It’s 5x more difficult to acquire a new client than to nurture your existing customer base.
To win over a new client, you must locate an ideal target audience, market to their unique pain points, and often spend more time and money on this process.
That means when customers leave through voluntary or involuntary churn, it creates more work for you and your team — and no one wants that.
That’s why implementing effective strategies to reduce the number of customers cancelling their orders from your subscription-based business is vital to creating a long-term business strategy that works for you and your team members.
The Ins and Outs of Customer Churn
If you’re unfamiliar with the term “customer churn,” it simply refers to the process of customers cancelling their subscriptions and quitting your service. Essentially, through these events, people that used to be customers are no longer customers of your business.
Losing customers is expensive! Just how expensive? Well, the average global value of a lost customer is $243. Which means while every business needs new customers, there’s a ton of value in keeping the ones you already have.
So, let’s dive into what the difference is between voluntary and involuntary customer churn and how you can effectively reduce both of these churn rates for your subscription-based business.
What Is Voluntary Churn?
When thinking about customer churn (or customer attrition), you likely imagine the voluntary kind. Voluntary churn occurs when a customer ends a subscription by choice. This could be as a result of incorrect expectations, a poor quality product or course, lack of connection to the product or course, change in life, etc. To be honest, the possibilities are almost endless.
But at the end of the day, the customer has decided to leave the subscription.
Knowing someone has decided to disassociate with your business can be a tough pill to swallow… but try not to take it personally! It’s natural; it happens in all businesses.
Instead of ruminating on lost customers, there are some specific action steps you can put into practice to reduce the number of customers wanting to leave your subscription program.
How to Eliminate Voluntary Churn in Subscription-Based Businesses
At the end of the day, customers will leave your subscription service. Losing a customer doesn’t always mean there’s something wrong on your end. The customer could just no longer need their subscription or have another very plausible personal reason.
However, you can take action to prevent churn that may come as a result of a variable on your side of the business. Here are five of our top tips to help reduce voluntary attrition in your subscription-based business:
Have a Clear Onboarding Process
Setting up accurate expectations is key! Because let’s face it: No one likes having unmet expectations. The first order of business in ensuring this is selling your subscription clearly and accurately. That way, you’re setting yourself up for success to meet your customer’s needs.
Once you’ve sold your customer with information that accurately reflects your product or service, take them through an onboarding process to reinforce the hard work you’ve put into accurately selling them.
Onboarding email sequences often work really well to do this. Whether you’re selling a product or course, tell your new customer about next steps, how to use your product or service, and what to expect as they go through this new journey with you.
Your customers will love this, and it makes you appear organized, reliable, and trustworthy! It’s a win-win.
Anticipate Churn by Noticing the Warning Signs
Deciding to cancel a subscription often isn’t a spontaneous or instant decision. Oftentimes, customers will provide you with warning signs that they’re about to take the leap and cancel.
So, your best bet is to get ahead of this. Be on the lookout.
If you run a subscription-based course, notice: Is the customer engaging with the course content? Have they even logged into the course platform recently? If the answer is no the either of these questions, these are red flags you may lose this customer.
If you offer a subscription on products, it may be a little bit harder to tell if your customer is about to leave. However, if a customer is repeatedly pausing their subscription order, this is a glaring warning sign!
Put on your detective glasses and look for any outliers in your customer group. Find the low engagers and move onto the next step… sending out an activation campaign.
Send out an Activation Campaign
When you notice a customer's engagement with their subscription slowing, it’s time to reignite their excitement and passion for your product.
You can do this through sending out a triggered email campaign that focuses on re-engaging (or “activating”) your customers.
Through this email series, you may:
- Ask the customer how their experience is going and if they have any questions about their subscription
- Provide social proof and share other customers’ journeys with your offerings
- Remind them why they started! And encourage them like a friend would...
It’s up to you to decipher the data you have and determine what your customer needs to strengthen their relationship with you and continue on with their subscription.
Ask Customers About Their Experiences & Implement Feedback
While asking customers about their experience during an activation campaign is almost a must, it’s wise business to ask all of your customers for feedback. This will help you improve your product or service, while also giving you material to use for marketing materials.
At the end of the day, the goal of your business is to serve your customer and meet a specific need they have. That’s why if you’re not asking for feedback and reviews, you won’t know how successfully your business is accomplishing this goal.
Sell Transformation, Not Information
To be honest, this is just great general marketing advise… and it also happens to help with churn! When you’re marketing your product or service, avoid just relaying the information about your subscription.
Information-based selling is dramatically less effective than transformation-based selling. Allowing your customers to envision a transformation in their lives (that they need your services for!), they have a motivation and goal that will encourage them to continue staying subscribed.
Information-based selling doesn’t offer the same incentive to continue engaging with your company.
What Is Involuntary Churn?
Involuntary customer churn (or customer attrition) means you’ve lost a customer who didn’t actually want to cancel their subscription… YAY! But also, NOT yay!
The good news is your customer likely wasn’t dissatisfied with their service and looking to discontinue the subscription.
Unfortunately, involuntary customer churn still means you’ve lost a customer. And there could be a number of reasons why.
Involuntary churn involves a failed payment, which actually makes up 50% of overall churn. Reasons for this failed payment could be:
- The credit card expired
- Incorrect credit card information was provided
- Credit card was reported stolen or lost
- The bank blocked a transaction or flagged it as fraudulent
- There are insufficient funds in the account
Ready for more good news? You can actually save many of these failed payments.
How to Eliminate Involuntary Churn in Subscription-Based Businesses
Traditionally, to help win back involuntary customer churn, subscription-based businesses will use a solution called dunning software.
Dunning uses an automated process to contact customers about collecting past-due subscription payments.
It sounds innocent at first, but let’s look at Mirriam-Webster’s definition of the root word ‘dun’: “to make persistent demands upon for payment”
If you’ve ever tried to make persistent demands to win someone back before, you likely know this typically doesn’t go over well.
Generally speaking, customers don’t enjoy being pestered. The automated dunning softwares lack empathy and any real ability to logically solve real-word problems customers may be facing.
That’s why businesses should humanize this process.
By using a team to collect failed payments instead of automation software, you’re able to put a human face and voice to your business and show your customers empathy and care. This in turn creates better communication, deeper brand engagement, and a higher likelihood of recovering your lost payment.
Because with something as simple as a call from a real human, your customers know you care.
To do this, you can hire an internal team within your company — or, you can hire on third-party experts like the ones at Gravy Solutions to help you winback your customers.
Both voluntary and involuntary churn have got to go! While you won’t be able to ever completely eliminate both, with some strategic planning, clear marketing, and a seamless failed payment system, you can help to reduce your customer churn rate.
We know you work hard to gather new clients and keep the momentum. By doing what you can to reduce customer churn, you’ll find a newfound sense of freedom in your business to continue to grow and develop, instead of staying on the hamster wheel of gaining new clients and losing new clients.
So, what’s one strategy you’ll implement this week to help you hop off the merry-go-round of customer churn?