The subscription-based business model opens up a realm of possibilities and challenges. Whether you’re just starting out or looking to grow, you’ve probably heard of “churn” – a term that might not sound very friendly but is super important to understand.
Churn, in simple terms, is when customers decide to say goodbye to your subscription service within a given period. It’s like throwing a party and noticing that some guests are leaving earlier than you hoped.
For side hustlers navigating this space, getting a grip on churn is crucial. Why? Because it directly affects how much money you’re making and how your business can grow and flourish over time.
Now, you might wonder why churn happens and why some guests at your party are heading for the door. There are a bunch of reasons. Maybe they didn’t find what they were looking for, perhaps there’s another more appealing party, or it could be that they just needed a break.
High churn rates can make it tough to maintain a steady income and invest in making your business better. It’s like trying to fill a bucket with water when there’s a hole in the bottom – you can keep pouring water in, but if you don’t fix the leak, you’ll never get the bucket full.
This week’s newsletter is your handy guide to understanding churn – why it happens, how it impacts your business, and what you can do about it.
We’re going to share some actionable strategies to help you keep your guests partying with you for longer, ensuring your subscription model not only survives but thrives.
So, let’s dive in and turn those goodbyes into “glad to stay” with some smart moves that will make your subscription service the place to be!
This week’s newsletter brings you:
- Trends – This week we take a look at the current average churn rates by industry.
- Strategies – Discover key strategies to make your subscribers feel like VIPs, eager to stay and enjoy the ride!
- Tool of the Week – This week we bring you a tool that can handle multiple facets of customer relationship management, engagement, and analytics.
Trends
Churn is a fact of life for any subscription business, and slight fluctuations in churn can make a significant impact on your current and future recurring revenue. Let’s take a look at the current average churn rates by industry.
Business Churn Rates by Industry
Different industries have different factors that influence churn behavior. Understanding these factors can help you formulate effective strategies to proactively fight churn and keep it at bay.
According to this data from Recurly Research, direct-to-consumer (DTC) subscription businesses experience higher customer churn rates than business-to-business (B2B) businesses. Digital Media and Entertainment, Consumer Goods and Retail, and Education industries have an average churn rate of 6.5%.
In contrast, their B2B counterparts–Software and Business & Professional Services–have an average churn rate of 3.8%.
Strategies
High churn rates often whisper tales of something amiss, perhaps in how we’re connecting with our customers or in the very blueprint of our business model.
Here’s a little secret: keeping an existing customer cozy and content in your subscriber family is way more wallet-friendly than wooing a new one – we’re talking up to 25 times cheaper! So, while churn nibbles away at your revenue, the real magic lies in holding onto those who’ve already said yes to your service.
Keep reading to discover how to make your subscribers feel like VIPs, eager to stay and enjoy the ride!
Identifying the Causes of Churn in Your Business
Tackling churn is a bit like being a detective in your own subscription-based business mystery. The first step? Digging deep to uncover the “whodunnits” behind why customers are deciding to part ways. And just like any good detective, you’ll need your trusty tools and a keen eye for detail to crack the case.
Step 1: Listen to Your Customers
Your customers are the main characters in this story, and their feedback is the plot twist you might not see coming. Pay close attention to what they’re telling you, whether it’s through direct feedback, social media comments, or reviews.
Are there recurring themes in their stories? Maybe it’s the cliffhanger of not knowing how to fully use your service, or perhaps the plotline of expecting more than what was delivered. Every piece of feedback is a clue.
Step 2: Dive Into the Data
Now, bring out the big guns: your customer relationship management (CRM) software and analytics platforms. These tools are like your magnifying glass, helping you see beyond the surface. Track down patterns in when and why customers are hitting the unsubscribe button.
Are there specific times of the year when churn spikes? Does a price increase lead to a mass exodus? Data doesn’t lie, and in it, you’ll find patterns that point to the usual (and unusual) suspects.
Step 3: Identify the Triggers
With your detective hat on, it’s time to pinpoint the triggers. These are the moments that push your customers from “maybe I’ll stay” to “it’s time to go.”
Common culprits include price hikes, less-than-stellar customer service encounters, or feeling like the service isn’t living up to the hype. Each trigger is a piece of the puzzle, and recognizing them gives you a map to prevent future churn.
