How to identify zombie segments - who’s at risk of churning
As subscription commerce thrives on the recurring revenue model, ensuring the continuity and growth of subscribers forms the heartbeat of successful businesses in this industry. Acquiring new customers is always attractive, but retaining existing customers costs less and is a solid business objective to pursue.
Statistically, companies across the U.S lose out on nearly $140 billion annually to customer churn, so managing this is the core agenda of most subscription commerce players.
In this article, we go over some warning signs that can help you identify subscribers tending towards the zombie zone and the risk of churning early on. With this understanding and some actionable directions ahead, you’ll be better equipped to predict and prevent churn.
Why is it essential to identify the risks of churning early on?
Identifying the risk of churning in a timely manner is crucial as churn impacts your business’ bottom line. High churn levels:
Negatively impact revenue collection and overall business profitability
Increase the customer acquisition spend needed to maintain the status quo
Potentially hinder future growth prospects as unhappy, churned customers tend to create negative word-of-mouth
Identifying and addressing the warning signs early can prevent subscriber dropout and its negative consequences, meaning you don’t have to lose the customers you didn’t really have to!
What are the warning signs of churn?
Customer churn seldom occurs without any warning signs. If you pay attention to the intricate details of user behavior on your platform, you can address any concerns proactively before subscribers stop using your product or service. The top signs to watch out for include:
Noticeable changes in typical subscriber activity patterns
If you closely track subscriber activity and gather an idea of standard behavioral benchmarks, you can easily spot any unusual patterns as a deviation from the usual norm. Common patterns of changes in subscriber activity to watch out for include:
A drop in engagement or interaction with your product or service
A lower dwell time or lower average spend
A sudden increase in visits to the pricing or cancellation page
The above metrics are simply suggestive and depend on your business case.
For instance, in the case of media streaming subscriptions, a lower app usage time would be more alarming than that of a subscription business offering weekly meal boxes. For a fashion brand subscription, reduced purchases may be riskier than lesser time spent on an app.
Changes in frequency of customer support tickets
Customer support tickets are an excellent gauge of what’s happening in users’ minds. A sudden surge in customer support tickets is often a warning sign for issues in the product or service and require immediate attention. Additionally, even though a low volume of support tickets may intuitively sound like good news, it could also imply a reduced user interaction with your platform that’s translating into lower support queries.
For example, in the case of B2B SaaS subscriptions, a certain volume of customer support tickets is a commonality, and deviations from that norm may be worrisome.
A rise in negative or unusual feedback
Direct inputs from customers in the form of social media brand mentions and survey responses are excellent indicators of satisfaction levels. If you discover complaints or dips in revealed satisfaction from surveys, you can safely assume that the risk of churn may increase. Opting out is usually what comes next when people are not happy with their experience. Moreover, if you notice that customers are suddenly asking for discounts or new features, it could be a signal of dissatisfaction-led churn.
For example, requesting new features could be a sign that your customers are looking for more and may start digging into competitors who offer what they want.
Outdated payment information
Outdated customer payment methods are also a signal of impending churn. Given the fast-paced, busy lifestyles and the multiple subscriptions individuals have today, it’s pretty standard for users not to remember updating their payment methods. This behavior often results in involuntary churn.
Best practices to reverse the risk of churning While churn, to a certain extent, is inevitable in the subscription landscape, the good thing is that intervention does help to ensure that it lies within healthy limits. Some best practices to reverse the risk of churning include:
Proactively responding to user behavior patterns
As a subscription business owner, you can access the exact user behavior patterns and data. Recording and studying this information well creates a direction to respond and mitigate the risk.
Suppose you notice a rise in churn levels and a typical pattern that links back to a specific activity or experience right before churning. With this knowledge, you can intervene and fix the potential problem.
Providing excellent customer experiences
Delivering stellar experiences is a great way to minimize the risks of churn. Staying close to customer feedback and being proactive with customer service can quickly help reverse dissatisfaction.
Offering real-time assistance in the form of onboarding support, live chats, screen shares, and call center support are ways to do that. Similarly, if you notice competition introducing new features or bundled pricing, you can consider exploring an upgrade or similar changes to keep up.
Continually engaging customers
Sometimes churn happens simply because your subscribers may be too busy to engage or are unaware of everything that you offer to meet their needs and desires. By staying in touch with them regularly, you can reengage them and avoid impending dormancy.
Interact with your subscribers via emails or social media to share offers, promotions, upgrades, or any other information that may be valuable to them.
Following intelligent pre-dunning and dunning campaigns
Finally, addressing involuntary churn risks is a powerful strategy to ensure revenue continuity and growth. Avoid the risks of churn due to outdated payment information or card declines by reminding customers to update their payment information or methods. If customers drop out due to non-payment issues, you can also reactivate them using the right triggers.
Keeping a close watch on which group is at risk of churning is an invaluable business practice. While handling operations, finances, and marketing, tracking all of these signs and responding to myriad customer preferences may seem like a daunting activity, especially when subscriber volumes are high.
Subscription management and billing platforms like Recurly can help you put these best practices into action easily to serve your subscribers better, strengthen relationships, drive more subscriber loyalty, and propel your revenue growth.