Why People Cancel Subscriptions and How to Prevent It
Did you know that it is 50% easier to sell to existing customers than to acquire new ones?
In fact, if you have a subscription eCommerce businesses, we know how you make the majority of your revenue – by continuing to sell to the customers who stick with you in the long run.
In fact, according to Bain & Co, 80% of your future revenue is likely to come from 20% of your current customers.
Still, many subscription businesses struggle to hold onto their customers. For one reason or another, they decide to leave and stop buying from you.
In this post, we’re going to delve into the reasons why people cancel their subscriptions and what you can do to prevent this from happening.
Why is this important?
Here are a few reasons why it is super important to keep your customers from cancelling their subscriptions:
Subscription businesses are based on retention, not conversion – subscription businesses survive because customers stick with you for a long time.
This allows you to pay off your costs for customer acquisition, meaning that, over time, each customer becomes more and more profitable.
In the first one or two months, you might not even make a profit, but this might change in the third or fourth month.
So, what will happen if the majority of your customers cancel in month two? Very simple – you won’t be making much money.
That’s why your main focus should be on increasing your customer retention rate, not on converting as many people as possible.
Subscription companies are always selling, and customers can cancel any time – each month, your customer has the option of deciding to spend his money somewhere else.
Don’t assume that he’ll just stick with you. You need to be proactive and remind your customers of the value you’re offering.
This means that, if you want to keep your customer, you should focus on delivering great exceptional customer service and great products, always on time.
By reducing your churn rate, you increase your average customer lifetime value – if customers stay with you longer, you will simply end up making more money.
If your average customer stays with you for six months, and you increase that by one month, you’ll increase your revenue by 16%.
That’s why you should try your best to keep your customers as long as you can.
Why do people cancel subscriptions?
Here is a list of the main reasons why people cancel their subscriptions:
Too much focus on acquisition – getting new customers is important for your growth, but keeping them is far more important.
The fact that 72% of subscription eCommerce customers don’t renew within 6 months of their initial transaction confirms that companies often forget about this important detail.
Spotify, for example, offers a discounted 3-month rate for new customers, but forgets to provide good deals for their loyal subscribers.
Don’t make the same mistake. Give your best offers to your most loyal customers.
You don’t deliver the same value anymore – the only reason why people buy from you is that you offer something that is valuable to them.
They have decided to become a subscriber because they need to fulfill their needs each month, and your recurring service seems like the best option.
What do you think will happen if you start sending lower-quality products, or delaying order delivery?
People will probably start looking for other options. There are countless competitors offering similar products and services, so always be sure to keep your quality up.
No options to change/edit their subscription – the needs of your customers might change over time. They might need more, less or different products.
If you don’t offer them the option of editing their subscription in their account, they might simply decide to cancel it.
Why pay for something you don’t need any more? Especially when you can’t change it.
You increased your prices – increasing your prices might cause a lot of customers to cancel, especially if your main competitive advantage is your low pricing.
Paying more for the same thing make people feel like they’re being ripped off. So, avoid increasing pricing for your current customers.
Of course, sometimes you will have to do it to survive in business.
In this case, be sure to back this increase in pricing up with an increase in value for whatever you’re offering to your customers.
Explain to them how the product quality or service will improve. Align your pricing with a social cause, such as a percentage of each sale being donated to that cause.
Customers don’t use your products – buying a product is not the same as using it.
Sometimes, you might have customers that initially decided to subscribe to your service, but never ended up using your product.
That’s why it’s extremely important to engage with your customers on a regular basis and teach them how to use your products.
Be sure to survey them to figure out whether or not they are happy with the quality of your product or service, and how they are using them what you sell. This simple rule can save your business.
The customer is trying to cut down on costs – sometimes, our financial situation changes, and we need to spend less money to survive. Or we simply want to spend it elsewhere.
Sometimes, there is nothing you can do when this happens, but in other situations, you can improve your chances of holding onto the customer.
If you are one of the first things that your customer has decided to cut down on, that means that your product or service is not a high priority for them.
Be sure to regularly remind your customer of your value proposition and how your products help them.
This will make your products seem more important to your customer, and they’ll be less likely to cancel their subscription.
The customer found a cheaper competitor – of course, there may always be someone who can sell even cheaper than you, even if that competitor isn’t making any profit from his sales.
Anyway, this might be a reason for your customer to switch, especially if your competitive advantage is low pricing.
That’s why you should always focus on having other advantages, as well – like exceptional customer service, high-quality products and fast delivery.
Another helpful strategy is building brand loyalty with your customers so they will never want to switch to a competitor.
The customer found a competitor offering better service/products – there might always be someone that outsmarts you with higher-quality products.
Remember that a higher-quality product does not mean that people will automatically switch to using them.
