Recurring payments form the lifeblood of subscription commerce. Therefore, subscription renewals are critical to drive stable revenue growth and profitability. Any friction during renewals trickles down to the bottom line, making these journeys crucial. This article discusses some of the best practices to incorporate for a seamless subscription renewal journey.

What is a Subscription Renewal journey?

The renewal journey refers to the process an existing subscriber undertakes to continue their active subscription into the next billing cycle. There are two main types of subscription renewals: manual renewals and automatic renewals.

Manual subscription renewals require customers to log in each time to renew and possibly update their card on file, address, or email address. Any interruptions in this–such as site crash, failure to process payment, or even a poor user experience or interface–can annoy them and lead to involuntary churn.

Automatic subscription renewals don’t require customer intervention, and automatic payments are processed each time unless intentionally paused. An automated subscription renewal process relieves the extra efforts needed to renew. However, sometimes they lead to disappointed customers who are surprised by unexpected renewals. 

Why does subscription renewal matter for SaaS?

If you are trying to grow a successful SaaS company, subscription renewals matter for you because they will ensure consistent profits. As your business grows, acquires new subscribers, and maintains their loyalty, you will be guaranteed profits at any point in the subscription period. Instead of hoping to make profits from a one-time payment, having a recurring revenue stream from subscribers will be profitable both in the long and short term.

With this in mind, keeping such a subscriber base is essential. If your customers involuntarily churn or if they choose to cancel their subscriptions, your business may bleed projected revenue. By having a subscription renewal journey that is easy to follow through with, your renewal rates can stay consistent, improving your company's health.

Renewal journeys for both manual or automatic billing types matter due to their contribution to revenue and growth goals. Statistically,

  • It costs five times more to acquire new customers than to retain existing ones. In other words, it makes better business sense to prioritize retention.

  • Research by Bain & Company suggests that a mere 5% increase in retention can translate into a 25% to 95% rise in profits.

  • As per Gartner, 80% of profits can be attributed to 20% of existing customers, making renewals an essential part of profit generation.

  • Satisfied customers indulge in positive word of mouth, telling nine others, on average, how happy they are. On the other hand, dissatisfied customers tell almost 22 people about their bad experiences.

Clearly, a subscriber’s decision to renew, pause, or cancel subscriptions impacts the business fundamentals. Losing out on subscribers due to renewal friction is undesirable. Hence, optimizing the journey demands attention. 

What are the essential elements in the renewal journey?

Most renewals follow a monthly, quarterly, or annual subscription billing cycle. Sometimes they may be longer depending on the nature or the type of contract. Regardless of the renewal cycle length, all renewal journeys are based on the same key elements, including:

  • Generating order records within the subscription platform to track the user’s subscription status. 

  • Notify customers about their upcoming subscription expiration. 

  • Charging the customer through their preferred payment method.

  • Providing the product in case it’s a non-service subscription.

  • Marking the process as complete on the subscription billing platform.

A frictionless renewal journey ensures that each of these steps is conducted smoothly.

What are the best practices to ensure a frictionless renewal Journey?

Achieving a seamless renewal process is easy for most business models if you get the basics right. Here are some best practices to integrate into your subscription renewal journey:

1. Organized tracking and timely intimation

It’s important to provide ample time for all customers to renew their subscriptions. Sending out reminders too close to the expiration date can result in involuntary churn. For renewals, especially in B2B organizations, there are several internal procedures to take care of, whatever the organization’s size.

Not providing enough time for internal approvals may lead to churn. Often, subscription providers reach out on time to their big-ticket accounts but tend to ignore the long-tail segment until the last minute. Ultimately, each customer contributes to revenue, so an organized process is a good practice to incorporate.

2. Providing renewal quotations and support efficiently

In the case of manual renewals, you should respond promptly to customer requests for new quotes or any customer support they may require. Automating quotations is helpful to ensure the speed and accuracy of providing any price estimates. Similarly, offering modern-day agile support is also beneficial in delivering excellent experiences. You may extend this through a 24-hour customer helpline, live chat, or prompt email support.

3. Flexible and efficient payments process

Payments form another critical friction point in renewal journeys. Changed credit cards or expired card details are among the most common reasons behind payment failure, resulting in involuntary churn. A simple, timely update about expiring credit card information with proper dunning campaigns helps to ensure that renewals are not blocked due to card declines.

That, or utilizing a subscription billing platform (like Recurly) that has automated card retries, can help streamline the billing process. Similarly, offering flexible renewal payment options is also important–73% of U.S. consumers prefer paying for subscription services via credit cards, and 31% prefer PayPal or Venmo. Providing a variety of payment options helps. 

4. Providing genuine cancellation options

This may seem counter-intuitive to optimizing renewals, but it’s essential to offer a legitimate way to cancel a subscription to your customer base. Making it difficult for your customers to make a cancellation request or to pause their subscription hurts the business. This is even more applicable for auto-renew subscriptions.

Suppose you offer a low-priced media subscription that renews automatically monthly. If you sneakily hide the cancel or pause button, you may collect extra revenue for some months from zombie customers who’ll be compelled to pay until they’re able to cancel. However, you will face their wrath and could be hit by strong negative word of mouth for your brand.

So, it’s best to equip those who wish to cancel or pause with hassle-free options. Similarly, informing the customer about debited payments is important to avoid sudden shocks after the renewal is also a good practice.

Subscription Renewal FAQs

Why would a customer cancel their subscription?

There are a variety of reasons a customer may fail to renew their subscription. Involuntary churn can sneak up on your business, especially if your customer forgets to renew their subscription or their payment details have changed. On the other hand, some subscribers may no longer wish to use the product or service if it no longer benefits them.

Additionally, if your pricing tiers are mismatched, customers may subscribe for a short period, then cancel if your service no longer matches their budget expectations. By implementing auto-renewable subscriptions and removing friction from the renewal journey, you can help prevent most of the reasons a customer may churn.

How do I get customers to renew my subscription?

To ensure subscription renewals, your company should practice the following:

  • Engage with customers to keep them interested in your brand and to show that you care about their needs.

  • Ensure you offer a high-quality service or product consistently.

  • Provide ample time to all customers to renew their subscriptions.

  • If a subscription is up for renewal, offer efficient quotes and customer support via a 24-hour customer helpline, live chat, or prompt email support.

  • Offer different payment options for flexible renewals to ensure credit card charges go through.

  • Offer a way to cancel a subscription, should your users wish to.

Learn more about improving your subscription renewal rates.

What is the typical retention of a subscription commerce consumer?

The typical retention of a subscription commerce consumer is high for SaaS businesses, as the business model is established to retain recurring customers. Having a retention rate above 90% is good for SaaS companies to aim.

How is automatic subscription renewal legal?

Although some people may view automated renewals as a sneaky way to ensure revenue, it is perfectly legal if done ethically with a proper contract. The law requires a business that offers automated subscription renewals to make a disclosure agreement with the customer that signs up for the service, stipulating in the contract that the user can cancel online or in the same manner they signed up for the service. The enforceability and requirements in this contract may differ depending on state law or the subscription service, but regardless, the contract holds between the company and the consumer to protect both of them and can be enforced in court.

Get more actionable insights to beat churn

For all businesses, especially subscription businesses, minimizing churn is a top priority and worth the time and resources.

Marketing and growth leaders across every industry want to know the latest churn rate benchmarks and how these numbers impact the trajectory of the subscription industry.

Recurly has compiled the data of over 2,200 leading subscription brands to inform your churn management strategy.

Check out The State of Subscriptions: The churn chapter to get the most recent trends, their overall impact in the industry, and Recurly’s impact on our customers’ churn rates.