The subscription business model is one of today’s most promising business models. At present, we see a profusion of companies that provide a cornucopia of products and services to more people than ever before. Virtually every software as a service enterprise employs the subscription business model. In the entertainment industry, we see giants like Netflix and Hulu battling it out for supremacy over the realm of video on demand, while Spotify and Apple Music contest for the top spot in the music subscription world.
We also see a proliferation of subscription box companies, with players like Ipsy, Birchbox, and the Dollar Shave Club offering beauty and grooming items, while others like Blue Apron, Home Chef, and Hello Fresh providing deliveries of meal kits and cooked food. And it’s not just skincare and food products that are being sold through subscription boxes. Everything from pet supplies, jewelry, and tactical gear to Polaroid transfers, Japanese candies, and adult toys are patronized by subscribers all over the United States.
To have a thriving subscription business, however, it is important to nurture customer relationships and prevent subscriber churn. This is essential because customer acquisition costs significantly more than customer retention, so you want to get as much lifetime value from each customer as possible. To help set you on the right track, we’ll let you in on a few best practices that you can implement in your own business.
Make Payments a Breeze
One of the most serious friction points that you need to address is subscription billing and payments. When a customer is unable to continue their subscription because of a failed payment transaction, that customer is said to have involuntarily churned. To give you an idea, a study conducted by IBM revealed that as much as 16 percent of subscription business customers have had their subscriptions canceled after they received a new credit card and failed to update their payment information. Imagine losing 16 percent of your customers just like that—your revenue prospects can tank!
As such, it is important to prevent failed payment transactions, whether it’s due to expired cards, network errors, exceeded credit limits, or other reasons. Make sure to use a smart subscription billing and payment software that automatically deals with transaction failures to make sure that you don’t fall short of your profit goals.
Reward Your Subscribers
When your customers subscribe to your business, they make a decision to integrate your company’s products or services into their life on a continuing basis. The customer is entrusting their time, effort, and hard-earned money into supporting your business, so it makes absolute sense to devote your own time and resources into nurturing this trust and building long-lasting relationships with them.
There are many possible ways to reward your customers. Offering discounts for subscription renewals is one way to do it, as is offering free shipping and free products. Another great way to reward subscribers is to offer special birthday incentives, since this highlights emotional commitment on your part to provide your customers something of value on a day that is highly important to them.
Onboard Customers Properly and Attend to Their Needs Right Away
Convincing a customer to sign up is one thing; convincing them to stay for the long term is another. Don’t make the mistake of lowering your level of engagement once a customer signs up for your subscription service. Proper customer onboarding, for instance, is important because a poor onboarding experience pretty much sets the tone for your relationship with your customers, especially if you’re running a software as a service (SaaS) business. If a subscriber becomes confused or overwhelmed with your product or service early on, consider the seeds of churn planted.
Help your customers by preparing a library of user guides and resources that they can use on their own. Nevertheless, make sure that your lines are always open so customers will be able to reach you when they have a problem. If a call center isn’t a practical option, consider live chat and email support instead. You can also have a forum where your community of subscribers and official moderators from your company can discuss issues. This can be particularly helpful when you sell subscription boxes and your customers want to discuss their experiences with the products they receive or if they want to give suggestions on the items they want to have next.
While convincing your customers to remain subscribed to your subscription business will always be a continuing challenge, the simple tips above can go a long way when it comes to preventing subscription cancellations and eventual customer churn.