accenture study states that companies lose $1.6 trillion a year due to customer churn.
• Forrester is of the opinion that customer acquisition costs five times more than retaining existing ones.
• KPMG is of the view that customer retention is the main driver of a company’s revenue.
• A Harvard Business School report says that 65% of a company’s revenue comes from existing customers.
• According to Marketing Metrics, the probability of selling to an existing customer is 60-70%, while it is only 5-20% when it is to a new prospect.
• As per industry research, a 5% increase in retaining customers can increase profit by 25% to 95%.
Tackling customer churn is crucial for any subscription management business, as even the slightest effort to retain can lead to significant revenue gains and cost reductions over time. Lost customers mean lost revenue, and hence it is very important to pay attention to keeping your loyal and existing customers satisfied with your offerings. This approach will give steady growth to your business and reduce all kinds of expenses associated with acquiring new customers. Also, it is only these satisfied, existing customers that are more likely to stay loyal with you and promote you through positive word-of-mouth. Keeping churn rates low can also significantly improve your market position and help build long-lasting relationships with your customers.
How To Tackle Customer Churn?
Tackling customer churn equals to understanding customer psychology and the way they chose to use your product. Effective strategies can curb the customer churn significantly and foster long-term customer loyalty. The following section outlines the methods to tackle churn and help your business progress.
Understand The Reason For Churn
This is the foremost step in tackling customer churn in a subscription management business. Begin by talking to your churning customers to understand their reasons for leaving. Let them know that you are genuinely interested in winning them back into the system. Find out the reason why your customers are leaving by simply sitting and chatting with them. This way, you will get to understand what it is about your product that is putting them off from it. You will also get a clear picture of why your product is not solving your customer’s needs. Now you will be aware of how your product is not solving the customer’s needs or whether it is a cause of trouble to the customer. You can use all the available channels, like – phone, email, website, live chat, and social media, to communicate with your customers to understand what went wrong.
Actively Engage Customers With Your Product.
Engagement is the first step to retaining customers. Keep engaging your customers with your product. Give them reasons to keep coming back to you. This way, you can easily keep them away from churning. Engage this customer segment with discounts, coupons, and other flexible payment methods to prevent them from churning. Get the customer to be so involved in your product that it is finally difficult for them to move away.
Keep Customers Informed About The Product Through Several Support Materials.
Customers should have the freedom to totally explore and use your product. This can be enabled by providing them with the necessary training materials and tutorials that will guide them to use your product efficiently. This will keep them aware of the product and see its value. This way of informing and educating them about the product will improve their stickiness to the product and reduce the probability of churn in the long run.
Offer Incentives To Customers Who Are Most Likely To Churn Or Leave.
This is a common strategy that organizations use as a final attempt to retain customers. However, this is powerful enough to give you the desired result of reducing customer churn. Incentives can be in the form of discounts or coupons. It can also be giving customers the ability to use additional features like pausing a subscription or being able to define the end date of their subscription and a lot more. This kind of enhanced flexibility for using the product will most often result in your at-risk customers moving to a position of customers who are likely to stay with your product for a long term.
Target The Right Audience
You might have sophisticated retention strategies to reduce the customer churn of your business. However, all your efforts to reach this goal might just go in vain if you have got your targeted customers totally wrong. Make sure your retention strategies are aimed at those customers who value your services and would like to stay with you for the long-term. Keep away from customers whose interests are limited to the short-term.
Don’t Ignore Customers Complaints And Suggestions
Complaints and suggestions are integral to any business. Managing them effectively is what equates to success, happy customer and successful business. Give serious thought to what your customers have got to say. If you feel that it is logical, don’t hesitate to act on it. Dissatisfied customers whose problems are attended to can turn out to be loyal customers who can then turn out to be some of your valuable brand ambassadors too.
Did You Know?? 96% of your unhappy customers will choose not to complain, and 91% of these will simply quit you to never come back!
Talk About Why You Are Unique And Why Customers Should Choose You Over Competitors
Flaunt yourself; it's not bragging but letting your customers know who you are and what kind of services you offer. Educate them about what makes you stand out from your competitors. This way, customers should be hesitant to leave you considering your services and uniqueness. Customers should be aware of the reasons for them to stick with you and what they gain from this partnership. This is a churn technique that most businesses usually forget or ignore. It might sound insignificant, but the returns can be promising. So, let everyone know why you’re so unique and why anyone should choose you over many others. This is yet another secret sauce in managing churn in a subscription management business.
Winding Up!
Understanding customer churn and crushing it down is effective for any subscription management business to thrive and flourish. This demands a thorough understanding of the customer journey with the product. It involves analyzing customer behavior and interactions with the product. For this, data can be collected from cancellation surveys and feedback forms. These help to identify the pain points resulting in the customer churn. Another way to understand the reason for customer churn is by studying the exit interviews of customers to understand why they left the system. Therefore, by combining several qualitative and quantitative data, one can arrive at the exact reasons for customer churn and develop targeted strategies to keep them in control.
Reach out to saaslogic if you are looking for an ideal subscription management platform that can effectively tackle customer churn.