When Shopify merchants turn to an agency for help with their subscription business, it’s likely that one of the major items on their to-do lists will be related to churn reduction.
‘Churn’ refers to the turnover of a business’s customers or users. With this in mind, we can see how a company’s churn rate directly relates to its business earnings and growth projections. In regard to sustainability, if customers are constantly churning, a business has to work hard and constantly acquire new customers to make up for that loss.
What’s more, HBR data shows it’s much easier to retain current customers than to acquire new ones — and it’s cheaper, too. It can cost anywhere from 5–25 times more to rope in brand new customers rather than simply lowering churn and keeping more existing customers on board.
This also means that reducing churn rate by as little as 1–2% can translate into major ROI on an annual scale. Take a look at how a churn reduction of just 2% plays out in regard to annual revenue:
You can see how even a small improvement results in a major positive impact for the business.
So how can your agency help subscription merchants lower churn with a strategic consulting session? That’s what we’ll be looking at in detail within this post.
Let’s start by looking at some averages around churn within the subscription economy.
What’s the average monthly churn rate for subscription companies?
With so many different types of subscription business models, average churn rates can vary widely. However, there are some benchmarks we can look at as a reference point. According to industry data, the average overall monthly subscription churn rate is 6.73%.
But let’s get into a bit more detail from here:
- For B2B subscriptions, the average sits at 6.22%
- For B2C subscriptions, the average sits at 8.22%
- Voluntary churn rate (which indicates customer dissatisfaction) averages 4.78%
- Involuntary churn rate (which indicates payment issues) averages 1.73%
Churn rate for subscription companies also varies by industry:
What this tells us is that regardless of which vertical or industry that the subscription brand is operating in, there’s a lot of room for improvement around churn rates across the board.
Let’s next look at a few ways your agency can step in and optimize a subscription company’s strategy for churn reduction.
Tell the story behind the company
One of the simplest ways to boost loyalty and buy-in with brand new customers is to make them feel like they’re part of something special, starting with that first interaction. This means getting new customers familiar with the ‘why’ behind the business.
How do you do that?
- Make the company’s mission/values part of the automated welcome email sequence. Experian data shows that transactional welcome emails have 4x higher open rates than that of everyday marketing emails, so it’s important to leverage this particular email in a way that spotlights the ‘why’ behind your company.
- Include the company ‘why’ on the ‘About Us’ page of the website. If a customer searches out information about the brand, be sure they’ll find plenty of up-to-date information about what drives the brand forward, who’s part of the team, and why the company was founded in the first place. Verve does this well:
- Let subscribers see what happens behind the scenes. Use social media, your newsletter, blog, etc. to show subscribers what goes on behind the curtains with an inside look at day-to-day operations, introductions to different team members, and other facets of company culture. This makes customers feel more connected to the brand and adds a human element that’s often missing.
Michael Shewmake, Cofounder of Atlas Coffee Club, said that storytelling has become a central part of their business as a competitive differentiator:
“First and foremost, I think it’s important to realize that it is becoming more and more difficult for companies to be able to compete with things like price or convenience alone (there’s already Amazon for that). Companies that create a connection with their customers through a cohesive branding experience that all conveys a deeper mission are the ones who will continue to set themselves apart in cluttered markets. For subscription businesses, this also helps to reduce churn and increase loyalty because you’re attracting people who are buying into you and your mission, not just a product.”
Start handwriting cards to increase perceived value and loyalty
If you want to stand out from the competition, you have to do something unusual. Enter the handwritten thank-you note.
HBR reported that handwritten thank-you notes are a rare commodity these days, noting data that shows the average person receives a personal note in the mail just once every seven weeks. Think about it: When’s the last time you received a handwritten note in the mail?
With this in mind, brands can add a personalized touch to each subscriber’s order by simply writing a short thank-you and including the subscriber’s first name. And we know that personalization is more important than ever, considering eConsultancy reports show 74% of marketers say targeted personalization increases customer engagement. A small effort like this can go a long way for increasing perceived value and overall customer loyalty.
It’s important to note that this approach is best for new brands with smaller audiences, as it’s not entirely scalable, but it can work to a point at which it’s no longer realistic or time-effective. At that point, you may recommend switching to a smaller scale personalization effort, like including handwritten notes in a few select orders each week (rather than all of them) — or even consider outsourcing the initiative.
Improve the onboarding process
Solid onboarding is extremely important for customer retention efforts that reduce churn down the road.
Like SaaS companies (think Salesforce, QuickBooks, Slack) who work within the subscription model, ecommerce subscription merchants also want their customers to become “activated”. Activation is when users first achieve the value you initially promised.
This elusive moment occurs when customers realize they’re happy with the subscription-based product and can’t imagine their world without it. A helpful and informative onboarding helps this moment of activation happen more quickly and more often.
The trouble is: many brands forget to optimize their onboarding processes and instead take more of a one-and-done approach, never taking a second look after the initial process is established.
Agencies consulting on churn reduction, however, can step in to review or audit a company’s onboarding processes and look for potential improvements to the brand’s existing onboarding elements, like automated emails, the packaging and the unboxing experience, order tracking, and more.
Give existing subscribers perks
Customer retention is all about making your existing subscribers feel like VIPs. When customers feel like they’re insiders getting special access to a product they love and care about, the thought of cancelling their subscription seems almost blasphemous.
So what kind of perks can you offer to show subscribers they’re valued and always on your mind?
