Customer retention management
Customer retention management is a major challenge for any business, but companies with subscription-based business models are especially at risk for the harmful effects of customer churn. It’s a fact of life that gaining new customers is much more costly than retaining existing ones. In fact, some studies indicate that customer acquisition is as much as five times more expensive than customer retention.
Beyond the clear financial problems of customer churn, there are also product and service development ramifications associated with ineffective customer retention management. Excessive churn can have a paralyzing effect on business innovation. Leading subscription businesses believe that the threat of high churn rates can stifle the pursuit of more dynamic and disruptive service models.
At Vindicia, our subscription management platform provides extensive customer retention software features. Vindicia Subscribe is our complete subscriber acquisition, management, billing, and customer retention solution. Vindicia Retain is our innovative customer retention solution that works with any existing billing system.
Vindicia Subscribe makes it easy to communicate with your customers while managing campaigns and promotions in order to maintain customer engagement and cultivate loyalty. And both Vindicia Subscribe and Vindicia Retain help you increase customer retention and extend customer lifetime value with advanced retention technology that can automatically recover up to 15-30% of previously failed payment card transactions.
Customer retention management techniques
Combating churn and increasing customer retention rates is vital to sustainable market growth and ensuring the long-term health of any subscription business. Regardless of the customer retention management solution deployed, there are a number of retention management techniques that any subscription business should undertake to reduce churn and keep customers in the fold for years to come.
Personalize services to provide unique value and engagement
Personalized services can go a long way toward improving the customer experience, offering subscriber value, and minimizing churn. Industry research shows that consumers are more likely to buy from a company that offers a personalized experience. Personalization can include offering new services or promotions based on a customer’s past activity and purchase history. OTT services like Netflix are especially adept at such tactics, leveraging a user’s viewing behavior to make targeted recommendations that fall in line with their personal tastes.
Before you rush to slash prices and race your competitors to the bottom, use your customer retention software to explore all of your opportunities to personalize content and services to better appeal to your customers.
Enhance the customer experience at every touch point
Irrespective of how valuable or desirable your service may be, do not underestimate the effect a bad user experience can have on customer satisfaction and ultimately customer churn. A poor interface on mobile apps, digital portals or brand websites, for example, or a lengthy, complex onboarding process, could easily create friction. Customers want to quickly and easily move across different platforms and touch points. A subscription service that does not support such seamless navigation could leave them displeased.
Billing can be a major source of friction for subscription companies, as errors and processing issues can quickly sour the relationship between brand and customer. Failure to process a payment frictionlessly or award credits for service disruptions will inevitably frustrate users and potentially make them think twice about their subscription status. Enhancing your subscription billing system and customer retention solution to ensure such issues do not occur will help improve customer retention over the long run.
Be transparent about services, offerings, payment and billing
Many subscription businesses attract new customers by offering competitive entry prices and enticing promotions. However, users may be paying more than they realize if they don’t read the fine print.
Take the use case of a wine club, for example. The service provides the first order for free while also allowing users to select from a service package that includes shipments every month, every two months or every three months. What the customer doesn’t immediately realize is that regardless of which plan they choose, the first paid shipment will arrive – and hence, be billed – one month after their initial free package. Those expecting to have a three-month grace period before being billed will be surprised when they see a charge on their credit card statement a month after they receive their first shipment.
From the business’ standpoint, it makes sense to bring in revenue from new customers as soon as possible and weed out individuals looking for a free trial they can cancel within a fairly large window. The customer likely won’t see it that way, though, and will feel that they have been taken in by bait-and-switch tactics.
The lesson here is to always be transparent with your customers when it comes to pricing and billing. You may turn away some users, but you are likely to lose even more if your customers receive a bill or credit card charge they were not expecting for a few months.
Actively monitor customer usage and activity
Customers rarely decide out of the blue one day to just cancel their subscription services without reason. While one-off incidents can turn away subscribers, in many cases, cancellations can result from loss of interest or from long-standing, pent-up frustration and dissatisfaction.