Step 4: Engage with Personalized Follow-Ups
Consider reaching out to customers who’ve decided to leave with a personalized follow-up. This could be a short survey or a heartfelt email asking for their honest feedback. It’s not just about gathering data; it’s showing that you care and are committed to making things better. You might not always win them back, but the insights gained are gold dust for preventing similar exits in the future.
Step 5: Implement and Iterate
Armed with your discoveries, it’s action time. Start with the low-hanging fruit – the changes that are easiest to implement but can have a big impact. Maybe it’s clarifying your value proposition or improving your customer service response time. Then, work your way up to more complex challenges. Remember, addressing churn is not a one-and-done deal; it’s an ongoing process of refinement and improvement.
By playing detective and following these steps, you’re not just solving a mystery; you’re turning insights into action and paving the way for a healthier, more resilient subscription service.
Enhancing Customer Onboarding
Rolling out the red carpet for your new subscribers starts with a killer onboarding experience that makes them feel like VIPs from the get-go. Think of it as the first date with your customers where you want everything to go perfectly. Here’s how you can make that happen:
1. Warm Welcomes Matter
Begin with a bang! Send a personalized welcome email that feels like a warm hug, showing your new subscribers they’ve made the right choice. This isn’t just any email; it’s the start of your relationship. Use their name, thank them for joining, and maybe even include a little surprise like a discount or a freebie to make their day extra special.
2. Show and Tell
Remember, not everyone is a mind reader, so it’s crucial to guide your new friends through what you offer. Create engaging, easy-to-follow tutorials or walkthroughs that highlight the cool stuff they can do with your service. Think bite-sized videos, infographics, or step-by-step guides that are as fun to go through as they are informative.
3. Make It Personal
No two customers are the same, so why treat them that way? Customize the onboarding experience based on their preferences, needs, or behaviors. Use a short quiz or survey to learn more about them right off the bat, then tailor your communications or recommendations accordingly. It’s like saying, “Hey, we get you,” and who doesn’t love to feel understood?
4. Immediate Engagement is Key
Get your subscribers using (and loving) your service ASAP. Offer challenges, tasks, or milestones that they can achieve early on. Maybe it’s completing their profile, making their first purchase, or participating in a community challenge. These quick wins not only keep them engaged but also help them see the value in sticking around.
5. Exclusive Perks for Newbies
Who doesn’t love feeling like they’re part of an exclusive club? Offer new subscribers access to content, features, or perks that aren’t available to just anyone. It could be early access to new products, exclusive tutorials, or special members-only events. This not only adds value but also builds excitement and loyalty from the start.
6. Feedback Loop
Finally, remember that onboarding is a two-way street. Ask for feedback early and often, showing your new subscribers that their opinions matter and you’re always looking to improve. This can be through quick surveys, direct emails, or even a dedicated feedback button. Their insights can help you tweak and perfect the onboarding process for future subscribers.
Building Customer Engagement and Community
Creating a buzzing community is about keeping the conversation going, offering more than just a product or service, and making each of your subscribers feel like they’re part of a big, happy family. Here’s how you can sprinkle a little bit of that community magic into your brand:
1. Share the Good Stuff
This could be anything from insider tips on how to make the most of your product, insightful articles related to your niche, or heartwarming success stories from within the community. It’s all about adding value and sparking joy.
2. A Tale of Two Subscribers
Imagine this: Sarah, a new subscriber, is just getting to know your product. She sees a post on your community forum from Mike, a long-time user, sharing his favorite hack that transformed the way he uses your service. Sarah tries it out, loves it, and shares her own experience. Suddenly, she feels connected to Mike and the wider community, realizing she’s not just buying into a service but becoming part of a story where everyone contributes and grows together.
3. The Gathering Place
Whether it’s a bustling Facebook group, a lively forum on your website, or exclusive online events, create spaces where your subscribers can mingle, share, and learn from each other. Host Q&A sessions, live demos, or virtual meetups where subscribers can interact directly with your team and each other, breaking down barriers and fostering a sense of belonging.
4. Celebrate Together
Nothing brings people together like a shared celebration. Highlight subscriber milestones, achievements, or even birthdays across your community channels. Consider creating a ‘Subscriber of the Month’ feature where you showcase someone’s unique story or how they’ve used your product in an inspiring way.
Offering Customization and Flexibility
In the world of subscription services, we know everyone has their own unique flavor. That’s why we believe in mixing things up a bit to suit everyone’s taste. It’s all about giving you the power to tweak, twist, and tailor your subscription so it fits you just right. Here’s how to add a dash of customization and flexibility into the mix:
- Flexible Plans for Every Lifestyle: Some of your subscribers will be looking to save, while others are willing to splurge on the full experience. Offering a range of subscription levels is a great idea to cater to more folks with budget constraints.
