by If you really want to be successful in your subscription box business you need to fully understand how important churn is. A lot of the time the difference between building a highly profitable subscription business and one that can’t stop losing money will come down to your churn rate.
The simplest way to explain why churn is so important is because of the following:
Your monthly churn rate has a direct impact on how much money you need to spend on marketing each month to grow or maintain your subscriber base. If it is too high your marketing costs will skyrocket and it will be hard to maintain profitability.
Now there are many things you can do to help you reduce your churn rate and I have covered some of them on my blog already. One of the easiest ways though is to put a process in place to fight your “passive churn”
In case you don’t know what Passive Churn is let me explain. You will come across two different kinds of churn in any subscription business.
1. Active Churn
This is also known as voluntary churn. This is the kind of churn your probably most aware of. This is when the customer decided to cancel their subscription simply because they don’t want your product any more. This could be due to a number of reasons. If you take a look at my blog you will see I have covered some of this already and there will be some tips that will help you here.
2. Passive Churn
This is also known as involuntary churn. This is when the customer DOES want to continue with their subscription but is unable to due to something stopping them.
Both types of churn are equally important to attack as both will eat away at your profit margins and you should have processes in place to fight each one.
Passive churn is easier to fight compared to active churn due to one important factor. Your customers actually want to continue with the subscription.
The majority of passive churn is caused by issues to the customers’ payment method. The customer might lose their card, get a new card, change bank account, stop getting paid into a particular account ETC…. All of these scenarios can result in the customer not been able to continue with their subscription.
I came across a quote from Profit Well which suggested up to 40% of Subscription churn is passive
I don’t know what yours is in your business but if it is anything close to that number you have a BIG Opportunity to reduce your over all churn and make your entire business more profitable.
Remember what I said above. These customers actually want to continue with the subscription so to reduce your churn all you have to do is put processes in place to allow them to.
The first thing you need to do is make sure you have some sort of dunning email sequence where the customer can update their card details easily. This email sequence should fire automatically when the customers’ payment failed and should contain a link the customer can click to update their card in one click.
The ability for the customer to update their card in one click is really important. If it’s a case you have been sending emails advising the customer to log into their account and update their card there you need to see if you can change that.
This is down to a couple of factors.
1. The customers may not be able to navigate their account to update their card.
2. The customer may have forgotten their login details
The whole point of this is to make the experience as simple as possible for the customer and remove any barrier which is preventing the customer from updating their card details.
Then another email should be sent out automatically for the reminder of the failed attempts on the customers cards. If possible you should edit these emails and explain to the customer if they need help updating their card they can get in touch with you.
We use a tool called stunning which takes care of all of our dunning emails. This is a fantastic tool and has recovered thousands for us at this point. There are some other ones you can look into as well I know another good one is called Churn Busters.
If neither of these tools are compatible with your platform don’t panic. These days a lot of the platforms have their own built-in dunning tools which you can use. Just make sure it is set up correctly.
Dunning tools are great, and they 100% make a big difference, but they aren’t going to catch everybody. Sometimes the only way to stop a customer from churning out of your service is to pick up the phone and give them a call.
Now I fully understand that this won’t be viable for every business but this is something you should seriously consider trialling to see what kind of impact it makes. After all your renewals go through you will be able to clearly see which customers failed due to card problems.
You can introduce yourself on the call and get some feedback about your service. Then tell them you would hate if they missed the next box and ask do they need assistance updating their card.
This is a great way to kill 2 birds with the one stone. You can get valuable feedback about your business and reduce your churn. Now obviously this won’t be viable as you scale up and have thousands of subscribers. You should test it though when your small and see if its worth it.
If it turns out to make a big impact in your business then you can get your customer service team to take care of it each month.
Churn is the number one killer of so many subscription businesses so you need to be smart and look at all the ways you can improve it in your business. If you have any questions about passive churn or subscription boxes in general please let me know and I would be happy to help
