Customer Churn Explained
Customer churn is the fear of any subscription business. Why did they churn? Could I have kept them from churning? If customer churn is the disease, data collection and actively engaging your customers is the cure. The methods of minimizing customer churn target three categories of a subscription business model: Product Value, Subscription Management, and Fatigue.
Product Value is the quality of your product matching or exceeding the customer’s expectation. When this expectation is not met it can mean that your price is too high for the perceived customer value or the product quality is suffering. That perceived value will reflect itself in cancellations, puts pressure on your customer service team, and worst of all damages your brand reputation. The solution is to collect feedback from your customers at key points in the customer journey when they’re more likely to engage with a survey and when you’ll get the most valuable response.
Depending on your product, you may decide to send a quality satisfaction survey a few days after the product delivery date (if you don’t have visibility into delivery tracking ask us about our Shipments Report) so it is more likely the subscriber has opened and tried the product – rather than say on the day of the delivery where they may not have had time to try it out. Feedback can be collected via text, email or the good ole fashion phone call. However you decide to collect it, this data gives you the information you need to lower customer churn around product value.
Subscription Management entails the entire customer experience around product selection and delivery. The pillars of the Subscription Management includes:
- Customer-facing subscription management tools
- The shipping operations / fulfillment
- Payment acceptance
Without the right tools providing the customer with options to swap, skip, or pause, most customers are forced to cancel and reactivate. Swapping tells you that the product value is not met, while skipping or pausing may point to fatigue (discussed next). The solution here relies on the right subscription billing platform that can link customer behavior to outbound marketing campaigns and analytics to track what works.
Another component of Subscription Management is fulfillment. Many subscription businesses outsource their fulfillment and under audit their performance. Quality fulfillment ensures your product presentation is consistent and reflects the quality of the product within. Are your shipments going out in a timely manner? What are you doing for subscriptions when a delivery fails? Are you communicating tracking information? Thankfully, the solution to auditing fulfillment is simplified with the right analytics tool that tracks fulfillment KPI’s and lets you set actions based on the data.
The final component of Subscription Management is flexibility in accepting payment. Each customer is unique in their finances and will have sufficient funds at varying times throughout the month. If you’re rigidly tied to a specific billing date (say the 1st), it may come down to them not having the funds at that time triggering a declined transaction. That decline transaction will go through a salvage recovery process ( known as the dunning process – ask us about our Dunning Report) with the hope of capturing the payment. However, this could’ve been avoided by offering the flexibility to the customer to set their billing date. By tailoring payment timing, your customer may avoid passive customer churn.
Subscribers experience fatigue when there is a lack of product innovation and variety, and over shipping. Product innovation keeps your subscriber excited to see what’s in the next shipment. Innovation is driven through customer feedback. Make sure you’re asking your customers opinions about things they would like to see. Getting that engagement in the product innovation process earns buy-in and a sense of ownership from the customer.
Offering variety keeps people from forcing a skip on a shipment. How many cinnamon apple candles do I need? Why can’t I swap to a different scent? Variety is your solution to a skip – the swap. Variety drives the consumer to look at alternatives instead of skipping, a lesser form of customer churn. Here the churn is temporary but still will be felt due to the missed revenue.
Lastly, make sure your shipment frequency matches consumption. If you are selling a product that ships too frequently, the consumer may cancel or pause until they have run out. It is better to ship less often but at the pace of consumption. If you are selling a product that comes too frequently, the consumer may cancel or pause until they “get caught up.” Which leads to reactivating or seeking an alternative.
To learn more about how Sublytics can change the way you manage your customer retention, get in touch with us today and get set up with a free 30-day trial of our analytics platform!