16 Serious strategies to reduce subscriber churn

16 Serious strategies to reduce subscriber churn

In the subscription business, winning a customer is only the beginning.

Once you've done the work of winning a customer over with your key features and loyalty program offerings, now your business has a new task: Keeping that customer loyal.

Subscription businesses need a stream of recurring revenue to thrive, which only comes when subscribers show high customer satisfaction.

The reality of a subscription-based business is that 100% customer retention is simply not possible. Each month, you're going to encounter some degree of churn, which has an impact on your monthly recurring revenue. The severity of that impact depends entirely on your ability to anticipate the reasons for churn and take steps to reduce it.

What is customer churn?

Churn, sometimes referred to as customer churn or subscriber churn, refers to the percentage of customers who stopped using your product or service during a given time period.

Churn is typically calculated on a monthly basis, but it can be calculated to match any given reporting period or subscription period. For instance, if you have a 90-day renewal period, it can be helpful to measure churn at 90-day intervals to see how many subscribers canceled before their renewal or after a single renewal.

While a 0% churn rate would be ideal, it simply isn't realistic. You can expect some degree of churn each month. As long as you're within a reasonable benchmark, there's nothing to worry about.

Subscriber churn rate

Churn rates vary widely across industries and types of products on average, B2B businesses experience a 5% churn rate, while B2C companies see a 7% average churn rate.

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Recommended reading: Recurly Research: Churn rate industry benchmarks

Types of customer churn: voluntary and involuntary

There's no single type of customer, and there's no single reason for customer churn. If you want to know how to reduce churn, you first need to understand the two main types of churn and the most common reasons behind them.

Involuntary churn occurs when a subscriber's payment doesn't go through. This most often occurs because of an expired credit card, a change in bank information, a server error, or insufficient funds. The customer didn't make a decision to cancel their subscription, which is what makes it involuntary.

Voluntary churn indicates the customer is the cause behind the cancellation. A customer may choose to end their subscription for any number of reasons. In some cases, the customer may have had a change in their budget or a change in their lifestyle which means they no longer require your product.

In other cases, they may have had a negative service experience, difficulty using the product, or other frustration or dissatisfaction that caused them to cancel. Voluntary churn tends to overlap with common sales objections. With an effective churn management strategy, you can work to overcome these objections before they occur.

In other cases, they may have had a negative service experience, difficulty using the product, or other frustration or dissatisfaction that caused them to cancel. Voluntary churn tends to overlap with common sales objections. With an effective churn management strategy, you can work to overcome these objections before they occur. 

What makes churn reduction so important?  

As a subscription business, you rely on recurring revenue to sustain and grow the business. Subsequently, every time a customer cancels, your monthly recurring revenue takes a hit.  More than that, churn shows you how good your company is at keeping your customers. 

Now, as we'll show you in a moment, it's important to accept a tolerable level of customer churn. However, you do want to actively work on churn reduction-to save your monthly recurring revenue and discover new aspects of your business. 

The churn reduction strategies below will teach you about your market, your customers, and how your business serves. With the right strategy, you'll rely less on customer acquisition, reduce churn-causing problems naturally, and meanwhile, enjoy healthy levels of recurring revenues. 

Do you even have a churn problem? Three signs to watch

So, you're running a subscription business. You're always working to dial down those customer churn rates. After all, churn hurts, right? You want as little churn as possible to improve your monthly recurring revenue (MRR) and build sustainable growth for your company. Working toward a 0% churn rate isn't sustainable.

A small amount of churn should be acceptable. No amount of customer loyalty, strong personal relationships, and going the extra mile can account for unforeseen circumstances and outlier situations. Life is unpredictable. So, set a sustainable customer churn rate for your company. Making a clearly defined window of tolerance may be the key to freeing up your company's resources so you can work on truly effective strategies that keep your loyal customer base loyal and make your onboarding experience the first phase of a long customer journey. So, what's an acceptable amount of customer attrition?

