Inside Subscription Sessions: Combatting churn

On April 18, Subscription Sessions: Combatting churn gathered industry experts from leading brands like Alaska Airlines, FabFitFun, Roku, The Guardian, and Output to discuss trends, tactics, and real-world examples to drive retention, renewals, and upsells. 

Watch the event on-demand now, or keep reading to get the highlight of each session.

The future subscriber experience

As you kind of, you know, start achieving some level of scale, I think data becomes like this, you know, the the this goal that you have because, you know, one of one of the companies we look up to and admire a lot is Netflix.

You know, when we see a lot of parallels with FabFitFun, when you when you sign up for Netflix, you're usually signing up because there's a specific show you wanna watch.

And, but you're you're joining a membership. Essentially, you're becoming a subscriber. And, you know, six months down the road, a year from now, you don't actually know what the content on Netflix is gonna be.

But Netflix has, tons of insights that they've generated about your viewing habits, you know, what other things you clicked on, how long you watch different things for, and they use that to inform their curating decisions, a year from now.

And, similarly, we're doing this in the world of consumer products. And so, I think being very thoughtful and rigorous about how you look at data, how you interpret customer feedback, you know, once you've gotten, you know, past this kind of just early focus on just, like, whatever it takes to make anyone happy, and you you should carry that through all the way. Although, you know, as you get to bigger scale, there's gonna be, you know, edge cases where you might not just you know, sometimes it's impossible when you're millions of women, you know, you you know, but we do our best still. But really looking at data and being rigorous about, you know, how you place, you know, how you optimize around the data, I think, becomes really important over time.

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The subscription business model has taken various industries by storm, changing how products and services are consumed–and the market just keeps evolving at lightspeed. For FabFitFun Co-CEO, Michael Broukhim, and Recurly CEO, Joe Rohrlich, these are the key elements that are shaping the future subscriber experience:

• Engagement is central to success: Personalized products and consistent engagement build a strong, long-term subscriber base. It's more than just a subscription; it’s about telling brand stories and creating a shopping experience that consumers can feel connected to.

• Business adaptability to drive growth: FabFitFun has constantly adapted its business model to the evolving market trends and customer needs. The company has expanded beyond boxes to include daily shopping events and a value-oriented retail model, reflecting agility and shaping itself in alignment with customer preferences.

• Strategic partnerships for expansion: Today, it’s all about collaboration–combining forces with other businesses to enjoy mutual benefits and sustained growth. FabFitFun has become a platform for brands to partner with at any stage of their lifecycle. Its partnership with Recurly offers unique expertise that boosts expansion. Combining forces with other businesses provides mutual benefits and can drive success in the rapidly growing subscription industry. 

Becoming a successful subscription business requires more than a nice product. In the words of Broukhim, customer-centric approaches help build trust and satisfaction, eventually resulting in an engaged and loyal customer base.

Retention and loyalty: What’s working, what’s not

I think, traditionally, a lot of subscription businesses measure their success in terms of breakage. Right? That's kind of your your profit indicator at times.

But at Alaska, it's almost something we don't measure, we don't look at as success, in terms of retention.

We want our subscribers to use their flight credits or their Wi Fi passes.

And we've learned that the use of those credits is a huge indicator to future churn. And so in terms of short term tactics, right, if we're not seeing someone use their subscription, we will actually remind them of the benefits that they have available and to use those, which is obviously, like, takes away from breakage, but is truly what we want, and it begets a lot of that stickiness behavior.

That transparency that we provide really helps us with that long term strategy. It's a a core kind of cornerstone of our brand identity is that trust and generosity, which holds true in our subscription portfolio. So making sure that we're clear about terms and conditions, making customer service available via phone, all of those things really allow us to keep that long term loyalty even if they may cost us things, in the moment.

We recognize that, like, that that strategy might not work for all subscription businesses. But at Alaska, we've really seen success in the more that we provide to the customer in terms of transparency and communication, actually, the more loyal they become, to our brand in general.