It’s all about positioning your brand and offering exactly what your customer needs.
If your competitors are offering additional features, but your customers don’t need them, why switch?
Remember what Mike Dubin, founder of Dollar Shave Club, said: “You don’t need a backscratcher and 10 blades.”
So, your competitor will only be able to successfully steal your customers if they offer them something that better that simultaneously fulfills their needs.
So, take some time to understand what your customer wants and what your competitors are doing.
You provide a bad customer experience – even if you have the best products in the world, you will turn a lot of customers off with a bad customer service.
When people have questions or problems, they want someone from your side to pick up the phone and help them ASAP.
If they have to hold the line for 30 minutes, you’ll make them feel very disappointed. And with time, this disappointment might lead them to decide to cancel.
How can I prevent cancellations and improve customer retention?
If you want to prevent more customers from cancelling, you should do the following:
Communicate regularly with your customers – this will allow you to learn more about customer dissatisfaction, unmet needs and reasons why your customers might cancel their subscription.
The best and simplest way to do this is with your customer service program.
Every time a customer contacts you, that means that they have a problem that needs to be solved. So, make sure to record all calls and save all chat and email messages.
Then, spend some time analyzing these issues and finding the most frequent reasons why people contact you.
Here are a few other ways to get to know the needs of your customer a bit more proactively:
- You can create a simple survey with Survey Monkey and send it to your subscribers
- You can run on-site surveys for your website visitors with Qualaroo
- You can call your customers and survey them on the phone
- You can ask them about their experience buying from you every time you meet them in person
Last but not least, don’t forget about analytic tools like Google Analytics, KISSmetrics, CrazyEgg, etc. They can really help you dig deeper into the online behavior of your web visitors and customers.
Use this knowledge for your own benefit.
Always focus on improving your service – when you do this, the value that you offer to your customer grows over time.
At the same time, this allows you to build even greater brand loyalty, which makes it even harder for your competitors to steal your customers.
There are several things that you should focus on improving in your subscription ecommerce business:
- Quality of your products – when you’re reselling someone else’s products, this might be harder, but you can always find better suppliers
- Your product packages – understand which products your customers tend to use together and offer them as a bundle at a better price. Also, consider the quantity of products that people buy, and create different offers based on the number of items people are buying.
- Customer service – don’t make people wait for someone to pick up the phone. Train your staff to answer all questions as quickly as possible.
- Delivery – make sure you deliver your products on time each month, damage-free.
Make your monthly subscription as flexible as possible – allow your customer to switch his plan at any time with ease.
Make the whole experience intuitive for him so he can simply go your website and choose what he wants to add or remove from his monthly order.
Teach your customers how to use your products – if you’re selling kitchen supplies, teach your customer how to cook. If you’re selling clothes, teach your customers how to dress.
That way, they can learn new ways to use your products, which will cause them to use your products more often and stick with your subscription service.
Also, this will be viewed as an added value and will make your customers more loyal to your brand.
Frequently remind your users of the quality and benefits of your products – as previously mentioned, in subscription businesses, you need to sell each month to your current customers.
To do that effectively, you need to remind your customers why they chose you in the first place.
Be sure to communicate regularly with your customers and inform them about your value proposition, how you can help them solve their needs, and why they should stick with you.
Share the same values as your audience – a lot of the time, customers will choose you because you share the same values.
This may be related to humor, saving the environment or helping those in need.
Handle bad publicity – no company is immune to bad publicity. Nowadays, the media can say whatever they want, and your customers can share a million different opinions.
You might not be able to prevent bad PR, but you should always act accordingly when it comes up.
Otherwise, you might lose a lot of customers. This happened with Netflix when they decided to increase their pricing and split up their streaming service and DVD-by-mail service.
So, here’s what to do when this happens:
- Admit your mistakes and make apologies
- Try your best to help all people who have been affected
- Explain why the mistake happened and what you learned from it
- Tell people how this crisis will allow you to serve customers better in the future
Always increase pricing with a value offer – when you have to increase prices, make sure to communicate how this will result in the customer receiving a more valuable experience.
Explain how this will improve your service – he’ll receive upgraded products with extra features, premium customer support or something else.
Always have someone to answer questions and help customers – handling customer support might be tough, especially if you’re a small company and have a lot of questions coming in from customers.
If you can’t handle it yourself, you may want to consider outsourcing it. There are a number of companies that are well-trained and will learn and answer everything about your product.
To build a successful subscription eCommerce business, you not only need to acquire new customers, but also keep your current ones.
Sometimes, this may be harder than it seems, but if you’re determined to improve your service, you’ll find a way to do it.
How have you kept customers from cancelling their subscriptions? Which strategies are you willing to try out to increase your retention rate? Let us know in the comments below.