Subscription fatigue: Why do customers churn in DTC?
Subscription offerings are steadily rising. Companies are turning toward this business model as there’s an added benefit of predictable, recurring revenues and the ability to secure a loyal customer base.
However, as the landscape becomes increasingly crowded, subscription fatigue and resulting churn are emerging as a natural consequence. If you’re an existing subscription brand or are planning to enter this territory, understanding fatigue, churn, and how to reduce both is critical for your success.
What is subscription fatigue?
Subscription fatigue, also known as subscription overload or subscription saturation, refers to the potential decline in the interest of consumers toward spending on subscriptions as the number of available subscription choices increases.
This concept is tightly related to customer churn–the amount of subscribers that cancel a subscription. Generally, churn from subscription fatigue can be attributed to three reasons:
Not enough value: If subscribers perceive a lack of value, they don’t shy away from exploring other options. Interestingly, value isn’t restricted to the price tag but the entire experience when transacting with a brand.
Poor customer service: Buyers are spoiled by choice and unwilling to settle for anything below what they consider best. Poor customer service is one of the most prominent causes of churn, and businesses lose over $75 billion annually due to not attending to their customers well enough.
No brand loyalty: The problem of brand loyalty arises whenever a subscriber views the brand as “interchangeable” with that of a competitor. According to Havas, 75% of brands could disappear, and nobody would care. This points toward the pressing issue of customer loyalty in today’s marketplace and explains the growing industry concern over churn.
Signs of subscription fatigue and how to prevent them
An ideal approach to fighting churn in subscriptions lies in identifying the signs of fatigue early on, along with the different drivers of churn, and accordingly undertaking the necessary steps. Some common causes and actionable solutions are:
Inability to demonstrate subscription value
Any customer subscribes to a product or service to achieve a particular outcome. If your subscription fails to make customers feel it adds significant value to their lives, subscription fatigue and churn can emerge. Sometimes, it can result from customers simply not knowing how to use the key features of your product or service and, therefore, feeling that it’s not of good value to them.
Solution: Outline your ideal customer profile and work towards explicitly providing them with a stellar product or service combined with an excellent customer experience. Simultaneously, you must plug in efforts to communicate your value proposition clearly and live up to what you preach. If that implies making your existing onboarding process more robust, you need to do it along with providing excellent after-sales support.
Failure to adapt to changing customer preferences
Many subscription businesses often fail to incorporate that market intelligence into their offerings and suffer the brunt of competitors poaching their customers. For instance, customers may start losing interest in your offering or undergo a lifestyle change that makes it irrelevant to them. In such cases, failure to be attentive and introduce measures on time can leave you vulnerable to avoidable churn.
Solution: To identify and respond to changing customer preferences, you need to collect enough customer data and study it deeply. Leverage that understanding to stay close to them and ensure they’re excited and engaged with interesting campaigns through social media, in-app communication, and emails. Monitor their behavior closely and respond to signs of reducing activity with emotional messaging that re-ignites their aspiration. The idea is to make them hit pause instead of canceling the subscription.
Offering rigid pricing and billing plans
Even though the price is not the sole influencer in driving purchases, it is still critical. Unless your business provides meaningful pricing options to customers, they are always at risk of exercising the option to withdraw the subscription at any point in time. Moreover, as consumers turn cost-conscious with the increasing number of overall subscriptions to spend on, offering a competitive deal helps.
Solution: An excellent way to tackle pricing-related churn in your subscriptions is by empowering customers with flexible pricing plans instead of selling one product or service at a flat price. Doing so ensures they have little reason to drop out or switch to a more flexible service. Additionally, revisiting your pricing from time to time is also essential to stay relevant.
Payment processing failures
Churn can be involuntary due to payment failure due to an expired credit card, a change in the customer’s banking details, or insufficient funds. Unfortunately, many subscription businesses have little know-how to control involuntary churn. As a result, they lose the chance to sell directly without engaging intermediaries, even if the end customers are eager to use their products.
Solution: You can effectively arrest involuntary churn by using robust, secure subscription management and billing platforms like Recurly, which has features that allow updating accounts, automatic retries in case of payment failure, and more. Furthermore, by introducing dunning campaigns, you can also request your customers to update their payment methods in a timely manner and cancel out involuntary dropouts by a large fraction.
Like in any subscription framework, customer churn arising from fatigue is inevitable. The right approach to control it and ensure a growing bottom line lies in maximizing customer retention.
Want to know how Recurly has helped businesses like yours to reduce churn and prevent subscription fatigue? Check out our product demo.