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How to Prevent Subscription Churn

By January 15, 2020July 3rd, 2020No Comments

A high churn rate is a major problem in a subscription-based business. Keeping subscription churn under control is key to establishing a stable stream of revenue from which you can expand your subscriber base. When churn rates rise, revenue fluctuates, sometimes making it difficult to manage operations.

What is churn rate, how is it calculated, and what tools are available to help you keep it under control?

What is subscription churn?

Subscription churn refers to the number of customers that canceled or failed to renew their subscription in a given period of time.

Calculating churn rate is simple: Divide the number of cancellations in a given period by the total number of subscriptions in the same period.

To express churn rate as a percentage: Multiply the quotient from the equation above by 100.

For example, if 25 out of 100 subscribers stop paying for your product after a year, your annual subscription churn rate would be 25%.

Churn can also be expressed as a dollar value, representing the amount of money lost when those subscribers canceled or failed to renew their subscription.

In this case, if each subscriber were paying $10 per month and the subscription churn lost 25 customers, churn would be responsible for $3,000 in lost revenue.

High churn rates are bad for business. Not only does it immediately impact revenue, but when a subscriber base is highly unstable it can negatively influence business growth plans and the ability for a company to invest in its products and services. Preventing a high churn rate, then, should be a key focus for any subscription-based business.

How to reduce subscription churn

Naturally, there will always be some subscription churn associated with a subscription-based business. Luckily, though, there are many things a business can do to reduce churn rate to acceptable levels.
Here’s a look at some steps businesses can take to ensure that subscriber retention remains high:

  • Maintain quality customer service: If it is easy for customers to get the assistance they need from friendly and responsive staff, they are more likely to remain loyal.
  • Obtain and act on customer feedback: If you regularly implement improvements based on common themes in customer feedback, you are far more likely to retain subscribers for the long haul.
  • Promote content that highlights product benefits: Creating useful content like guides and how-to videos will ensure your subscribers have an optimal experience and understand why they should renew their subscription.
  • Monitor customer usage trends: Monitoring the way your customers use your products and services and improving them accordingly can help you spot churn before it becomes a problem.
  • Leverage customer segmentation: When you can identify your most valuable subscribers, you can ensure you’re meeting their expectations and help keep them as subscribers.
  • Build incentives into subscriptions: You can offer incentives like discounts, premium features, and advanced testing of new features to keep customers engaged.
  • Offer discounted long-term contracts: Locking subscribers into a long-term contract provides more certainty and reduces short-term churn. To incentivize more subscribers to sign up with a contract, offer discounts that make it worthwhile for them to commit to a year or more of service.
  • Create a strong onboarding process: A strong onboarding process for new accounts will allow customers to get up and running shortly after sign-up. Ensuring their accounts are active and ready immediately can help them derive more value from your products and services more quickly, leading to an increase in satisfaction from the very start of their relationship with your business.
  • Keep an open line of communication with customers: Hearing from your customers regularly about the good, the bad, and the ugly of your products and services will help you better serve them and boost overall satisfaction.
  • Show gratitude to customers: Be sure to thank your customers regularly. When customers know you’re grateful for their support, they will feel valued and more likely to renew their subscriptions.

Managing these key points at every stage of the customer journey is sure to pay off and help you mitigate churn before it becomes a problem. If a high churn rate is plaguing your subscription-based business, check each of these aspects to see where there might be room for improvement. Following up accordingly could help move things in the right direction.

How Ubersmith can help prevent subscription churn

Ubersmith offers a billing platform that gives you insight into your subscriber base that can help keep customers happy and reduce subscription churn. Whether it is seamless data interchange for a quick, clean onboarding process or data-driven insights into how your customers use your products and services, Ubersmith can provide insight into almost every component of your subscription-based business’s operations.