Gone are the days of one-time purchases for many products and services. Both B2B and B2C customers now have the option to access everything from software to music to even meal boxes at a subscription. This has fundamentally shifted the way businesses operate, placing a premium on retaining subscribers over extended periods to maximize customer lifetime value.
However, keeping subscribers engaged and subscribed is no mean feat. It is a constant challenge for many reasons –
The cost of churn is, well, costly. Losing a subscriber isn't just about missing out on one or two month's payment. Studies show it can cost 5-7 times more to acquire a new customer than to retain an existing one. Churn, the rate at which subscribers cancel their subscriptions, directly impacts a company's revenue stream and the overall health of the business.
Balancing growth and retention can be tricky. Companies often face pressure to prioritize subscriber acquisition to meet growth targets. However, neglecting churn management can lead to unsustainable growth and hinder long-term profitability.
Understanding the reasons behind churn and implementing effective strategies to reduce it is crucial for subscription-based business. By minimizing churn, companies can not only stabilize their revenue but also foster long-term customer relationships that fuel sustainable growth.
Subscribers cancel subscriptions for a variety of reasons, often a combination of factors. Let’s delve into the key categories that contribute to churn.
Lack of Perceived Value
Failing to meet user needs and expectations. This is a fundamental issue. If your subscription service doesn't address the core needs users signed up for, they'll have little reason to stay. For example, a fitness app that lacks engaging workouts or a meal-kit delivery service with repetitive recipes might lead to cancellations.
Unclear value proposition or benefits not realized. Sometimes, users might not fully grasp the value proposition of your service. Confusing marketing messages or a poorly designed onboarding process can leave them unsure of how the subscription benefits them.
Feature fatigue or feeling overwhelmed by complexity. Offering too many features can backfire. Users might feel overwhelmed by a complex interface or an abundance of features they don't need or use. This can lead to frustration and ultimately, churn.
Friction and Usability Issues
Difficult or confusing user experience. A clunky interface, unclear navigation, or a slow-loading app can significantly hinder user experience. If it's difficult for users to find what they need or complete tasks within the platform, they're more likely to abandon ship.
Technical problems or bugs hindering user journey. Technical glitches, bugs, and frequent crashes create a frustrating experience for users. These issues disrupt the user journey, making them unhappy and leading to cancellations.
Lack of proper onboarding and in-app guidance. New users need a clear roadmap to navigate your platform and understand its value. Users might struggle to get the most out of your subscription without proper onboarding and in-app guidance, leading to dissatisfaction and churn.
Customer Experience Shortcomings
Poor customer support and slow response times. Efficient and helpful customer support is crucial for retaining subscribers. If users encounter problems and don’t get timely assistance, they're more likely to cancel their subscriptions.
Hidden fees or unexpected charges cause frustration. Transparency in pricing is key. Hidden fees or unexpected charges tend to erode user trust and lead to cancellations.
Difficulty in managing accounts. Making it difficult for users to manage their subscriptions creates a negative perception. A smooth and straightforward process to upgrade or downgrade fosters trust and can help retain subscribers who might otherwise churn out of frustration.
External Factors Influencing Decisions
Changes in user needs or life circumstances. Sometimes, churn is due to factors outside your control. Users' needs and life circumstances can evolve. A student who subscribed to a language learning app might cancel upon graduation as they no longer need it.
Economic downturns leading to budget cuts. Economic downturns can force users to tighten their belts and cut back on discretionary spending, which can lead to subscription cancellations.
Finding a better deal or competitor offering more value. The subscription market is competitive. If users find a competitor offering a better deal or more value for their money, they might switch providers.
Prioritizing user research and understanding customer needs. Understanding the target audience and their needs is fundamental to any business. Conduct user research through surveys, user interviews, and A/B testing to identify pain points and areas for improvement.
Simplifying onboarding and communicating value clearly. The onboarding process is crucial for creating the right first impression –get this wrong and you risk alienating even the most enthusiastic first-time users. Make the onboarding process smooth, and informative, and highlight the value proposition clearly. Users should quickly grasp what the subscription offers and how it benefits them.
Opal's paywall outlines a clear 7-day onboarding process
Focusing on user interface (UI) improvements and intuitive design. A clean, intuitive UI is essential. Strive for a user-friendly design that allows users to navigate the platform easily so they can find what they need without getting lost.
Apple TV's paywall has a clean interface with clear messaging on what their subscription offers
Deliver Consistent Value
Regularly update features and content to maintain user engagement. Complacency is the enemy of retention. Regularly introduce new features, fresh content, and updates to keep users engaged and coming back for more.
Implement personalized recommendations and cater to user preferences. Personalization goes a long way in enhancing the user experience. Study user behavior to recommend content, features, or subscription plans that cater to individual preferences.
Offer different subscription tiers to cater to different needs. A one-size-fits-all approach might not work when trying to engage with users with differing needs, missions, and psychographics. Consider offering different subscription tiers with varying features and price points to cater to diverse user needs and budgets.
Peacock TV's multiple subscription plans
Create Strong Customer Relationships
Extend proactive customer support and address user concerns promptly. Provide excellent customer support with multiple channels for users to reach you (e.g., live chat, email, phone). Respond to inquiries promptly and address user concerns so that they continue to trust you.
Gather user feedback and implement improvements based on insights. Actively seek user feedback through surveys, reviews, and support interactions. You can also make use of in-app or in-platform user behavior to understand “aha moments” and drop-off points. Analyze different subscription metrics to identify areas for improvement and implement changes that enhance the user experience.
Offer loyalty programs and incentives to reward long-term subscribers. Show appreciation for your loyal customers. Implement loyalty programs, exclusive discounts, or early access to new features to reward long-term subscribers and incentivize them to stay.
Address Payment and Billing Issues Proactively
Ensure a smooth and secure checkout process. The checkout process for subscriptions should be frictionless and secure for your users. Offer multiple payment options and ensure a clear and transparent pricing structure.
Offer flexible subscription options like pausing or downgrading plans. Give your subscribers flexibility. Allow them to pause their subscription if needed, downgrade to a lower tier, or easily switch plans based on their evolving needs.
Send out clear communication regarding billing cycles and potential price changes. Transparency in billing is key. Communicate billing cycles clearly, and provide advance notice of any potential price changes to avoid surprises and frustration.
For any subscription-driven business, understanding churn and its causes is critical. Losing subscribers not only impacts revenue but also weakens your customer base, negatively impacting investor confidence. By identifying the reasons behind subscription churn, as explored in this article, businesses can develop effective strategies to retain subscribers.
The key takeaways for reducing churn lie in:
Optimizing the user experience: Prioritize user research, simplify onboarding, and focus on intuitive app design to create a seamless and engaging platform.
Delivering consistent value: Regularly update features and content, personalize the user experience, and offer flexible subscription tiers to keep users engaged and satisfied.
Fostering strong customer relationships: Provide excellent customer support, actively seek user feedback, and implement loyalty programs to build trust and incentivize subscribers.
Addressing payment and billing issues: Ensure a smooth checkout process, offer flexible subscription options, and maintain transparent communication regarding billing.
Remember, churn management is an ongoing process. By continuously analyzing data, implementing improvements, and adapting to user feedback, subscription businesses can minimize churn and build a loyal subscriber base that fuels sustainable growth.
To learn more about how to manage your subscriptions successfully, reach out to Nami ML.
Dan Burcaw is Co-Founder & CEO of Nami ML. He built a top mobile app development agency responsible for some of the most elite apps on the App Store and then found himself inside the mobile marketing industry after selling his last company to Oracle.
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