No matter how churn increases, it results in lost revenue. While some companies experience “acceptable” churn rates of 5-7 percent, others lose major pieces of revenue by mismanaging subscription models or simply not managing them efficiently.
High churn rates can cost companies thousands — even millions — of dollars per year. For a small or midsize company, churn could prevent a company’s growth, or in some cases contribute to its downsizing.
An analysis of churn studies provides this example based on a low, 5 percent churn rate scenario: If a company with 1,000 customers sees an annual churn rate of 5 percent, that’s a loss of 50 customers per year. If that churn rate were 5 percent per month, that company would lose 460 customers in one year — heavily impacting the company’s overall revenue base.
Managing churn by identifying factors that lead to cancellations or declined payments is crucial for companies to turn unreliable subscription revenue into a model that generates consistent cashflow.
The following tips suggest ways to address high churn rates, and create stabilized monthly income.
Churn Management Is Key to Success
Subscription programs increase the accessibility of products to broader audiences while creating reliable income and loyal customers, but implementing a churn-management strategy is key to the model’s success.
As subscription models continue to change the economy, companies need to evolve to meet the needs of customers and provide the flexibility they’ve come to expect from providers.
While companies cannot avoid churn, they can avoid high rates. With the right plans in place, revenue streams from programs can become reliable.
Incentivize Prepayments
Offering flexible subscription plans, such as month-to-month options, is great for customers but often can mean unpredictable churn for companies. Encouraging subscribers to pay up front at a discounted rate is a win-win. The customers receive a discount on the service, and the company has guaranteed revenue for the amount of time the subscriber opts to pay. Rather than having a customer who could cancel after 30 days, the company has a contract that’s paid up front.
If a product or service is difficult to discount, companies should consider offering exclusive benefits or a free month to those who prepay. To further reduce churn, companies can invest part of that prepaid income in customer acquisition activities to help offset monthly churners.
Great Branding
When a customer sees a great and effective brand as an advertisement or as any other way it gets fixed in the mind of the customer as a ‘Sticker’. This only happens when the company branding is unique and outstanding, unlike the companies whose branding efforts are half-baked or forgettable. A great branding must include consistency, sense of purpose and connect with the emotions of the customer. This is the first way one should consider when looking to build a sense of loyalty and attachment among the customers.
· Own pricing
Whenever a subscription service loses a customer as soon as they sign up because the customer feels that it’s not worth it for their money. The initial on-boarding procedure could be tenuous time for the new customers. There is always a requirement of someone responsible for mapping out and owning the customer’s experience that is in the beginner stage to use a service or products. The price owner may find a place on numerous teams depending on the business type but the most crucial is that someone takes the ownership.
· Answering
The questions might be tricky to figure out the optimal pricing model for subscription service. There are numerous options and various teams in the organization might have different priorities when it’s about pricing. Questions that can provide guidance and clarification are: What makes the customer subscribe? When can you put the customer’s desire first?
· Retention Goal
While selling subscription retaining a customer is a crucial target. They are the source of revenue for the time you can make them involved and replacing them might be cheaper than sorting out how to keep them on board.
· Building Credibility
Trust is the foundation of the customer relationship. One must focus on clients most likely to be a good fit. When a client is not satisfied with the answers and feels that the person is not being honest they might stop engaging. It is important to strive for building a trust culture with the clients.
The loss of customer or client churn is a critical situation for any business. When one is facing turnover from even a small percentage of the client, it reduces the revenue and ties up valuable resources as one try to recover. All the given factors are effective ways to reduce E-Commerce churn because churns also affect reputation.
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