Expert Tips for Reducing Subscription Churn

The popular adage saying that retaining a customer is less expensive than acquiring a new one still rings true. Acquiring a new customer can be up to five times as costly as retaining an existing customer, according to research firm McKinsey and Company.

For merchants who rely on subscriptions to generate recurring revenue, reducing customer churn could be the difference between failing and scaling. Do not let your hard work acquiring subscription customers go to waste. Learn how to entice your customers to stick around longer with these tips and strategies for reducing subscription churn.  

Nip Involuntary Churn in the Bud

It is a shame involuntary churn is the most common type of subscription churn because it is avoidable. One common example of involuntary churn happens when customers inadvertently stop paying for a subscription because their credit cards expired. And with cards expiring every couple of years, this can be a major source of revenue loss. Avoid this dilemma by adopting sticky.io’s Account Updater. The tool automatically updates outdated customer credit card information, such as expiration dates and newly issued card numbers — reducing involuntary churn. In fact, sticky.io merchants using Account Updater typically see the tool update 4% of existing subscription accounts each month. That means 4% of subscription customers could have slipped through the cracks and churned just because of an outdated credit card.  

Smart Dunning is another trick of the subscription commerce trade. Smart Dunning automatically reattempts to bill declined orders at optimal times. These times are based on customer historical behavior — increasing the chance of a successful rebill. In fact, merchants can recover between 20% and 50% of declined transactions with Smart Dunning. Avoid losing the customers who may be your biggest fans simply because of insufficient funds in their account on a certain day or their credit card expired.  

Tip #1 — Use Account Updater and Smart Dunning to reduce involuntary churn

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Give the Power to the People

Some merchants think allowing customers to self-manage subscriptions will increase churn because it makes it easier for customers to cancel. But in fact, giving customers more control helps keep them around for the long haul.  

Let’s take a vitamin subscription as an example. A customer who receives the vitamins too frequently might cancel the whole subscription if there is not an easy way to pause until catching up. Another customer might flat out cancel before leaving for vacation if there is no way to temporarily stop orders. The vitamin merchant would benefit from offering customers a simple way to pause, change the frequency or update a subscription order with a few taps of a smartphone. Customers cannot control life, but they should be able to control how a subscription fits around their lifestyles.

Tip #2 — Allow customers to self-manage subscriptions

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Time to Get Personal

Personalization is essential for reducing subscription churn, and harnessing first-party data is a key component of personalization. Selling through online marketplaces such as Amazon absolutely has benefits, but the third-party data coming from these channels leaves many merchants guessing about customer needs.

To truly understand your customers and reduce churn, ask questions directly to customers, then store and process the data. Innovative merchants are pairing first-party data and artificial intelligence to predict if a subscription customer is about to churn. For example, a reporting dashboard within an ecommerce platform could reveal a high churn rate three months after customers sign up for a monthly subscription box. To entice customers to continue subscribing, the merchant can automatically email at-risk customers promoting special deals or allow them to add an additional product in their next box.

The more you know your customer, the better you can tailor offers that appeal to their budget, interests and buying habits — all effective ways to reduce churn and extend customer lifetime value.

Tip #3 — Use first-party data to personalize customer experiences

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The Sum Up

Subscription shoppers are savvy, loyal and educated, so make sure you hold on to them. Learn more about how tools like Smart Dunning and Account Updater can reduce subscription churn and recover more revenue.

Start your subscription program off on the right foot to effectively avoid high churn. Learn how sticky.io helps merchants combat churn and keep loyal customers.