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Home News Combatting churn: How subscription businesses can use technology to maximise customer retention

Combatting churn: How subscription businesses can use technology to maximise customer retention

by Uma Rajagopal
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Combatting churn: How subscription businesses can use technology to maximise customer retention

By Tarmo van der Goot, VP EMEA, Chargebee

The subscription economy has reinvented the way we consume goods and services. Today, four in five UK consumers are signed up for at least one subscription service – from entertainment and education to personal care and home essentials. Even traditional industries are now exploring the model to generate recurring revenue and build long-term customer relationships. This trend has given rise to a new type of consumer who expects value and personalisation at every turn. 

Meeting these elevated customer expectations must be front and centre for every business. Customers vote with their feet, and 8 in 10 would abandon a brand after two or three negative experiences. This is the new, true cost of customer loyalty, and subscription businesses that fail to prepare by devising the appropriate retention strategies for it, should prepare to fail.

Churn, the subscription business killer

Reducing churn – the rate at which customers cancel or do not renew their subscriptions – is central to any customer retention strategy, as it directly impacts revenue growth. A recent Chargebee survey of majority subscription businesses has found that 65 per cent believe their churn rates will increase in 2023. Nearly all (96 per cent) agreed that customers cancel for reasons that could be managed or fixed. 

Identifying those reasons is crucial because they are emblematic of customer dissatisfaction brewing under the surface. However, voluntary churn in particular can be difficult to pin down and manage. Unlike involuntary churn – which is caused by payment failure, for example, due to an expired or maxed-out credit card – voluntary churn shows a clear customer intent: the customer no longer finds value in the product or service and is ready to leave, and perhaps even encourage others to do the same. 

Even if a customer has had an unsatisfactory experience with a product, it’s possible to salvage their relationship with the right cancellation flow process.

A smart cancellation flow in three steps

The cancellation flow is a sequence of steps that guides customers through the process of cancelling their subscription – from the moment they express their intent to cancel to after they have churned or been successfully retained. The flow should provide a high level of support to the customer throughout the process, including feedback collection, issue acknowledgement and retention offers. These will make the customer feel heard and valued, and give the brand a chance to recover the relationship and potentially lost revenue. 

A robust cancellation flow will help businesses identify the exact reason for churn – whether that’s underlying issues with products, processes or the customer experience. This can provide clear metrics and insights to help businesses gauge the success of their retention strategy, and inform future efforts to help them win back lost customers. Subscription businesses can craft a winning strategy in three steps:

  • Facilitate easy cancellations 

If a customer is determined to end the relationship, it is more beneficial to offer an easy way out or the option to pause/skip their subscription. By helping the customer cancel without any hassle or confusion, businesses are not only enforcing trust but also avoiding compliance issues. In fact, Chargebee research found a surprising number of businesses showing common signs of non-compliance: 19 percent of respondents stated that their customers could buy subscriptions online but couldn’t cancel online, while 33 percent allowed their customers to cancel either via email or phone call. Providing online cancellations is a legal requirement in many US states already, and as regulations tighten around the world, businesses must be upfront with their policies.

Businesses must provide a clear cancel button at every point of their communication and set up exit surveys that allow customers to provide valuable feedback. It’s key that these surveys are regularly updated with response options that accurately represent a changing market and customer sentiments. Keeping the cancellation process positive can leave customers with a better impression of the business.

  • Analyse and personalise engagements

To go one step further, businesses can leverage modern retention tools to further analyse responses from exit surveys and use the insight to power real-time, personalised deflection offers in the moments that matter the most. This can help address the specific reasons why the customer wants to cancel and present them with an attractive alternative. For example, if price is the driving factor, businesses can offer discounts or free months. On the other hand, if the customer does not find value in the product, businesses can trigger an automated workflow to the customer success team to help them exhibit the product’s benefits better.

It’s important to note here that a common argument against creating a cancellation flow is the risk of customers cancelling their subscription purely to make use of the retention offer. Indeed, this can be a real risk for businesses that apply a one-size-fits-all approach in their retention strategies. Instead of offering a generic discount, businesses should tailor their programmes to the specific customer, based on usage. This way, they can retain loyal customers with a steep discount or special offer, while not offering any special conditions to customers who just finished their trial or spent only a few months with the service.

  • Draw conclusions and take action

Despite best efforts, customers may still decide to leave – at this point, a business’s job is not done. An effective cancellation flow will next focus on acknowledging the cancellation, leaving the customer with a good final message and then helping the business plot a win-back strategy based on y the learnings.

Modern retention tools can help businesses analyse churn results and give them valuable insight to develop a win-back strategy. The simple most effective way to do this is to identify customers who cancelled their subscription due to temporary issues such as problems with the product or the presence of a competitor with better features. Once the temporary issue has been resolved – for example, the product has matured or inefficiencies were overcome – businesses can try to win back these customers with a new and improved value proposition.

Elevate your retention strategy – future-proof your revenue growth 

Technology is playing an increasingly essential role in subscription businesses’ efforts to reduce subscription cancellations. By leveraging an effective cancellation flow that enables data analysis, personalisation and a frictionless customer experience, businesses can improve customer retention and maintain their edge in today’s competitive market.

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Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.