Depending on your industry, a monthly churn rate between 4% and 7.5% is common. And B2B companies tend to have lower churn rates than B2C companies. 

How do you know what a "normal" churn rate is for your subscription business? Ask yourself these questions:

  1. Are you landing new customers at the same rate as your customer churn rate? Then your churn rate is stable and not robbing your sales team of their progress. 

  2. How much is your revenue churn compared to your customer acquisition costs? Customer retention rates matter, but if your premium customers are staying loyal,  your revenue churn will stay low. Focus churn reduction efforts there, and use those lessons to improve the user experience for your whole customer base.

  3. What's the customer churn rate of your promotional periods? If you're offering 60-day and 90-day plans, "monthly" might not be the right time frame for you to uncover unhappy customers or bad experiences.

How to cut down your customer churn rates

If you're ready to take serious steps to reduce customer churn rates, there's a lot of good news. It takes some work, but it pays off. Noticeably in your monthly recurring revenue and customer feedback surveys.

Analyze why the churn is happening.

If you're leaving this up to an exit survey, you're missing out. Get your support teams to call up your former customers and investigate. Their job is simple: Dig until they understand what turned this once-current customer into a churn rate statistic.

When you rely on customer satisfaction surveys, you miss out on quite a few reasons for customer churn, including some that point to whether this churn is voluntary or involuntary churn. If unhappy customers misunderstood some step in the onboarding process, you might not pick up that nuance from a survey. That said, customer engagement surveys do have a place in improving your retention rates. 

Engage with your customers and get valuable feedback. 

If you want to know something, sometimes the best thing to do is just ask. At every opportunity, you should invite and welcome customer feedback, both from your most loyal customers and from those who have decided to churn. While you might be the expert at marketing and selling your product, your customers may have a completely different perspective.

Conduct regular surveys of your subscriber base to get an understanding of how people are using your product, the features they'd like to see, and the challenges they're experiencing. This kind of engagement can help mitigate voluntary churn before it happens.

You should also ask canceled subscribers for feedback immediately after they cancel. This will give you their reasons for cancellation in concrete terms, helping you potentially overcome the objection and reduce future churn in other customers.

For instance, if you survey your churned customers and two out of three say that the price was too high, it's probably the right moment to take a look at your pricing structure. In this type of survey, you should make it as simple as possible to respond. Checkboxes instead of required comment fields.

Train your customers on your products.

Offer free webinars. Post video tutorials. Host live product demos. Your subscription business runs on providing content or a service, so make sure one of your offerings is about what you provide.

In a SaaS business, this comes with the territory since you're creating a new product under your customers' feet. Teaching your current subscribers how to realize the full potential of your products and services goes a long way toward keeping those customers. Sharing tips and tricks while listening to your customer feedback can create a virtuous cycle; the better you train your current customers, the smarter your onboarding for new customers can get. 

Identify those about-to-churn customers. 

An ounce of prevention is worth a pound of cure. And preventing customers from churning is one sure way to avoid paying customer acquisition costs all over again. 

If you have a good sense of your customer lifecycle and key conversion points, you'll be able to identify the actions and behaviors that occur before a cancellation. This might include reduced usage, decreased login frequency, or an increase in support tickets. If you're aware of these signals, you can implement tactics to mitigate the risk of churn.

Finding customers at risk of churning is all about customer relationships 101: Talk to the quiet ones. 

Go look for those customers who have had the least interactions with your company. For example, if a customer hasn't logged in for a few weeks after regular usage, you can shoot them a quick “we miss you” or a “what's new in our product” email. If they're repeatedly reaching out for support, you can proactively have a customer success agent get in touch to schedule a conversation. Do they have an open service request? Have they been unresponsive to other customer satisfaction surveys? Have they simply gone passive? 

Make this effort mirror your efforts to understand why customers did cancel. You're looking for trends and themes when studying this population of your customers. Taking the time to identify these behaviors and react appropriately can dramatically reduce churn before it happens. 