- Offer early/VIP access to new products and offers. Elements of exclusivity (like early access and subscriber-only offers) make subscribers feel like they’re part of an insider, members-only club — and that they’re getting special treatment.
- Consider using a membership model (like Costco or Amazon.) Membership models that allow subscribers to pay a fee once per year for access to products are another way to increase perceived value and that ‘insider’ mentality. A membership model might simply entitle customers to buy a select group of ‘member-only’ products, or it might be for access to perks like free shipping year-round.
- Encourage long-term relationships with a loyalty program. Loyalty programs that reward subscribers for customer referrals, repeat spending, or length of subscription can help reduce churn by incentivizing a long-term relationship. What’s great about this is that there are many great integrations (like LoyaltyLion, for example) that will work alongside a subscription billing platform and automate the program entirely.
Parker Imeson of Splash Wines explained how a loyalty program has helped reduce churn within their subscription-based business:
“When you combine a subscription model with incentives to stick around through rewards, customers will do just that. It cultivates loyalty, which is exactly what we’re striving for. In addition to everyday rewards, we run limited time promotions that further engage customers and keep them involved in the rewards program.”
Start an annual subscription program with even greater perks
You also might recommend merchants offer an annual subscription program that includes significant perks for a 12+ month commitment to a subscription. This way, rather than leaning on month-to-month subscriptions that leave more room for churn, brands can add sustainability for the business through long-term signups.
There has to be a good reason for the customer to opt into a year-long subscription, however. Perks for an annual opt-in might be similar to the membership offer we discussed: Free shipping all year, discounts on products, early access to sales, etc.
However, keep in mind that free shipping is the most sought-out perk by online shoppers. Data from Lab42 showed that 96% of online shoppers were more likely to buy on a site if it offered free shipping. With that much consensus, it’s hard to ignore.
Rob Colon of KnitCrate said adding an annual subscriptions options has been a major success in their experience:
“Adding an option for annual subscriptions has done wonders for KnitCrate and our customers. It locks customers in for the duration, reducing churn, and our community can just ‘set it and forget it.’ These also make great gift options on the site.”
Post the delivery schedule in multiple locations
If subscribers are churning because they’re dissatisfied with the shipping and delivery timelines around their orders, it only makes sense to improve communication with subscribers around logistics by posting delivery schedules in multiple locations.
By sharing the delivery schedule on product pages and in automated emails around the purchase, for example, you can quickly reduce friction around this element of the business. Kopari, a beauty subscription retailer, does this well but posting shipping and delivery details on its website:
Plus, this is easier than ever. With the help of a shipping integration tool like ShipStation, subscribers can always know when/where their products are during shipment via automated email updates.
Rob DuBois of Surfshop Box explained how his company has seen success using this tactic:
“One of the most important elements in reducing churn is making sure the member’s expectations are aligned with the reality of the subscription. Clearly communicating the delivery schedule is a key part of insuring that members understand when they’ll receive their boxes, and when they’ll be charged. If things are happening the way the member expects them to, the chances of conflict/cancellation will decrease substantially.”
Gather feedback from subscribers
To foster loyalty, make sure to give your subscribers a voice and reach out to them on a regular basis.
Merchants can ensure this happens by conducting regular email surveys like product satisfaction, net promoter score, and more. These surveys, conducted via tools like SurveyMonkey or GetFeedback, create a feedback loop for overall improved customer experience (CX) and provide invaluable insights about how customers feel and what they want.
Improved CX is extremely important these days, too: NewVoice data shows 58% of consumers will never use a company again after a negative experience. What’s more: Walker data indicates CX will be the leading competitive differentiator for businesses by as soon as 2020.
But it’s not enough just to gather feedback and let it gather virtual dust. Once collected, survey data and insights from customer support (like live chat/support requests) should be analyzed and then acted upon — either in the form of process/site improvements or via content like FAQs.
Doing this on a regular basis helps ensure you’re always improving customer experience and thus reducing potential churn.
Take a hard look at churn when it happens
Last, but not least: Be sure you’re taking a hard look at churn when in happens.
By analyzing customer data and finding out when churn occurs and at what day in the subscription cycle, you can quickly spot problems and recommend areas for improvement. You should also be asking questions like:
- What reasons do customers give for cancelling?
- Are there additional delivery options or order sizes needed?
- What answers do they give when asked what they need to stay a customer?
With this information, you can then spearhead re-engagement efforts to retain at-risk subscribers and dramatically reduce churn. Within ReCharge, this might mean offering retention strategies such as:
- Offering an incentive at cancellation to boost retention
- Custom promotions for different cancellation reasons
Brands like Bokksu are already using these tactics successfully. Here’s what this looks like in action:
And other brands are using these retention efforts to reduce churn as well. Take a look:
Rescue Your Subscription Clients from Dreaded Customer Churn
Let’s do a quick recap of all the ideas we covered when it comes to helping subscription merchants reduce their churn rates:
- Tell the story behind the brand
- Send handwritten thank-yous for a personalized touch
- Optimize the onboarding process
- Offer perks to current subscribers
- Create an annual subscription program to add sustainability
- Post delivery schedules in various places
- Gather feedback on a regular basis
By executing many of these strategies at one time, you can help merchants do wonders for churn reduction (and increase their bottom lines).
Interested in learning more about how to succeed as an agency in the subscription economy? Check out our Partner Resources for helpful guides and resources, to find out about upcoming events, and to get top-tier insights into the subscription marketplace.