Why You Need to Keep an Eye on Churn Rates – Part 2
When you’re running a subscription commerce business, your churn rate is one of the top metrics that you need to keep an eye on. Churn can be caused by a variety of factors, which we explore in this two-part series.
In this second part, our focus is on how to identify common problems that lead to a growing churn rate, and how to fix them. In part one, we discuss what attrition rate is, how to calculate and why it’s so important to the health of a subscription business.
Churn rate is one of the most important metrics to measure the health of your subscription commerce business. As we discussed in the first part of this series, a growing churn rate can eat away at your revenues and increase your cost per acquisition. Conversely, shrinking your churn rate can have massive positive impact on your revenues that is compounded over time. If you’re new to churn rate or how to calculate it, we highly recommend reading that post first.
If you sell physical products—wine, health supplements, food, etc.—you really need to look at this metric every day to make sure things are running smoothly. At first, it might not be clear whether your churn rate is good or bad. For some businesses, a 30% churn might be acceptable, while for others, it needs to be much lower.
The point is that by checking each day, each month and each year (once you have enough data), you’ll be able to establish your own benchmark for your business. All three ways of looking at churn will give you the pulse of your business as well as a longer-view and long-term problems that might be lurking.
So, what are some common “leakages” of customers? Here are a few of the top causes for growing attrition rates:
Customer service issues: Perhaps your product fulfillment is taking too long. Or your response to basic account questions is not as fast as it could be. Poor customer service can be a real driver of canceled subscriptions. When people aren’t happy, they vote with their wallets.
Technical issues: Is something broken on your website or payment gateway? With Subscribe Pro, you can actually log in as a customer, so you can see exactly what they’re experiencing and uncover any technical glitches that are preventing subscription purchases from being completed.
It’s too easy to cancel: While some companies like the convenience of allowing a customer to self-cancel their subscriptions, you might be making it a little too easy. Some companies prefer to force customers to cancel by phone, while others use it as an opportunity to upsell by giving a special offer to anyone who is canceling.
Lack of marketing: If you’re not telling potential and current customers about your subscription offerings, then you might as well not offer any. We’ve seen entire subscription programs fall flat mainly due to lack of investment in promoting them. One of the best ways to stem churn is marketing your programs so that you acquire new customers faster than you lose them.
Cannibalization: Offering competing promotions can often eat a hole in your subscribers. Savvy shoppers will look for deals, and if it’s better than what they’re currently getting, they’ll cancel without thinking twice. After all, you’ve made it easy to re-subscribe.
So, how do you find these leakages? If it’s technical, you can always log in as your customer to try and see what the problem is. But it’s also a good idea to get more direct feedback by either talking with your customer service team to see if they’ve noticed any specific trends or even by asking customers directly.
Are you ready to cut your churn rate? Reach out to us to discuss how Subscribe Pro can help, or how to set up your own subscription business.