One of the most critical things subscription firms can do to drive their growth is to reduce churn. However, Kim Terry of Subscription Systems puts a slight twist on how to prevent churn this week. What is the easiest method to eliminate churn, he asks?
What is a 'Churn'?
Churn is part of the game we play in the subscription economy. The disadvantage of having the chance for compounding growth over firms that only charge for one-time transactions is that some customers will no longer perceive the value in your product and will cancel.
How Can I Solve This?
To combat churn, you need to understand your consumer, target the proper ones, and create a product that provides them with value while ensuring they comprehend the value you’re providing them with, which is different. However, that requires effort, and many of you want to put in only some of the necessary work (or, at the very least, are aware that work takes time), so what are some tactical things you can do to reduce churn quickly?
Modify Your Pricing Model
While not the quickest, but certainly the quickest, the most effective churn reduction approach that does not necessitate substantial study is to adapt your pricing plan to value metric based. A value measure is how much you charge per user, per hundred visits, or thousand videos. Those that use value measurements have half the gross revenue turnover rate as companies that solely feature differentiated pricing.
Refresh Your Support Strategy
Rethink your assistance strategy and significantly improve the quality.
We coded customers’ perceptions of various organizations’ support and then compared their retention rates. We discovered that consumers with a reasonable opinion of a company’s support had 5 to 10% greater retention rates than those with a neutral perception of the company’s support. Customers with a poor perception have a 10% lower retention rate in absolute terms.
Remember that we’re discussing something other than client success regarding exceptional assistance. In truth, customer success has a minor impact on your gross turnover, with organizations that use it seeing their churn rates reduce by a point or two on an absolute basis, depending on the level of their customer success. It’s not that enhancing customer success isn’t beneficial – it has a significant impact on your expansion revenue – but it will only lower churn quickly.
Implement Forced Customer Onboarding & Training
This will drop your conversion rate marginally, but those customers who went through implementation saw 10 to 20% greater retention rates relative to those who didn’t go through forced onboarding. This tendency is similar for B2C and B2B organizations and from low to high price points.
Examine Your Term Lengths
Annual contracts cut turnover significantly since clients make one purchase decision per year rather than twelve separate purchases. As a result, as your number of years of customers grows, your churn decreases, with those who have 100% of their customers on yearly contracts experiencing 80% less turnover than those who have no annual contract clients.
Examine Your Payment Schedule
Finally, you must address your failed payments. Credit cards are mechanical devices prone to failure and delinquencies; failing credit cards account for 20 to 40% of churn in both B2B and B2C businesses.
To put it another way, for every ten people with a payment failure, you only recover three, leaving seven to be effectively flushed down the toilet. You may significantly reduce this churn if you treat these people as their marketing channel.
We could talk about numerous methods for hours, but those five significantly influence customer attrition if you need to make immediate adjustments in the next quarter. However, remember that your relationship with your customer extends far beyond fast repairs.
While these tactical components will help you reduce churn, no techniques will compensate for selling the wrong product to the wrong consumer, so make sure you’re researching why people are churning so you can fill in the gaps to minimize churn in the long run.
