By Morten Suhr Hansen
“How do I avoid churn in my subscription business?” That’s probably the question I get most often when talking about subscriptions with our customers at Subscrybe. Admittedly, it’s certainly an important question because as a subscription business, you constantly need to work on reducing churn.
However, no matter how well you do it, churn will never completely disappear. There are ongoing subscribers who choose to cancel their subscriptions for various reasons, and every cancellation is actually an opportunity for a savvy subscription business to build on a strong relationship and lay the groundwork for more business. I’ll elaborate on this in the following, but first, a few observations from my own household.
Two examples of poor execution in the cancellation process
Earlier this year, my wife chose to cancel her subscription to a magazine from one of Denmark’s larger media houses. Not because she was dissatisfied with the magazine; she simply needed a break. However, the cancellation process was associated with a lot of hassle, and a couple of errors crept in as well. So, after numerous emails and phone calls, when she finally canceled the subscription, she dryly stated that she would never accept a good subscription offer from them again.
My daughter had a nearly identical experience when she wanted to cancel her membership in the union she had joined during her gap year. When she read on their website that she could only cancel by calling a person in their customer service, she loudly proclaimed that she wouldn’t be joining them again! (Can it really be such a hassle to have to make a call to cancel? Yes, for the younger demographic, it’s a significant turn-off).
These two examples may seem random, and in at least one case, just an expression of human errors and poor execution. Unfortunately, it is my experience that many subscription businesses assign too little value to the cancellation situation and the customer’s experience in that situation.
Churn is actually one of the great benefits of running a subscription business
The lack of attention to this issue may partly stem from the fact that we are actually sad when our customers leave us and would rather focus on those who stay. But let’s try to turn the argument around. Shouldn’t we be happy that we KNOW when a customer has left us? And simultaneously recognize the business opportunities that arise precisely in that situation.
Because that’s one of the advantages of running a subscription business – customers tell us when they no longer want to be subscribers. In any non-subscription business, we have no idea if a customer has churned. When I walk out of a supermarket where I’ve just filled my shopping bags, they have no clue if I’ll come back tomorrow or never again. Therefore, they can’t act on it. It’s the opposite in a subscription business. Here, customers tell us that they want to pause their relationship with us. However sad it may be, the opportunities lie right at that moment.
How to improve retention with a better sign-off experience:
At Subscrybe, we often collaborate with subscription businesses to enhance the cancellation process in their subscription solutions, aiming to increase retention in the short or long term and thereby create a better business.
We specifically focus on six different tactics, and I’ll briefly elaborate on three of these that most subscription businesses can immediately start implementing in their operations:
- Make it easy to cancel the subscription. Does that sound too obvious? Consider the two examples I began with. But why make it easy for your subscribers to cancel? First and foremost, it’s the law. It should be just as easy to cancel as it is to purchase a subscription. But won’t a cumbersome cancellation process reduce churn? Yes, in the short term. In the long run, it’s a disaster. Because the new subscribers you need to thrive in the future aren’t as new as you think. Studies show that often between 50-80% of all ‘new’ subscribers are actually returning ones. So the subscribers you bid farewell to, you’re actually just saying ‘see you later’ to. Therefore, it’s crucial to build trust at every stage of the customer journey, even when they’re canceling.
- Try upselling when your subscribers are canceling. ‘Downselling’ is, of course, one of the six tactics, but why not instead try to sell a larger product to them when they cancel? It may seem contradictory and require courage, but the fact is, many subscriptions are canceled because subscribers don’t get enough of what they need from a subscription or don’t feel it’s valuable enough. So what opportunities do you have to provide the subscriber with even more value and perhaps the feeling of even more value for their money? What could be an example? Imagine you want to cancel your Apple Music subscription because you don’t use it enough and don’t want to pay 109 Danish kroner per month. But when you try to cancel, you’re offered the chance to upgrade to Apple One, which includes not only Apple Music but also subscriptions to Apple TV+, Apple Arcade, and iCloud for just 159 kroner per month.
- Win back your customers. Another ‘no-brainer,’ you might think. All subscription businesses must be masters at convincing subscribers they’ve made a mistake, then trying to win them back quickly! If you think that, try canceling a handful of your subscriptions and see what happens. In the best cases, you’ll be subjected to relatively generic attempts. In the rest, you won’t hear much. In our view, winning back customers is an extremely refined process where communication with subscribers is personalized. Because they are former subscribers, we know a lot about their buying and subscription behavior. Knowledge we can use to tailor the process and communication.
I think we’ve now established how crucial the cancellation process is in your subscription business. So, how do you get started with optimizing it?
You’re more than welcome to send me a message, and we’d be happy to perform a ‘mystery shopping’ on your subscription business, testing how well you’re implementing our six tactics and offering a few suggestions on how to make it better.