The subscription market has skyrocketed in recent years, driven by the growth of e-commerce and a significant shift in consumer behaviour due to people staying at home during the pandemic. In the UK, popular subscription services include everything from Netflix and Spotify to meal delivery services like HelloFresh and subscriptions for clothing and beauty products.
The subscription economy was estimated at $120 billion in 2022 and is forecasted to reach $904 billion by 2026. However, growth has slowed, with concerns around the rising cost of living prompting seven in 10 Brits to be more selective about their subscription services, according to a recent Barclaycard Payments survey. But the research also shows that despite the rising cost of living, two-thirds of consumers remain signed up to at least one digital or direct-to-door service, and 34 percent see subscriptions as an essential tool to help manage finances at a time of rising costs.
Given today’s cost-conscious consumer, how can subscription businesses ensure they can keep their revenue recurring?
CUSTOMER RETENTION AS A GROWTH STRATEGY
It’s vital to understand that acquiring a new customer costs at least six times as much compared to retaining an existing one. As a result, in tough economic times, businesses that have been heavily focusing on customer acquisition should shift their focus to retention. And to do so, they need the right technology.
PERSONALISE CUSTOMER EXPERIENCE
Forty-five percent of consumers believe subscriptions offer a personalised experience, which is why subscriptions remain appealing to consumers. However, personalising the customer experience can be a challenge. For most high-volume subscription businesses, the customer base is both large and diverse and can’t be treated with a one-size-fits-all approach. This leads to a conundrum for subscription businesses regarding how they can operate a successful retention strategy – at scale – that isn’t impersonal. To avoid this disconnect, companies need to have a deep understanding of the unique preferences and behaviours of each individual customer.
Customer experience personalisation depends on access to accurate information. To develop a complete view of your customer, it’s essential to organise data from multiple sources, like demographic details, product usage, payment histories, and support interactions. Technology tools enable companies to gain this visibility and operate from one source of truth for their customer data. Clear and up-to-date data allows businesses to spot trends and take action faster.
The next step is to define the criteria that indicate when customers are happy and engaged. (e.g., they watch a certain number of shows per week, use multiple features, etc.) Collection of this data, combined with cross-functional alignment, can inform actions like automated push notifications that increase customer satisfaction.
Collecting ongoing feedback from customers through direct input and survey collection is also important to differentiate the customer experience and make improvements to offerings or processes, such as lowering barriers to sign-up or adjusting pricing.
By shifting the focus to customer personalisation and loyalty, companies cannot only slow down the outflow of customers but also drive growth from existing ones.
UNDERSTAND YOUR CHURN FUNNEL
When it comes to customer acquisition, most companies are all in. They field teams to focus on different stages of the customer journey, tweak campaigns based on performance and measure success based on conversion rates. In challenging economic times, the same level of commitment and attention should be given to retaining customers. Imagine teams dedicated to identifying the warning signs of churn and proactively intervening and tracking both acquisition and retention metrics.
Just as the traditional sales funnel is an important tool for driving customer acquisition, understanding the churn funnel is vital for ensuring customer retention. Instead of tracking progress towards a purchase, a churn funnel is a visualisation of the customer journey that helps businesses understand why customers stop using products or services and cancel their subscriptions.
TURN CANCELLATION REQUESTS INTO OPPORTUNITIES
The churn funnel starts at the point of cancellation, and technology solutions enable the identification of unique customer attributes such as account type, billing plan, location, and account tenure to understand why customers are choosing to leave. The ultimate goal is to identify ways to win back these customers through targeted retention efforts by providing them with personalised solutions that meet their specific needs and keep them engaged.
Many companies conduct automated exit surveys, which are considered a best practice for customer success teams to better understand why customers leave. They then use that information to improve in the future. But companies should also go a step further and focus on influencing customers to stay at the point of cancellation. Cancellations generally come down to a handful of reasons related to product concerns, inability to execute, changing needs, pricing concerns, poor service and internal/company changes. Many of these issues can be resolved in the moment to reduce churn. Specifically, businesses can program automated personalisation and offer discounts, pauses, plan changes, and extensions to suit the individual customer.
Cancellation does not have to be a given or an absolute. It should be a signal from customers that their expectations aren’t being met. At that point, it’s not necessarily too late to step in and help your customers find what moved them to sign up for an account in the first place. Of course, some customers can’t be saved, but a churn funnel helps to
ensure the retention of as many as possible. Gathering data and feedback at this critical moment enables your teams to make improvements to reduce future churn.
CUSTOMER LOYALTY DRIVING ECONOMIC RECOVERY
Even in the best of times, growth without retention is like pouring water into a leaky bucket. And in today’s challenging commercial landscape, retention is more critical than ever. Consumers are tightening their spending belts, and customer experience remains one of the best ways to keep customers from initial onboarding to the last-chance cancellation request. Focusing on customer loyalty may not seem as exciting as acquisition, but with the right technology tools, it can be even more effective in propelling business-critical growth for businesses today.