Customer activity monitoring is an important customer retention management practice. Frequent monitoring of each customer’s service usage and activity history gives subscription businesses the ability to spot potential red flags indicating a cancellation may be looming. If a once-active user suddenly scales things back – perhaps by moving to a lower service tier or consuming content on a less regular basis – that could be a sign that they are no longer happy with their subscription.
Armed with this information, subscription companies can proactively utilize their customer retention solution to reach out to churn risks and determine what can be done to retain their business.
Use data to spot overarching trends
The insights gleaned from customer activity need not be limited to those specific individuals. The more data subscription companies can gather about their users, the better understanding they will have regarding general customer and service trends. Points of friction can be pervasive, but collecting and analyzing more data will quickly bring those issues to light. Such insights can extend across your entire customer base. It can give your business a higher-level view to spot more widespread issues that need to be addressed.
For instance, after analyzing user behavior and activity on a broad scale, you may notice that a bundle or service package that had been previously very popular with your clients is no longer gaining the same amount of traction. It may be outdated or perhaps your customer demographics have shifted to the point that they are interested in a different offering. Either way, that old standby may need to be retired in favor of a fresh, new service bundle.
Stay in contact
Too often, customer interactions with your service only occur at fixed intervals: billing notifications, payment requests, shipping alerts, etc. It’s very easy for customers to check out of a subscription relationship when their awareness to your brand is limited to these fixed, technical interactions.
The good news is that subscription companies have ample opportunity to engage customers on a regular basis and through multiple channels, thanks to the numerous digital, mobile, web and social media platforms consumers use today. Be aware that it is ultimately the subscribers who will choose their channel of preference, by responding to the communications that they receive in their channel of choice.
Offer a variety of paying options
People differ in their preferences with respect to paying and billing. Some prefer credit cards, others prefer bank debits, while still others find it easier to track digital payments. Some use Android, while others use iOS. Some are committed to the service, while others are experimenting with it. Some want to be able to cancel at any time, while others prefer to receive a substantial discount for a long-term commitment. Subscription businesses need to offer sufficient variety in payment option to match the lifestyle of potential customers.
Talk to your customers
Perhaps the simplest step subscription companies can take to improve customer retention management is to regularly contact users to gather feedback and assess customer satisfaction levels. Segment the responses you get by demographics, personas and service tiers to gain more insight into the various pain points and subscription drivers across different customer types. Also be sure to solicit feedback whenever a cancellation request is submitted to better understand what specific factors drove a customer to end their subscription. These individuals are the least likely to sugarcoat their responses, giving your organization a clear view into the customer mindset.
Reduce passive churn
Passive churn can be much trickier to correct that active churn because the causes are less obvious. An angry or dissatisfied customer will likely make himself known, but one who involuntarily leaves your service because of a glitch in your payment process is more difficult to spot and anticipate. Something as seemingly trivial as having an expired credit card on file puts subscription statuses at risk, and could be costing businesses a lot of money in lost revenue.
There are only a handful of viable strategies to effectively address passive subscriber churn, which makes it all the more important to have a subscription billing and payment platform that includes these tools:
- Retry. Your subscription billing and customer retention software should include customizable retry configurations to attempt payment processing as many times as you like and avoid prematurely canceling a user’s subscription.
- Account updater. If left unchecked, outdated account information could easily lead to higher instances of passive churn. Account updater pulls the latest available information from card networks to keep your customer accounts completely up to date.
- Dunning. Many organizations use fairly basic – even manual-based, at times – dunning tools to collect outstanding payments. Sophisticated, automated dunning solutions optimize these crucial processes, improving revenue streams and keeping customers in the fold.
- Vindicia Retain. Vindicia Retain goes above and beyond other customer retention software solutions, using state-of-the-art subscription intelligence capabilities to automatically resolve as many as 30% of your terminally failed payment transactions. Vindicia commissioned Forrester Consulting to conduct a Total Economic Impact study of Vindicia Retain that examined the potential customer retention ROI that enterprises may realize by deploying Vindicia Retain.
Reducing churn rates through efficient customer retention management techniques is the formula for sustained success in the subscription market. From billing processes and payment models to service delivery and user experience, subscription-based businesses need to take advantage of every opportunity to counter churn and maximize ongoing recurring revenue streams.