In business, you cannot hold onto your customers forever. Eventually, at least a few of them will leave, either intentionally or by accident. This phenomenon is called customer churn or just “churn.” While losing customers is bad for any business, churn is a major headache for firms with subscriptions or recurring billing.

It doesn’t matter if you sell subscriptions for razors, groceries, video streaming, or other cloud-based software services. When your existing customers (subscribers) leave, it hurts your finances in two ways.

First and foremost is the direct impact churn has on your revenues – naturally, they decrease when people stop subscription payments. But many firms often fail to adequately factor the cost of replacing these customers with new ones – it shows up as additional expenses on your overhead.

While churn cannot be erased altogether, there are steps you can take to reduce it in your subscription business. Here, you can learn about 5 strategies to reduce churn in recurring billing.

#1 Attract the Right Customers

Being too inclusive can hurt a subscription business. While paying customers are always an asset, they do come with additional expenses. For instance, customer service can be costly, especially if it involves high-level technical expertise. Customers who are not adequately qualified to use a particular product or service will require a lot of additional attention from support teams.

If your subscription service attracts a lot of these customers, you might be compelled to invest more in additional support teams. And if a large percentage of those same customers leave the service, the extra investment ends up being wasteful to some extent. Unsophisticated customers are more problematic for SaaS companies.

Smaller retail businesses with recurring billing may face a different kind of mismatched customer. If you have a lot of smaller customers and suddenly receive a huge, demanding customer, it will create an imbalance. As you spend more time catering to this new customer, there will be increased churn among other clients due to dissatisfaction with your customer service.

Ultimately, it is important as a subscription business to know your ideal target customer. This way, you can tweak your marketing strategies to improve your customer retention stats. It also allows you to quickly identify a potentially unsuitable customer – knowing when to say no to such clients can help improve your customer churn rate.

#2 Be Transparent With Customers

Your customer’s trust is a precious commodity in business – something that takes years to build up, yet can be lost in a flash. A PR debacle during the 2014 Winter Olympics prompted this memorable quote from Kevin Plank, the founder/CEO of the sports apparel brand Under Armour:

Brands are all about trust. That trust is built in drops and lost in buckets.

Kevin Plank

Transparency may seem like a straightforward concept – you maintain an honest demeanor, with all the details included in the fine print. But while that may seem adequate from your end, the customers may see this as deceptive or dishonest. It might lead your customers to believe that they were kept in the dark or worse, misled.

Few things can sour a relationship more quickly than dishonesty. Ultimately, what matters is the opinion of your customer/subscriber. Subscription businesses need to provide customers with clear expectations of what they will get when they sign up. Keep all the details front and center, not tucked away inside ambiguous Terms and Conditions (T & Cs). Otherwise, it will lead to an increase in the number of churned customers.

#3 “Be Present” (in the minds of your subscribers)

Sometimes, customers stop using certain products or services after a while. They no longer care about your brand – often because of a perceived lack of value in their minds. When the time comes to renew a subscription, they just don’t feel inclined to do it. One way to prevent this from happening is to make it hard for them to forget you – deliver a top-notch, compelling experience that sticks in their minds.

This will make it difficult for them to forget about your brand, and more importantly, why they purchased your service in the first place. When your value is strong and ever-present, customers will stay with you longer.  Successful organizations with thousands or millions of customers achieve this using a tech-touch customer success model.

In this approach, the focus is on being a high-value resource for your customer – think customer journey email series, well-developed knowledge bases, well-written documentation, and so on. Such high-quality customer experiences, powered by a tech-driven model, have served many subscription services very well in recent years.

Here is a quick example: when you sign up for a popular shaving club, they send you a guidebook inside your first box delivery. Instead of a boring instruction manual, the book is crafted in a light-hearted and witty comic-book style – fun to read yet highly informative about shaving and grooming etiquette. Seemingly small touches like these can go a long way in leaving a lasting impression on your subscribers. They can be persuaded to stay with your brand for a longer time, helping reduce churn rates.

#4 Be Communicative

For a subscription billing business, being communicative means responding quickly when your customers reach out to you. While it seems very straightforward, it comes with one major caveat – depending on the size and type of business, it can be quite pricey and extremely challenging.  But unfortunately, in the modern marketplace, you don’t have a choice in this.

Patience is a virtue that is in extremely short supply, particularly among customers. They are accustomed to instant gratification, whether it be in the delivery of physical products, online services, or response to support requests/queries. There are no alternatives. If you have the bandwidth and resources to provide this kind of service experience to your customers, do it!

Just be mindful of the Goldilocks principle – avoid the extremes and try to maintain a balance. All customers have a unique communication cadence. Some require constant attention and reminders while others are put off by it. Try to learn the rhythms of your subscribers – a smart option is to seek feedback from them after notable interactions and then making appropriate tweaks to your communication policies for best results.

#5 Don’t Be Passive!

Subscription businesses have to be wary of passive churn – a situation where your customer stops paying despite having no inclination to leave your service. Passive churn often happens due to circumstances that are beyond the control of the customer. This could be a change of address/ZIP code, an expired credit card, or some other technical reason that they are simply unaware of.

To combat this, you have to avoid being passive towards passive churn! Use an automated collections process to send timely alerts regarding failed payments or upcoming card expiry dates to your subscribers. Chargent customers have two core products at their disposal to reduce passive customer churn rates:

  • Automated Collections – Works in Salesforce to target failed payments with automatic retries and notifications to customers while offering easy ways to update their payment methods.
  • Account Updater – Works in Salesforce to target payment failures due to expired credit cards by automatically sending update requests to customers, before their credit cards are due to expire.

Both are tools that help prevent passive churn by notifying your customers about failed payments. But they cannot prevent voluntary churn – where your customer opts not to take corrective measures, simply because they see no value in your service. It is YOUR responsibility to help them keep your service and see that value.

Final Thoughts

Subscription payments should be a quick and easy process for all customers. Chargent can help through products like Automated Collections and the Account Updater. They are extremely powerful yet easy to configure and use.

When customers willfully leave your service, it means you have to take action to improve your brand value – it may not be easy. But when customers leave due to difficulty in payments, you can address it with relative ease in Salesforce, with the help of Chargent. Contact our Salesforce Payments Specialists to learn more about how Chargent can make payments simple for you!