Are you tired of losing subscribers? Have you been wondering if a subscription management system could help? A study by Bain and Company determined that increasing customer retention rates by just 5% increases profits by 25% to 95%. While that’s a huge variance, it shows that improving customer retention by even a small percentage can make a significant impact on your organization’s profitability. If that’s not convincing enough, did you know that, depending on your industry, acquiring a new customer can be 5-25x more expensive than retaining an existing one?
While acquiring new customers is exciting and shouldn’t be overlooked, retaining customers, especially if you run a subscription-based business, is essential. In fact, a customer experience agency found that loyal customers are 5x as likely to repurchase, 5x as likely to forgive, 4x as likely to refer, and 7x as likely to try a new offering.
The bottom line – customer retention is good for business, regardless of the business model. However, if you run a subscription-based organization, nurturing long-term customer loyalty is essential to the financial health of your business. Not sure where to begin? This is where a subscription management system can help.
What is a Subscription Management Platform?
Popular among both B2C and B2B companies, subscription-based business models are inherently dynamic and complex. Billed at predictable intervals, subscription-based pricing goes beyond simple one-time and a la carte sales to provide flat-rate, tiered, per user, and per unit pricing models. In addition, subscription-based pricing typically includes additional offers such as packages, bundles, promotions, discounts, freemium, etc.
Given the complexity of these business models, a subscription management system is more than a “nice to have” tool. It is increasingly becoming table stakes to run an efficient and profitable subscription-based enterprise. These platforms support, and in some cases automate, the entire customer lifecycle. From customer acquisition and fulfillment through invoicing and revenue recognition, to collections and churn – it eliminates manual and error-prone efforts. By automating the complex and time-consuming tasks of this dynamic business model, you’re able to spend more time on developing long-term customer relationships.
The benefits of a subscription management platform don’t end there. A powerful subscription management system provides the flexibility to quickly change pricing structures and easily bill for complex accounts. Additionally, it provides the ability to group customers and automate billing schedules, easily handle subscription upgrades and downgrades, configure subscription billing models (without IT involvement), and maintain compliance through seamless integration to external tax engines.
How to Manage Churn and Turn Subscribers into Loyal Customers
A subscription management system shouldn’t end with invoicing, payments, and revenue recognition. To keep your subscription-based business profitable, you need a customer base that stays with your organization long-term. Here are five ways a best-in-class subscription management system can boost your customer retention rates.
1) Put the customer at the center of every touchpoint
Whether it’s a long onboarding process, a poor customer experience when interacting with your organization, or complex and confusing navigation on your mobile apps, digital portals, or brand websites, a single unpleasant experience can quickly lead to churn. While the above can and do lead to customer churn, the leading cause of customers going to the competition is billing errors and payments that haven’t been correctly credited. A subscription management system ensures customers receive the experiences they expect, so you improve customer retention.
2) Deliver subscription flexibility
There are nearly as many reasons customers may need to make changes to their subscriptions as there are subscribers. The key is being flexible and making it easy for them to modify their subscriptions. Here’s a few examples of how a subscription management system can give you the flexibility to enable customers to quickly make subscription changes – with zero customer friction.
- Simplify upgrades and downgrade requests: Give customers the option to quickly make subscription changes directly from your website or customer portal.
- Provide late payment options: While standard practice is to charge a certain percentage for late payments, by knowing the customer’s situation or if late payments happen on an infrequent basis, you may want to waive the late fee. Alternatively, you can extend the subscription renewal date.
- Offer alternatives to cancellations: There are many reasons customers opt to cancel their subscriptions – some that are beyond your control. However, there are circumstances where you can offer options instead of losing a customer. For example, let’s assume that the customer found a competitor that is offering the product or service at a cheaper price. By knowing the reason a customer is canceling, you can offer a more cost-effective plan. In our second example, if a customer doesn’t require the product or service for a certain timeframe, provide the customer with the option to temporarily pause their subscription.
3) Personalize the experience
By knowing your customers and their requirements, you’ll be in the position to add value through personalization. Here’s a few examples – 1) Give high-value customers preferential treatment by offering exclusive or targeted upsell/cross sell opportunities based on their purchasing history; 2) Make it easy for customers to subscribe to the best plan for their requirements. When it’s not financially feasible, consider offering them the plan at a reduced cost for a certain time period; 3) Extend the trial period for prospects that need more time to evaluate your offerings.
4) Offer multiple and secure payment options
No one likes to be forced into making payments using a method that is unfamiliar or uncomfortable for them. Make it easy for customers to make payments by offering a variety of payment options. Offer debit/credit cards, PayPal, direct debit, lockbox, hosted payment pages, as well as others by integrating your subscription management system with a payment gateway. Additionally, ensure payments made are secure by complying with PCI-Level 1.
5) Communicate frequently
Communication with your subscribers can’t be stressed enough. Use all communication channels at your disposal. Utilize the bill, self-service portals, your website, emails, texts, social media, and snail mail to provide limited time offers, deliver upcoming specials, or send informative messages. You can also invite subscribers to events and webinars, gather feedback through short surveys, etc. Regular communication with your subscribers helps you to better understand their needs and shows that you appreciate their business, while building brand awareness.
These are proven ways to increase subscriber retention, but churn does and will happen. Churn falls into two categories – voluntary (active) and involuntary (passive). Subscribers that choose to cancel their subscriptions fall into the voluntary category and may be more difficult to retain. Subscription cancellation is inevitable, so be sure that your cancellation process is easy to follow and seamlessly handled. A self-service portal of your subscription management platform helps empower customers and reduce friction.
Let’s dive into more on involuntary churn, why this type of churn occurs, and how you can lessen its impact.
Stem the Tide of Involuntary Churn
The primary cause of passive churn is payment failure. This happens when there are issues with the credit/debit card network, insufficient funds, a decline by the payment processor or bank, etc. When this happens, a sophisticated recurring billing subscription management system will have the tools to automatically handle the payment decline.
Here are three ways a subscription management system can reduce involuntary churn.
- Account information: When a customer’s account information expires, the subscription management system needs to pull the most current information from the credit/debit card network.
- Payment retries: When a payment is declined the subscription management platform should automatically retry the payment processing process. The number of retries should be customizable based on your internal processes.
- Dunning management: Keep customers informed of past due payments with automated dunning management that enables you to easily schedule and tailor messages. The subscription management system automatically attempts to retrieve delinquent payments based on preset intervals, manage late fees, account suspensions, and customer notifications.
Reducing churn rates isn’t a process that happens quickly or without effort. However, much of the effort can be reduced or even eliminated with a next-generation subscription management system.
Combat Churn and Increase Customer Retention
Reducing churn and increasing customer retention is vital to the long-term financial health of your subscription-based organization. From billing processes and payment models to service delivery and payment collections, you need to keep the customer experience at the center of your processes to successfully counter churn.
BillingPlatform delivers a cloud-based platform that enables you to deliver a frictionless customer experience. All while monetizing any and all revenue opportunities! Unlike other cloud and legacy subscription management systems, BillingPlatform delivers a sophisticated array of analytics tools. That means that you can quickly identify trends in customer usage. You’ll gain insight into predicting churn, the ability to reduce the risk of managing sensitive customer interactions, invoicing, and payments. Plus gain a flexible customer portal that empowers customers to manage their accounts for a customer experience that exceeds expectations. Our team is ready to answer questions and help you maximize your investment, reach out to learn more.
