Conversions, churn, lifetime value of a customer ….
Merchants hear these ecommerce buzzwords all the time, but how can they really help drive strategy and measure long-term success?
It’s important for merchants to recognize different types of churn to better understand how to effectively implement the correct strategies.
In this article, we’ll take a deeper look at how merchants with subscription memberships can improve long-term customer retention by reducing churn rates to increase the average lifetime value of a customer.
Churn of your subscription customers is one of the most important factors to look at when measuring the health and longevity of your business. Recurring billing models always see some regular churn, it’s just the nature of business with subscription programs. Merchants experiencing a higher-than-normal churn rate are losing out on potential profits, but the good news is they can implement marketing strategies to cut these rates and retain their base.
It’s important for merchants to understand the various types of churn so they can effectively implement strategies to reduce loss in their subscription base.
BELOW, I’VE IDENTIFIED THE FOUR MOST COMMON TYPES OF CHURN SEEN IN THE INDUSTRY:
1. Proactive churn
This is the worst kind of churn a merchant can experience because members are proactively canceling their subscription services.
2. Payment failure churn
This happens when customers forget to update expired credit card information or the card declines the annual recurring billing charge.
3. “I have to stop for now” churn
This occurs when customers are satisfied with the program but need to stop the recurring billing due to circumstances beyond the control of the member or webmaster. Examples include financial issues or a partner questioning the transaction on a bill.
4. Trial churn
These are members going through a trial program that abandon before or right after their first recurring billing charge.
As you can probably guess, some types of churn are easier to reduce than others.
One of the easiest ways to reduce churn rate is by tackling issues with payment failure. Making several rebill attempts before blocking a member can often lead to a processed payment.
At SegPay, we also recommend merchants offer card updater tools instead of forcing members to create new accounts if they have an expired credit card. Simplifying the process of updating information can create significant reductions in lost memberships.
If you have lost members in the past due to expired cards, ask your payment processor to provide information on these consumers so your marketing team can reach out to these customers to try and persuade them to stay.
To reduce proactive churn, try presenting discount offers to members who move to cancel their subscription. This strategy also works for “I have to stop for now” and trial churners. SegPay’s market research shows that when consumers are considering canceling a subscription, churn can be reduced if a merchant presents the consumer with a lower price point subscription.
If a retention offer stops the subscriber from canceling their membership, the lifetime value of that specific customer is instantly increased and merchants get that annual charge put back into its revenue pipeline. Most often, merchants that have effectively implemented these retention offers greatly reduced their monthly churn rate. In fact, since we began offering these types of “Cancel/Keep” retention offers, merchants that set one up have retained more than five percent of customers who initially wanted to cancel.
Additionally, it works to target former subscription members with email marketing campaigns offering special discounts in exchange for re-joining. Digital campaigns sent on a quarterly basis typically see good conversion rates aimed at welcoming back former members.
It’s important for merchants to keep members active and entertained with quality content to reduce churn. Updating and refreshing content in the membership area on a regular basis is very important in an age where consumers want new content on-demand. Investing in content will ultimately lead to customers investing in a subscription. Programs that are constantly pushing out new content are bound to see lower churn rates.
Adding interactive programs in member areas can engage subscribers with content and reduce churn. Ask your payment processor about white label CAM options, interactive adult game partnerships and other membership options that complement your existing content.
It’s important for merchants to recognize different types of churn to better understand how to effectively implement the correct strategies. As stated, if merchants don’t understand the different types of churn and incorporate targeted solutions based on which types their customers fall under, they risk missing opportunities for retention.
Understanding why a merchant’s customers are choosing to opt out of their memberships is the first part to reducing churn. Implementing programs and strategies to retain them is the second. Merchants that can master both of those things will see the average lifetime value of their customers soar.
It took only three years for Cathy Beardsley to turn startup SegPay into a profitable company. As president and CEO, Beardsley oversees the day-to-day operations and long-term strategic planning for the company. SegPay is one of four companies approved by Visa USA to operate as a high-risk Internet payment service provider in the U.S. Since 2005, SegPay has offered online merchants a state-of-the-art billing platform that provides realtime payment processing around the globe.
