February 12, 2021 | Authored by: Vindicia Team Blogs
The two best friends no modern CFO can live without
It’s one of the trickiest, most monumental challenges for every subscription-based business.
If you find it hard to get subscribers and keep them, well, you’re not alone. In fact, sixty-three percent of online publishers say that convincing regular readers to subscribe is one of the most difficult things to do. Even if you do manage to excel in acquiring new customers, the struggle to reduce CAC is real and not just in publishing.
People love the consistency and ease of subscriptions. That’s why consumers are moving towards subscriptions in a range of segments as broad as cosmetics, meal kits, cars, and even flights. CFOs in all these industries are facing the same question: How to boost financial predictability when customers are hard to catch and can “switch off” the revenue stream at any time.
For CFOs, once you’ve succeeded in the “big sale” and signed up new customers, then making sure they stay (aka, reducing churn rate) is the order of the day. Why? Because it is far easier and cheaper to retain customers than to acquire new ones. In other words, why invest more time struggling with CAC, when the cost of retention is always lower?
Bottom line: The antidote to churn is retention – keeping subscribers satisfied, tuned in, turned on, and engaged. In order to succeed at retention, you need a heck of a lot of knowledge about your subscribers and what might make them leave or stay. After all, there are lots of reasons why customers churn, and you need to drill down on all of them to really nail it.
But it’s a lot easier said than done. And it’s much easier when CFOs have best friends on their side. Let’s take a look at the two things that no CFO working with a subscription-based business model can live without.
1. Solid data
Wouldn’t it be amazing if you could get inside the head of every customer and know exactly what they want? Yes, but there is simply not enough time in the day. That’s where subscription intelligence comes in.
Subscription intelligence is the answer because it takes masses of subscriber data and analyzes it automatically for you, providing insights about user behavior patterns as they are happening. These insights are then leveraged to guide you in meeting your retention goals. CFOs and their teams can access smart data via a personalized dashboard, helping to gain a deeper understanding of subscriber metrics and what they mean. Via the dashboard, you can track this vital data in real-time and send push notifications that act on current trends and issues. You can also gain a comprehensive view of the bigger picture, so you can build short- and long-term data-driven strategies that bring you closer to your goals.
2. Top retention tools
Solid data is critical, but it won’t mean much if you don’t use it. The CFO’s next best friend is outstanding tools to optimize retention and support successful payments throughout every billing cycle. Data-driven strategies are not enough. What you need is an operational system that actually makes the moves to solve the obstacles to retention.
Take the burdensome issue of passive churn. In this case, the customer does not actively decide to quit your service. Rather, their monthly credit card payment doesn’t go through, so their subscription lapses. This is more common than you might think – 10 to 15% of all recurring credit card payments fail every month.
Partnering with Redfast, Vindicia provides automated functionality to identify the reason for failed credit and debit card transactions and apply retry and corrective measures to solve the problem. With the help of solid data and a sophisticated retention system in place, CFOs can resolve 30% of failed transactions that were previously unsalvageable.
Happy customers = happy CFOs
When a subscriber decides not to renew, that’s a customer lost. When a monthly subscription payment doesn’t go through due to a failed credit card transaction, that’s another customer lost.
This is a huge challenge, even for a giant like Netflix, which picked up over 8 million subscribers between October and December 2020. Sure, that’s an awesome (and enviable…) number. But it’s definitely not the end of the story. In order to minimize churn and assure ongoing, predictable revenue from these new subscribers, the CFO of Netflix has to focus on the next crucial step: retention.
For CFOs, there are other (and no less critical) factors impacted by revenue predictability, like the ability to guide the public market, manage the expectations of private and public investors, as well as company management. And you want to be able to do all these things accurately, optimally, and with no surprises.
If you’re the CFO of a subscription business, it doesn’t matter if you picked up 800, 8000, or 8 million customers. You always need two best friends – solid data sources and retention tools – to keep happy customers (and happy investors) and maintain stable revenue.
Don’t hide the cancel button: 14 strategies for better subscription retentionDownload