How to Stop Subscription Churn For Startups

Subscription box churn
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Subscription products slot right into today’s eCommerce market – the industry is forecast to be worth $478.2 billion by 2025.

Signing up for a product for a regular fee provides transparency and convenience for customers.

It’s also time-efficient – all they need to do is tick off their products when they arrive, and there’s always the lure of wanting to see what comes in the next box.

Plus, it has to be said that many people simply forget about their subscriptions – guilty as charged!

With that said, the main issue with subscription products is customer churn, i.e. the rate at which customers leave the product. Churn is measured by a percentage reflecting the total proportion of customers that leave the subscription each month, e.g. if you have 100 customers and 5 leave a month then your churn rate is 5%.

Customer Churn Stats

  • McKinsey research indicated that around 40% of subscribers cancel their subs at some point, with a third canceling in months 1 to 3.
  • Recurly estimate a churn rate of around 5% for B2C businesses, meaning 5% of subsciption product customers leave each month.
  • Business2Community states a slightly higher average of 6% to 8%, anything below 5% would be considered very good.

Here are 4 proven methods for reducing customer churn:

1: Keep Buyers on Their Toes

One of the advantages of the subscription box product is that buyers receive different products each time, thus alleviating the stress of them finding new products to buy themselves. This adds a layer of excitement which is the retailer’s responsibility to maintain.

Mystery products are an excellent way to keep buyers interested in the next box. Some brands show their next boxes on social media with a silhouetted ‘mystery product’ in the shot.

Be creative with the angle you take on your boxes, they need to be general and useful enough to have mass appeal whilst being interesting enough to give them an edge vs generic high-street products. Combine staple favorite products with something a little more unique and interesting.

2: Watch Your Promos

Promotional deals on the first-time subscription is the go-to method to incentivize buyers to try a subscription product.

However, if promotional boxes have very low or even negative margins then a situation might develop where buyers opt into the subscription for the promo period only, and then churn before you have a chance to recuperate investment in a promo.

Keep an eye on whether or not churn follows a promotional deal – this is an important time to target new customers with incentives to stay beyond the trial or promo period.

3: Create Strong Welcome Emails

Creating strong welcome emails that inform customers of what to expect and the benefits of the product are essential. Grammarly’s welcome email below informs subscribers of the tool’s more advanced features that might be overlooked if they weren’t highlighted to the user.

Stop subscription churn

4: Analyze and Predict Churn

By analyzing when customers tend to leave the service, you can create and send targeted promos to boost retention. An example might be if your usage stats indicate a customer hasn’t interacted with a product in 2 to 3 months. Your data might show that this is when customers are at high risk of churning.

At the 2 – 3 month mark, analyze if a new customer has interacted with your product. If not, a targeted email might stoke their interest again. Below is an example of a targeted email that intercepts a customer when they’re at their highest risk of canceling.

Stop subscription churn

Summary: How to Stop Subscription Churn For Startups

Some level of churn – typically 5% to 6% – is inevitable. Subscription products are often cheap in the short term and attract impulse buyers that grow disinterested over time. However, implementing just a handful of strategies can help you retain customers for many more months to come, or possibly even years.

Once you’ve created a well-optimized subscription product model that creates genuine value for your customers, you’re probably onto a winner, but at the same time, it’s complacency that can grind subscription products to a halt.

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