Define your churn goals and identify your most valuable customers. 

Define your acceptable churn rates and which customers you're committed to keeping. Set thresholds for a monthly acceptable churn rate, maximum churn tolerance, and any churn thresholds that would signal new action for your marketing teams.

 Then, identify those valuable customers already showing loyalty with their wallets. Make sure your customer success teams know who they are. Develop some customer segmentation data and a customer profile for this audience. Make sure your teams have a firm grasp of what makes a most valuable client. And do better than simply identifying the big spenders. After all, the wrong client may pay plenty of dollars before they demoralize your departments. 

Once you know which customer types are most profitable, who's most ready to cancel, and who's most likely to accept offers, your teams will be well-positioned to manage churn rates.

Offer incentives

Think about the last time you stayed in a hotel. You paid for your night in the room with the expectation of a bed to sleep in and a clean bathroom. You arrive at check-in and receive a warm chocolate chip cookie with your room key, get to your room and find mints on your pillow. After a good night's sleep (with a complimentary sleep mask) you enjoy a free continental breakfast. All of these little add-ons make you feel welcome and appreciated. Next time you take a trip you're likely to book with the same hotel-the same concept applies to your subscription business.

Value-added services such as member-only content, premium support access, and additional features make your product more attractive to paying customers. While you might only see a marginal increase in your operating costs with these offerings, you'll see an exponential increase in brand loyalty and reduced churn.

Be proactive about communicating with customers

Dunning is the process of communicating with customers (usually by email) to try to collect payments due. In the subscription business model, dunning is specific to reducing churn because of failed payments. Most involuntary churn in subscription businesses happens because of an expired payment card. Because you know when your customers' cards expire, you can easily send them reminders to update their card information.

We recommend sending multiple emails during the dunning process as this gives customers multiple reminders to update their payment information. We do not recommend dunning cycles longer than 28 days for monthly plans. A dunning period longer than 28 days can cause invoices to get into a “loop” state where a new invoice is issued even though the prior invoice was not collected.

This is by far the simplest way to reduce involuntary churn understand that your customers are busy, and give them a reminder to update their card information. Be sure to make it as convenient as possible to do so by offering a direct link to log in and update payment information.

Turn billing obstacles into your allies   

Credit card changes, billing info changes, or a simple typo on payment information can cause involuntary churn. However, you don't have to leave these process problems to chance. 

Mastercard, Visa, American Express, and Discover cards all offer an automated service that monitors customers' credit cards for changes and makes updates to the records whenever necessary so that recurring transactions can be processed successfully. In this way, a subscription business processing payments can avoid a failed payment before it even occurs.

Recommended reading: Maximizing subscription revenue recovery

Deploy a subscription billing and management platform

Along with the dunning process, credit card transactions that fail can automatically be retried using a subscription billing and management platform. The reason for the failure determines the frequency and timing of the retries. For example, if a customer has insufficient funds, this may take longer to rectify than other failure types. This kind of “intelligent” retry logic means that retry attempts are set at a schedule that will most likely lead to success.

The goal is to maximize revenue gained through retry attempts, while also being mindful of the fees related to these transactions to make sure they stay within reason.

Top subscription management platforms, like Recurly, take advantage of billions of data points and machine learning to attempt retries at just the right time, thereby minimizing retry costs for merchants.

Recommended reading: Strategies to minimize churn & maximize revenue

Target the right audiences  

If they joined for the free lunch, will they pay for a five-course meal? Some customers are worth churning. Your products and services have value, one that grows as you develop your offering. When you have identified those subscribers who keep delving deeper into your products, then you can keep looking for more customers like them. If you're offering cheap, starter specials, you may be attracting the wrong potential customers. 

When you find customers who see themselves sticking with your service for the long term, those are customers worth the effort to retain them.  

