by The most important metric in any subscription business is churn. There are so many different ways to get customers signed up but, if you haven’t figured out how to keep them you are fighting a losing battle. I am going to share some tips and strategies that you can apply in your business today to start reducing churn immediately
We all know that a B2C subscription box typically has a much higher churn rate than a good SaaS company. This is because most boxes are simply not needed. A monthly box of goodies is a lovely treat but let’s face it. Most boxes are not essential for customers. This usually means a few things.
- Unless you are providing an unbelievable experience you will have high churn.
- Churn normally follows the box (Send out a bad box. Watch your metrics collapse)
- When a customer is looking to cut back on expenses and save some money your box is first to go.
When I speak about high churn you might wonder how high is too high? Well, I personally believe in this industry anything over 15% is way too high. If you have 15% monthly churn it means you are keeping customers for 7 months on average. That means you turn your entire user base over every 7 months. If your churn was any higher I don’t think it would be possible to have a profitable business. Ideally, you want to be aiming for under 10%. Your business will be much more profitable at this number and you will be able to scale it much easier.
So let’s go through a few things you can do to help get it down to that magical number
1.Make your subscription essential
This will be very helpful for anybody who is thinking of setting up a subscription service. If possible, make sure your product is needed in the customers daily life. In 2016 Dollar Shave Club was acquired by Unilever for 1 Billion Dollars. Do you know how they managed to get sold for such a large sum? The reason is their metrics actually make sense. They don’t have a subscription where everybody leaves after a few months. Their Razors actually solve a problem as most men shave and on top of that their service is really cheap and convenient. This is a winning formula and my guess is they have ridiculously low churn. I would imagine under 5%.
So if you are starting out. You should be looking at doing something similar. Focus on the replenishment model and try your best to nail that with a very good brand. If you manage to pull it off. You are sure to be onto a winner.
If you are already up and running why don’t you look at launching another subscription that will run side by side with your main one. This is what we did a few years ago. We launched a complimentary subscription, in the exact same niche. The only difference is. This was for an essential replenishment product. This worked out very well for us and helped to bring our churn down. All we did was simply contact all of our existing and previous customers and told them about our new service. We got lots of people signed up this way and didn’t have to pay any additional marketing costs. All that happened was we boosted our CLTV considerably (This won’t always be possible for your niche but it is worth looking into)
2. Price Testing
Where did you get your price from when you started your subscription service? Did you pull it out of thin air or was there some thought actually put into it. A common thing I keep seeing is people copying their competitor’s pricing. This isn’t a good idea. Your competitor may have a competitive advantage you don’t know about or on top of that they may have their pricing all wrong and now you are copying it. I have seen a small change in pricing make a massive difference to churn. Literally changing it by a few euro helped keep customers signed up months longer. You should do some market research and find out how much customers in your niche are willing to pay. There are company’s out there who will do this for you or alternatively do it yourself by sending out surveys.
3. Create a community
A customer is going to hear from you twice a month. The first time is when their renewal goes through. The second time is when their box arrives. This is why you need to make your product more than just a box. Make the customer feel like they are part of something. Here are some ways you can do this.
Create a Facebook Group – Make sure you are very active in the group. You should be promoting good discussions and filing it with great content. Whatever you do don’t turn the group into a spammy sales fest.
Keep customers up to date via email – You should send regular email updates out to your subscribers. Let them know what is going on in your world and make them feel like they are in the know.
Create a Blog – Make a blog and write as many relevant, helpful and interesting articles as possible about your niche then regularly promote it to your customers.
Go Live and Answer questions – Set a date with your subscribers for when you plan to go live on Facebook. Make it an event and tell them you will be answering as many questions as possible about what is going on in your business.
4. Have a process in place to tackle passive churn
Passive churn is when a customer leaves your subscription due to an unresolved billing issue. E.G a customer lost their credit card and then forgot to update their card details when they received their new one. This is some of the most annoying churn you can experience and it is highly erratic but guess what, it counts towards your overall churn so you need to be working on it. The first thing you need to do is get a good dunning tool. A good dunning tool will use machine learning to understand the best time of the month to charge certain customers. It will also remind a customer if their card is about to expire and will make the process of updating the card really easy for the customer.