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This exciting panel between Mary Rosberg, Growth Evangelist at Recurly, Emilie Harkin, SVP of Growth at The Guardian, and Taylor Putnam, Principal Commercial Product Manager at Alaska Airlines, could only bring actionable insights to combat churn and foster retention: 

• Uniqueness of retention and loyalty models: Loyalty and retention can have a different meaning depending on your company. The Guardian operates on a supporter model, indicating loyalty through recurring and one-time supporters. Alaska Airlines, in contrast, measures loyalty using a broader perspective, encompassing customer preference beyond its subscription service.

• Importance of trust, transparency, and customer value: Understanding customer behavior and building transparency were strong themes throughout the discussion. Alaska Airlines boosts subscription retention by promoting transparency, clear terms, and outstanding customer service.

• Focus on high-quality offerings: While all speakers underpinned the importance of delivering high-quality offerings, Harking highlighted The Guardian's commitment to excellent journalism as a strategic differentiation tool and a proven retention method. 

• Leveraging personalization strategically: When seeking personalization, avoid over-personalization. Rosberg took the opportunity to advise on starting with a simple offer and layering on personalization to let customers get familiar with the core product.

Overall, their advice reveals the mutual interplay between customer loyalty, retention, high-quality offerings, personalization, and the mastery of basics in subscription-based business models.

Harkin encourages you to keep the quality of your product at the center, and Rosberg lends her support, insisting on the importance of getting the basics right and then innovating. Moreover, Putnam stresses the balance between formulating enticing product offerings and ensuring platform reliability.

Identifying gaps in your subscriber lifecycle

Customer centric pricing is a huge part of this. And, at Atlas, we talk a lot about LTV and how it's your North Star for guiding how you present offers out into the world.

So different audience segments take longer to get to an optimal price depending on how warm this prospect was at acquisition or the acquisition pricing used.

However, I think the the point of this is that if you look at this chart, a newsletter subscriber that has been engaging with us for two years, let's say, and subscribes via email with a three for five dollar trial and, let's say, thirty five dollars quarterly might achieve an optimal price after two years with that fifteen percent price rise versus our Black Friday offer, which is super discounted and a ten percent price rise. They don't get there until year three.

So your warmer, more engaged audience here is getting to that optimal price before your Black Friday people. And this is why it's so important to think about, you know, nurturing your customers along the way even before they become customers, really.

So you want them engaged and loyal and and into your product before you even convert them because you're probably going to be able to bring them up way before, the Black Friday offer people who just decided kind of on a whim maybe, to order that way. And maybe then when they get renewed next year, they they don't think it's valuable.

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Now that we’ve discussed what’s working–and what’s not–for subscriber retention these days, Jill Marchisotto, Partner at Atlas, shed light on critical insights about managing subscription lifecycles successfully. 

• Focus on customer retention: As you work to retain your subscribers, consider engagement and personal touches in interactions to convert customers into advocates for the brand.

• Consistency is key: Uniform design and messaging build loyalty over time. Ensuring a consistent, user-friendly experience since sign-up should deliver value instantly to the customer. 

• Discounted promotions management: Marchisotto reinforced the need to manage heavily discounted promotions effectively to prevent existing subscribers from canceling in a bid to take advantage of lower prices.

• Re-engagement and nurturing strategies: Connecting with disengaged customers can result in an unexpected yet substantial impact. Additionally, segmenting customers based on their behaviors and sending personalized messages can help you build loyalty.

• Collaborative teams and constant monitoring: Both acquisition and retention teams should understand their role in enhancing LTV, and adjusting strategies based on measured KPIs such as cost per acquisition (CPA) and average revenue per user (ARPU).

Sustainable growth is a cocktail of high emphasis on retention and personalized nurturing strategies. Consistent tracking, interpretation, and adjustments based on key metrics will shape the direction you should take to remain competitive.

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The “failed payments” playbook

Coming back to repaid, when we first launched churn, involuntary churn was at an incredibly high rate.

Through analysis, we realized that much of that was through prepaid cards, which could be viewed as maybe trial fraud or they had no intention of paying, but it was a problem. And so we analyze the prepaid and on started to understand that there was a difference between the prepaid non reloadable cards and the prepaid reloadable cards. So we quickly said non reloadable makes zero sense for a subscription business. So we change that in our our fraud logic.

