Some brands imagine subscription programs as “set it and forget it”: customers sign up, and the brand kicks back to watch the passive revenue roll in. Truth is, if you’re not continually optimizing the subscriber experience, you’re most likely leaving money on the table.
Subscription Churn: What it is, How to Measure it, and Why it Matters
If subscription is a key element in your business strategy, you should make it a priority to test and iterate on the subscriber experience to reduce churn.
Luckily, analyzing your subscription performance and identifying trends can give you a huge leg up. You need to know: when and why subscribers churn, and what products have the highest churn rates.
Defining subscriber churn rate
Subscription churn is defined as the percentage of subscribers who cancel their subscription during a given time period.
A high subscription churn rate can directly impact financial health, eating away at monthly recurring revenue. And if your retention rate is weak, then you’ll have to lean more on acquisition — a costly and challenging activity.
How to calculate your churn rate
Subscriber churn rate is the percentage of subscribers who have discontinued their subscription within a given period of time. To measure it, divide the number of churned subscribers by the number of starting subscribers. Multiply the result by 100 to get a percentage.
Churn rate = (churned subscribers / starting subscribers) x 100
Identifying Factors Affecting Churn
Your overall churn rate is an important metric to overall business health, but it doesn’t give you much actionable information. That’s why you need to dig deeper, to identify your most vulnerable touchpoints and your highest churning products.
Lack of perceived value
Customers cancel their subscriptions when they no longer feel a particular product meets their needs or provides sufficient value. This might be because of the availability of alternative options, an overall lack of customer satisfaction, or simply that their preferences have changed.
Additionally, if customers perceive the subscription is too high for the value they receive, they may be inclined to cancel, or if prices increase suddenly or frequently without clear justification.
Frustrating subscriber experience
Customers want to be able to manage the details of their subscription programs without dialing up your CX team (and your CX folks want that, too!). Put subscribers in the driver’s seat with a seamless portal that makes it easy to skip or delay shipments, swap items, and more.
Of course, there’s no guarantee that they’ll never need support — so when they do, make sure you can deliver a prompt and helpful response. Inadequate or slow support can frustrate subscribers when they encounter issues or have questions.
Lack of engagement or usage
If customers find little utility in their subscription, or realize they’re amassing a stockpile of your products in their pantry, they may decide to discontinue the subscription. Inactivity or underutilization can signal a lack of engagement, increasing likelihood of churn.
Reduce Subscriber Churn with an Optimized Experience
Once you know which products correlate with the highest subscription churn, and which points in the subscription lifecycle are the most vulnerable, you can build a subscriber experience that gets ahead of those challenges.
Build an engaging onboarding sequence
It can be challenging to keep subscribers engaged and subscribed, especially in the early stages of their membership, and brands are often hesitant to try. They might think that, by not communicating with subscribers, they can forget about their subscription and not cancel.
However, research shows that educating customers on the benefits of their subscription and how to navigate and customize it can significantly reduce churn. So set the right foundation with new customers right away.
Provide clear instructions, educate them about the benefits of your subscription services, and help them understand how to get the most value out of their subscription across the customer lifecycle.
Offer strategically timed incentives and upgrades
If you’re trying to get more subscribers past the churn plateau at, say, order six, try testing small ways to surprise and delight them on orders two or four. You can look at your risk analysis to see which order points typically see the highest churn rates, and test different offers to see what works.
Being able to offer free gifts to your subscribers is a great feature, and Obvi did the testing to know how those free gifts impact their subscription numbers.
Using Risk Forecasting can help you see which churn risks are most likely to occur at certain points in the customer lifecycle.
Keep subscribers engaged over time
Leverage customer data to offer personalized recommendations, targeted promotions, and relevant content to help you demonstrate that you understand and value your customers. Targeted retention campaigns and promotions like exclusive discounts, loyalty rewards, or referral incentives can incentivize customers to stay.
Offer alternatives to cancellation
When you find a pattern to understand why customers typically cancel their subscriptions, one solution is to set up customized cancel flows to get them to stay. Giving subscribers more control and flexibility over their subscription can help retain them by aligning with their individual preferences and circumstances.
Ever and Ever uses Stay Ai’s RetentionEngine, which optimizes user actions for the most desirable business outcome. When someone goes to cancel their order, they first see a screen with possible alternatives. When someone goes to skip, we ask them whether they’d like to gift it to someone. And when someone goes to pause, we ask them whether they’d like to just skip this next shipment.
Ever & Ever is seeing consistent redemptions on these alternate offers, allowing them to minimize monthly churn and reduce cancellations and skips.
Optimize Your Subscription Experience to Cut Churn with Stay Ai
Subscription churn is a critical metric that directly impacts the financial health and growth of ecommerce businesses. Simply setting up a subscription program isn’t enough. Continuous optimization of the subscriber experience is essential to reducing churn and maximizing revenue potential.
Through the use of data-driven strategies and optimization tools, businesses like Obvi and Ever & Ever have successfully reduced churn and increased subscriber retention. By continuously testing and iterating on the subscriber experience, these companies have not only minimized monthly churn but also unlocked higher lifetime value from customers.
Need help reducing the churn for your subscription business? Click Get Started below to chat with our team of subscription & retention experts.