- Offer the Ability to Pause: Your subscribers might just need a break from time to time. By offering the option to pause their subscription, they’ll know that you’ll be waiting for them when they get back, ready to welcome them with open arms.
- Easy Downgrades (or Upgrades): Consider offering the option to switch between plans whenever a subscriber needs to, no fuss involved.
By sprinkling in these options, you’re not just offering a subscription service; you’re creating a ‘choose-your-own-adventure’ where your subscribers are in the driver’s seat.
Analyzing and Adjusting Strategies
Navigating the subscription business landscape is like being the captain of a ship in ever-changing seas. To keep your vessel steady and on course, it’s essential to regularly check your maps and adjust your sails.
This is exactly what analyzing and adjusting your strategies to reduce churn is all about. Here’s how to stay agile and responsive to customer needs and market trends:
- Keeping a Close Eye on Churn Metrics: Think of churn metrics as your compass. Regularly diving into these numbers gives you a clear direction on where your efforts are leading you. Track not just the overall churn rate but also segment it by customer demographics, behavior, and feedback. This granular analysis helps identify specific areas for improvement and opportunities to enhance customer satisfaction.
- Adapting to Customer Needs and Market Trends: The market is a vast ocean, constantly moving and evolving. Stay attuned to changes in customer preferences and emerging trends by conducting ongoing market research and listening actively to customer feedback. This could mean evolving your content strategy, adding new features, or adjusting your pricing models. The key is to remain flexible and open to change, ensuring your subscription service remains relevant and appealing to your audience.
Actionable Steps for Continuous Improvement:
- Set Regular Review Intervals: Schedule monthly or quarterly strategy review sessions. Use these to analyze performance, discuss feedback, and brainstorm adjustments.
- Engage Your Team: Involve your team in these discussions. Different perspectives can spark creative solutions and uncover blind spots in your strategies.
- Test and Learn: Don’t be afraid to experiment. Small, controlled tests can reveal what works best for your audience, allowing you to refine your approach with real data.
- Stay Customer-Focused: Ultimately, every strategy adjustment should aim to enhance the customer experience. Keeping your subscribers’ needs and preferences at the forefront ensures your service remains valuable and indispensable to them.
By regularly analyzing your churn metrics and being willing to adapt your strategies, you keep your subscription business agile and aligned with your customers’ evolving needs. This ongoing process of review and refinement is crucial for success with a subscription-based business model.
Tool of the Week
For side hustlers looking to reduce churn in their subscription business, a tool that can handle multiple facets of customer relationship management, engagement, and analytics is key. HubSpot stands out as a highly recommended digital tool for this purpose. Here’s why HubSpot could be your go-to solution:
- All-in-One Platform: HubSpot offers a suite of tools that cover marketing, sales, content management, and customer service. This integration means you can manage your entire customer journey in one place, from attracting subscribers to keeping them engaged and happy.
- Email Marketing and Automation: With its powerful email marketing tools, you can create personalized email campaigns to welcome new subscribers, offer exclusive content, and re-engage inactive ones. The automation feature allows you to set up workflows that trigger based on specific customer actions, making your retention efforts more efficient.
- CRM Features: HubSpot’s CRM is not only free but also robust, offering detailed insights into customer interactions, subscription preferences, and feedback. This data is invaluable for understanding the reasons behind churn and tailoring your strategies to improve retention.
- Customer Feedback Tools: Collecting and acting on customer feedback is crucial for reducing churn. HubSpot provides survey and feedback tools that can be integrated into your email campaigns or website, helping you gather actionable insights directly from your subscribers.
- Analytics and Reporting: Understanding what works (and what doesn’t) is easier with HubSpot’s analytics. You can track the performance of your emails, see how users are interacting with your website, and monitor your churn rate over time. This data helps in making informed decisions to tweak your strategies for better retention.
- Community and Support: Beyond software, HubSpot offers a vast library of resources, a community forum, and customer support to help you get the most out of your efforts to engage and retain customers.
Implementing a tool like HubSpot can significantly enhance your ability to manage customer relationships, personalize your marketing efforts, and ultimately, reduce churn. By leveraging its comprehensive suite of features, you can focus on delivering value and building a loyal subscriber base for your subscription business.