Prioritize your onboarding process

In the SaaS space, early subscriber churn is common when customers feel like they're not sure how to navigate a product or use it effectively. If you're seeing a high churn rate after the first few subscription periods, you might need to take a hard look at your onboarding process.

Make sure that you have documentation, email, and tutorial content that helps your customers navigate and set up your product. If you're a higher-priced B2B product, you might consider making a significant investment in a customer success team to personally walk your new customers through the setup and onboarding process. This ensures that all of their questions are answered as clearly and quickly as possible.

Recommended reading: MarketMuse uses smart promotions to fuel subscriber growth

Help your customer teams offer killer customer service

When you run a SaaS company, you'll have access to plenty of customer behavior data. So if you want to offer killer customer service, set up a department of people whose sole task is to make sure your customers are getting the most out of your products and services. 

Customer support handles emergencies. Customer success is like the dietician and fitness trainer. They're signing up your customers' power users for webinars, treating the VIPs to unique offers, and overall showing the best side of your products and services. 

So give that team unprecedented access to the customer behavior data. As analysts, your customer success and customer support teams will be able to read customer data with greater empathy for your customer. 

Study complaints, review sites, and community forums

Ever wonder what your customer satisfaction surveys aren't telling you? Go to the forums. 

The community forums, third-party review sites, and your own customer complaint box are all a treasure trove of valuable feedback. This customer retention rate booster takes thick skin and some de-personalization. Go into it with the air of an anthropologist or as an outside researcher trying to understand your business. Trust yourself that you can identify which complaints are in bad faith and which ones are customers you genuinely lost due to a process you can fix. 

Because the good news is, it probably is solvable. Your team will fix what's broken, add what's missing, and tune the slightly misaligned expectations. And if it's nothing you can solve, then add the findings to your research into reasons for customer churn. 

Send your brightest and best to answer big cancellations

Get the short list of your company's most winsome and charismatic B2B sales reps. Then make them your premium subscriber savers. 

If you spot a high-value customer making signals that they're about to cancel their subscription, send in your all-stars. You can never underestimate the value of a good sales rep. It'll take effort to turn around a situation headed south, but that's what defines a high-performing sales rep. It may only take a bit of listening, some well-posed questions, and a short-term incentive. You'll know for sure only once you've sent in the pros. 

Show off your competitive advantages to your current customers

You created your subscription business to offer something unique or in a unique way that no one else in the market has. 

So grab some of your marketing team, have a fun lunch outing, and spend time talking about what makes your business different. Explain it fully, completely, and succinctly. Have them repeat it to you in their own words. Volley the key differentiators back and forth with each other until you and your marketers can say what makes your product and service stand out and what customers lose when they decide to quit. Then use the most memorable phrases in places where your current customers will see them. 

Make this an annual exercise. This comes from an old writing exercise: Say it straight and then say it great. And while it may seem like preaching to the choir to tell your current customers why the subscription they're paying for is so valuable, don't take your customers' loyalty for granted. 

Offer long-term contracts

What might be the most outrageous versions of your products and services that you don't think any customer would ever choose? Longest possible terms? Most wide-ranging value? Take it as a challenge for your products and services team. You might be surprised to find a customer will still subscribe to it. 

The right upgrade offer with a long-term contract will win over any customer who's enjoying the benefits of your products and services already. Then effectively these customers are churn-proofed for a longer period than the rest of your customer base.

Raising your customer retention rates come down to this...

Communicate, anticipate, and participate. Reducing customer churn starts with communicating directly and often with your customers. Then studying your customers will help you anticipate their needs and develop imaginative ways to overcome objections. Then your business must participate in your customers' day-to-day life so you can establish and reaffirm the value you're bringing. 

 Reducing voluntary churn can feel like trying to hit a moving target. There are so many reasons a customer might voluntarily churn. Fortunately, there are just as many ways to win customer loyalty and prevent anyone from voluntarily leaving. 

 What about involuntary churn? Use an automation tool like Recurly's Revenue Optimization Engine to take the hard work out of the dunning process.

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