Dose #87: Tackle Churn Step by Step

Matt here with your weekly Subscription Prescription 💊

Churn baby churn. This week’s dose is all about fighting the boogeyman of subscriptions - churn. We cover the old way of fighting churn, finding the right mindset to improve retention, dive into data, how to approach high month 1 churn, and finally how it all comes back to acquisition.

There’s an invisible problem plaguing subscription companies: accidental churn. This is when an otherwise happy customer’s legitimate payment is falsely declined by the credit card company, resulting in their subscription getting canceled.

Subscription Prescription has a new partner and sponsor that tackles this very problem: Butter Payments. They focus on reducing accidental or involuntary churn and keeping customers who want to be on their subscription around. The problem with churn like this is that a lot of customers don’t know they are being canceled and don’t want to be canceled.

Butter is able to automatically resolve those failed payments that otherwise would have led to churn and keep your recurring revenue and subscription customers as healthy as possible.

Prefer listening to a podcast? This week’s dose is live for listening. The podcast goes more in-depth with examples and explanations, although I ramble more there than in the newsletter. ;)

Or give it a watch here (yes, we have a new YouTube channel!):

This week’s dose is all about the big C word: churn. Keeping people active on a subscription longer is the goal for any business. More revenue. More profit per customer.

What makes it so hard?

Old Way of Looking at Churn

Think about the last time you had a bad experience canceling a subscription. They make you jump through hoops, have to make a call, or something like that. Annoying.

Old school approach to churn is making it really hard to cancel. You’re trying to block the fire exits.

If you want to get better at fighting churn, then adjust your mindset.

The Right Mindset for Retention

Great retention isn’t about keeping people from leaving. It’s about finding the people that want to stay. With this approach, we spend time analyzing a few key components:

1. Obvious holes that need filling (for example, people cancel because the flavor is bad, or people cancel more on month 7 than month 6 - why is that?)

2. Analyze what’s going wrong later on so you can address it earlier (for example, people end up with too much product and cancel, so you make the sizes smaller to match customer usage)

3. Analyze what’s working and go after more of that (for example, you identify a product that lasts longer than others on a subscription, so you start highlighting it more in your marketing)

Ultimately, we want to uncover our best kind of customers. The ones that stick around forever spend the most money and see the value of our subscription the most. That is the secret behind great retention.

Start Understanding Subscribers with Better Data

You don’t know what to fix or double down on without the right data.

Before someone even subscribes, you can collect info via quizzes. More than product recommendations, if you’re offering value in exchange for value, you can collect data from prospective customers. (Think: sleep quiz that helps someone identify their problem.)

If you aren’t using post-purchase surveys, you’re missing out on a huge opportunity. You can learn why people subscribed - or why they didn’t - plus get insight into the value props you’re offering. Was it the discount that pushed them to buy? The gift? The free shipping? The problem you’re solving?

Periodic surveys to subscribers - automated or manual - can help you address problems before they happen. Don’t let someone cancel because they keep feeling ‘meh’ about the product or don’t like a feature. Find out first, and get in front of the issue.

One of the biggest data points you should collect is the cancellation survey. You can get feedback directly from customers on why they’re leaving. The trick here is getting into the ‘why’ behind common reasons like ‘too much product’ or ‘price.’ For example, too much product might mean the wrong size, or they don’t like it, or they don’t know how to use it. Each one can be addressed but in a different way.

More Quantitative Data

In addition to the sources listed above, you can get into retention data and segment customers into different cohorts, like:

• Monthly (how they perform over time)

• Sales/promotions (ie, Black Friday versus July)

• Different offers you run (free shipping versus a free gift, price/discounts)

• Products (which ones perform the best over time)

The goal here is to have a better understanding of what is working - and not working - throughout the program. Finding products that retain better would be worth dedicating offers in your sales channels, for example.

When Month 1 Churn is High

One of the biggest problems many subscription brands face is churn in month 1. 20-30% drop-off is normal. It can certainly be improved, but that’s a good starting point.

For anyone seeing 50-60% or more churn in month 1, you have an acquisition problem. Either the quality of customers is low, people are more interested in ‘trying it out,’ or the offer is misaligned with your site visitors.

This can feel messy. If you’re running into this problem, hit reply and let me know. I’ll provide some feedback or ideas. But, basically, you need to start testing different offers. Change the price/discount, offer a different initial offer (like a starter kit instead of just the product).

You can also do a better job of demonstrating value. Improve the initial unboxing experience, messaging, and each touchpoint you can find.

Fight Involuntary Churn

One of the final problems to address here is involuntary churn. Larger programs typically see 1-5% of their subscriber base disappear each month when it could have been prevented.

I mentioned Butter Payments at the top of this email, but they’re part of the solution to this problem. Credit card declines are a real problem in the subscription business, and you can save a lot of revenue with their solution. The best part is that they can look at what’s happening and tell you upfront how much they can recover - before being a customer!

Bring Retention Back to the Source: Acquisition

Most of this dose was pretty high-level, but the idea is the same: understanding better what customers love will let you acquire more of those customers. That’s the end goal of a great subscription program. On top of that, you do what you can to improve the experience and eliminate friction points that are causing you churn.

That’s it for this week’s dose - stay tuned for Dose #88 next Tuesday!

- Matt Holman 🩺

The Subscription Doc