In e-commerce businesses today, customer success depends on not only growing your customer base, but also nurturing customer loyalty. Everyone wants to gain new accounts, but implementing marketing strategies that actually succeed becomes more expensive and difficult if a large number of the customers you acquire end up leaving on a regular basis. With recurring revenue businesses, high churn rates can seem like a losing battle.
But there are proven steps you can take to prevent voluntary churn.
Voluntary churn happens when a customer decides to end the relationship and stops using your product or downgrades from a paid version. Preventing voluntary churn requires the right combination of product engagement, customer experience and perceived value. If customers don’t use your product often, don’t have a good experience when they do or don’t see value in your product, they won’t stick with you. This holds true whether you’re talking about free trial users considering a paid upgrade or paying customers deciding whether to renew.
In this post, we cover some proven tactics to reduce voluntary churn and help increase your recurring revenue. These include cancel flows, tracking pre-cancel events, collecting feedback or shifting customers to auto-renewal.
Read on for more insights into how you can reduce customer churn and keep your user base around for the long term.
The timing and frequency of your renewal reminders are important. Best practices dictate that you segment messaging based on renewal status.
Reminder emails for manual renewals might be sent at 30 days, 7 days or 1 day before expiration, and they should all contain consistent offers for a special discount for enabling auto-renewal.
At the same time, notifications for automatic renewals should be simple and effective. We recommend our clients to include one notification before the expiration date. This is in line with the strategy of having the customer in control and showing them that you care. Should they not want to continue with your service, automatically renewing without notifying them will only create frustration and will increase your refund and chargeback rates. On the other hand, a transparent and honest practice will build trust and decrease churn.
Customers prefer to feel like they’re in charge of their accounts and can choose to leave when they want to. It may seem counterintuitive, but be sure to incorporate “cancel flows,” or clear paths within your applications and customer portals that give customers the option to cancel your service. At the same time, however, you’ll want to remind them of the great services and growth opportunities (not to mention possible discounts) they will miss if they leave.
When customers can find a clear exit path, they don’t feel trapped, and it shows that you’re confident in your product and focused on treating your customers right. This builds more trust. Then, offer the right incentives to customers so they really want to stick around. Some of these incentives might include:
You might think that cancel flows will only lose you money, but they’ll cost less in the long run than combating negative feedback posted online by customers who struggled to cancel your service.
Ultimately, it’s all about the timing. In order to fight customer churn, you must find a way to analyze past events and predict your revenue stream well into the future. This means utilizing better tools to detect exactly what customers’ pre-cancel events were, or what your customers actually did before they decided to cancel their subscriptions. Here are some hints of what to look for in terms of cancellation warning signs:
No matter the specific pre-cancel behavior, you can start to address it once you identify patterns.
One of the software companies we work with, was able to reduce voluntary churn and boost renewals with a combination of approaches:
To reduce voluntary churn, you can’t just make assumptions about why people want to leave your brand. You have to figure out exactly what these customers needed and didn’t get from you. If you give customers a chance to talk and are willing to listen, they’ll tell you what is truly important to them.
Demonstrating interest in what your customers have to say builds trust. If you use customer surveys and follow-up emails well, you can turn cancellations into opportunities for improvement. Here are some questions you could ask:
By taking a closer look at your customers’ responses, you will get closer to finding a solution that will encourage them to stay on board or come back if they already left. At the same time, you will have more insight into what you need to improve in your product. This allows you to fine-tune your services or capabilities and reduce this voluntary churn rate in the future.
Hidemyass recovered 6.1% of cancellation attempts by surfacing the right offers. At the same time, with exit surveys, they can see what reasons are trending, and often this points out the effect of certain changes they made.
In addition to making it easy to cancel and listening to feedback, there are many effective churn prevention strategies that focus on the user. Consider usage-based targeting; cohort analysis (which looks at your customers in relevant groups, rather than treating everyone as one unit), and customer segmentation as ways to determine which customers are most likely to use your product, which are your biggest advocates as well as those most “high-risk” clients.
Calculate the potential post-retention profit you’ll generate after accounting for the incentives you offer each segment in order to retain them. For example, for high-risk/ low revenue customers, you may offer no incentives for them to continue using your product; on the contrary, you may want to deliberately off-board them in some particular cases where keeping them may hurt your business. For client segments that fit your ideal customer profile, you will want to offer more incentives to encourage them to stay.
Auto-renewal is an important weapon in the war against churn because it benefits customers and companies alike.
It’s more convenient for customers, who can enjoy an uninterrupted service and never have to worry about losing access to your product, including their stored preferences, tasks, projects or other account information, or re-entering payment details after a subscription ends. It’s also an effective way to keep customers on board and increase their lifetime value to your company.
The real-world experiences of hundreds of software companies can tell us a lot about the advantages of auto-renewal for vendors. In some cases, the automatic renewal rate is four times the manual renewal rate, clearly reflecting the advantages of auto-renewal as a tool for keeping customers around.
An example is Absolute, who found that its Customer Lifetime Value (CLV) more than doubled for its standard product and nearly quadrupled for its premium product with auto-renewal compared with manual renewal, further demonstrating the effectiveness of the approach as a way to strengthen customer value.
If many of your customers are using manual renewal, transitioning them to auto-renewal can make a big difference to your bottom line. Some of the tactics you can use for subscription enrollment, meaning to encourage customers to shift from manual renewal to auto-renew, include email offers, in-product messaging, offers in MyAccount (customer portal), customer support and migration campaigns. The most effective approach of all may be to combine messages and offers across channels.
In-product messaging, such as a system tray pop-up or real-time messaging, should not only remind users about their upcoming expiration, but also include an attractive offer that matches all of your other communications. Taking action early on, with an email campaign that starts as many as 180 days before expiration, can help lock in an attractive discount and long-term loyalty for customers who turn on auto-renewal.
Aim to enroll your users in recurring programs and capture those who haven’t enrolled using various tactics, such as incentives. Incentives are important, as only about 2% of customer portal users activate auto-renewals without them, so it’s clear that finding the right offer is necessary for increasing conversion.
For further churn prevention, build reactive retention campaigns that are designed to retain customers who want to disable auto-renewal with appealing offers. Discounts can be offered on the next renewal price, on all the billing cycles, or for something in between, for the next x number of cycles and so on.
Across multiple customers, this type of churn prevention programs converted 6.5% of the time and grew revenue by around 4%!
No matter how attractive it may be, even a discount won’t win over all of your customers to auto-renew. If you have customers who want to disable auto-renew, you should make it easy for them to do so, manual renewal is still better than churn.
When customers cancel auto-renewal despite your best offers, make sure to survey them to find out why they’ve made that choice. Their feedback can help you redesign your product and programs to keep customers in the future.
Whether it’s creating cancel flows, collecting feedback or converting your customers to auto-renewal, there are many tactics you can employ to combat that dreaded enemy, voluntary churn. Stay tuned for our next post on ways to reduce involuntary churn.
In the meantime, you can check out our webinar on How to Maximize SaaS & Software Renewals for more insights into churn prevention tactics.