However, prepaid reloadable, not desirable. However, there are some regions in the world where that is the predominant payment method like Italy. Right? So we then created a strategy around prepaid reloadable specific to Italy.

And still today, we allow it in other areas with a left, but a more conservative fraud rule. Right? More strict than, say, you would get out of debit and credit, and we look at that customer deeper.

But we so we have varied rates in that understanding those decline rates per payment method within that card category became incredibly important to us and really made a massive impact on our involuntary churn.

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This insightful discussion with Melanie Stout from Optimized Payments, Jason Korosec from Roku, and Brian Zarlenga from Output underlines that broader perspectives on payments can promote robust marketing strategies and enhance the overall customer experience.

• Layered strategy to handle involuntary churn: Roku uses a layered strategy to handle passive cancellations and payment failures. They try to process the transaction multiple times over a period. If successful, customers' streaming services are reinstated to create a seamless viewing experience for them.

• Importance of the right fraud strategy: Zarlenga emphasizes the need for a tailored fraud strategy for your customer base. He also advocates for proactive customer engagement for updating their payment methods while investing heavily in solid retry logic–something Recurly supports Output with. 

• Understanding payment behavior: All speakers agree that understanding customer behavior and offering the right payment methods is critical to combat churn. Stout underlines the role of trust in payment methods. For instance, consumers who may not trust a new brand might opt for prepaid cards instead.

• Utilizing data insights: Korosec emphasizes how data informs Roku's decision-making. By examining factors like card types, response codes, and issuer details, they identify patterns that provide insights into payment failures. 

• Rethinking payments as marketing strategies: Zarlenga underlines why payments are not merely operational tasks—both he and Stout assert that a holistic approach to payments can have a positive impact. Stout mentions that offering customers options like downgrading, removing products, or changing payment plans can increase retention.

Understanding customer behavior, their payment preferences, and scrutinizing details like approval rates across different card types are essential elements for combating churn. This exciting discussion underlines that broader perspectives on payments can enhance the overall customer experience.

Analyzing churn: KPIs and reporting

On average, seventy five percent of churn is voluntary and twenty five percent is involuntary.

It varies across industry and it varies across time, but it's pretty rare to see involuntary churn comprise less than ten percent of a, of a merchant's churn. And sometimes it can go quite a bit higher than twenty five percent as well too. But the point is, is that involuntary churn makes us with a substantial portion of churn. Voluntary is obviously still the biggest and where, companies just spend most of their time. But probably the amount of time that companies spend is vastly skewed toward voluntary and, skewed away from involuntary. So, typically, there's a lot of opportunity that exists to reduce involuntary churn, because it is a major driver of overall churned.

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We’ve discussed the what, the how, and the why of churn and the effective strategies to combat it. It’s time to review how to seize the success of these efforts. Brian Geier, Recurly VP of Business Intelligence, presented key best practices to understand and measure churn.

• Understanding voluntary vs. involuntary churn: Voluntary churn is when customers choose to cancel their subscriptions, while involuntary churn occurs due to payment failures. On average, 75% of churn is voluntary, and 25% is involuntary, signaling a significant opportunity for businesses to reduce involuntary churn.

• The role of engagement and how to measure it: Geier underscores the importance of measuring user engagement and its correlation with churn. He advocates that every subscription business should adopt a mechanism to gauge engagement directly linked to churn.

• Strategies to reduce churn: Strategic measures such as automatic credit card updates can prevent payment failure and, consequently, involuntary churn. Retaining customers requires both proactive and reactive strategies that ensure a smooth renewal process.

• The value of testing and learning: Testing and continual learning play pivotal roles in reducing both voluntary and involuntary churn. A holistic approach towards churn reduction involves adopting retry models, implementing dunning management, and leveraging churn dashboards for measuring and analyzing churn.

Get even more insights and churn-crushing strategies

Churn is a fact of life for every subscription business. And while completely eradicating it sounds impossible, working towards a healthy churn rate number is achievable.

It's clear that the key to minimizing churn lies in understanding and addressing the multifaceted needs of subscribers, leveraging data analytics for personalized experiences, and keeping an unwavering commitment to delivering value.

Get all the benchmarks, insights, and best practices to make that happen in Subscription Sessions: Combatting churn. Watch on-demand now!