We use a tool called Stunning to help with our failed payments, but there are loads on the market. Another good one is Churn Buster. Do your own research and see what is right for your business, but the bottom line is you need something. Stunning has recovered THOUSANDS for us over the last few years, so it is well worth the fees we pay towards it.
The next thing you need to do is actually put a process in place. E.G Your boxes ship on the 15thof the month and your cut off is the 13th. You go into your customer list on the 10th of the month and check all your failed payments. You then pick up the phone and you call all of these customers and tell them their box is going to be shipping soon and you don’t want them to miss out. You then offer them some help in updating their card information. If you put this exact process in place this should make a massive difference to your churn figure each month.
5. Survey Your Customers
This may seem simple but a lot of people don’t do it. You should set up email automation and survey everybody after they cancel and find out the exact reason why they ended the service. If 60% of people are telling you you’re too expensive. Then guess what? You are too expensive. So you can either fix the issue or continue to have terrible churn and never get anywhere. Likewise, if you keep checking your surveys and a frequent answer is, your boxes are rubbish then they probably are. To fix your churn you can’t bury your head in the sand when it comes to the data. You need to accept what your customers are telling you and then you will be able to resolve the issues causing people to cancel.
You should also take it a step further and survey all your customers after they receive every box. Ask them for feedback about the service and the products they received. Eventually, you will have a lot of data built up and you will be able to use that to plan better boxes in the future that people are sure to love.
6. Reward Programs
Set up a reward program. E.G A customer will receive a free item or they will get a discount after so many boxes. You should set it like this 3 boxes, 6 boxes, 12 boxes. Make sure the rewards are good enough so customers will look forward to receiving them. You can also do one better by doing a big monthly raffle. Tell all your active subscribers they are entered into it and then go live on Facebook at a set time at the end of the month. Make it a fun experience and give away some decent prizes. This will get your whole subscriber base involved and increase customer loyalty.
7. Learn the points where a customer is most likely to churn.
A SaaS company has an advantage when it comes to this point. They are able to analyse their user’s behaviour and understand when somebody is likely to churn. E.G They haven’t logged in for a certain period of time or they don’t use a certain feature. If they see a customer fall into this behaviour pattern they can reach out to the customer and try and save them before they churn. (Trust me it is much easier to save somebody than it is to try and get them to sign up again) We don’t have this luxury with a subscription box business but we can do the next best thing. The next best thing would be to monitor your monthly cohorts and try to understand at what point in a customers subscription are their spikes in churn. Once you know this information you can then put processes in place to intercept them and try and save them. E.G here’s an example. You look at your monthly cohorts and you notice between month 1 and month 2 there is a big spike in churn. You survey these customers and you come to the conclusion they are leaving because they don’t really understand your service and don’t think it is right for them. You then put a plan in place to engage with future customers during this point of their subscription and try and save them. You can either do this by email or what I find works really well is getting your support staff to ring them and see how they are doing and what do they think of the service.
8. Bonus (They probably won’t sign up again)
For the majority of your subscribers when they cancel they won’t be in a rush to sign up again. Yea sure there is the exception and depending on the cancellation reason some people do reactivate. You will probably find a lot of people don’t though. That is why it is essential for you to offer more than one product. Imagine having an email list of thousands of people sitting there and all you offer is one subscription box. If this is the case you are 100% leaving money on the table. You know what these customers like so you should be able to sell them other things to boost that all-important CLTV metric. Some easy products you can offer are special one-time boxes. E.G Birthday boxes, Christmas boxes, Halloween boxes or some random once-off theme. Get creative though you should be making the most of all of the emails and customer data you are collecting.
I hope this article is helpful for anybody looking to decrease their churn rate. As I previously mentioned churn is the most important metric for any subscription business and it is something you will be working on non-stop during the lifetime of your company. I only touched on a few things here. If I covered everything about churn I would end up writing a novel, so I had to stop haha. If anybody has any questions about this or anything about subscription in general, please let me know and I would be happy to help.
