A key problem with subscription services is customer churn – the tendency for customers to open a subscription service (potentially taking advantage of an introductory offer), but then to shortly cancel the service. Particularly if there are high onboarding costs, or the initial promotion is costly, there may be a high cost associated with the churn. This article explores some key considerations to reduce customer churn in subscription services.
Understand why your customers are canceling their subscription
It may seem intuitive, but one of the most important steps in addressing customer churn is to understand why your customers are looking to cancel their subscriptions. Customer feedback has a lot of value, and maybe especially from customers expressing issues with your offering by canceling. Ask everyone that is canceling the reason why they are looking to cancel – there may be a common theme among users as to why they don’t want to continue.
The better understanding that you have of the reasons for canceling their subscriptions, the better placed you will be for addressing the underlying issues. There is a key danger if you don’t get to the source of the problem, that you will be trying to address the wrong issues – things that are not actually causing your churn.
Evaluate whether you are attracting the right customers
As well as listening to the reasons why your customers are canceling their subscriptions, it is important to consider whether you are actually attracting the right customers – those customers who value your product sufficiently to continue with their subscriptions.
It is not unusual for subscription services to include significant sign-up offers – potentially a significant discount for the initial subscription period. While these offers can be a good way of attracting new customers – they may also attract the wrong sort of customers – the sort of customers who like the signup bonus, but are not likely to continue past the promotional period. Better targetting of promotions is one approach to reducing the likelihood of turnover. This may for example involve refer-a-friend promotions – giving credits to your existing loyal customers that they can share with their friends and colleagues who may be more likely to continue their subscriptions past the promotional period.
Are their ways of increasing your subscription's value
A final important consideration to reduce customer churn is whether there are ways of increasing the subscription’s value. At least to some degree, customers are likely canceling their subscriptions because they don’t believe that the value that they receive from the subscription exceeds the cost of the plan. If there are additional features that you are able to add, particularly in areas valued by customers, this may help increase customer loyalty to your subscription offering.