Merchants Try New Tactics to Slow Subscription Churn

With the economic outlook not improving or likely to until 2023 or 2024, subscription commerce faces an inflection point that could see a mass customer exodus unless providers get creative in their strategies and use platform tools to navigate a tricky time.

Rima Khoury, vice president of engineering at subscription billing and management platform Vindicia, told PYMNTS the cancel impulse often begins with preventable glitches that subscription providers need to be on top of lest they lose subscribers almost by accident. Consumer expectations have been reshaped by the digital shift to the point where any friction and inflexibility in subscriptions can tip someone to cancel unless it’s headed off.

“There are a lot of factors that play into the frustration, and part of it is how do you manage all of these from the consumer’s perspective?” she said. “How do you know how much you’re spending and what subscriptions you need or want versus the ones that you just forgot about?”

Involuntary churn is perhaps the most vexing as these are subscribers who end up canceling passively — they replaced their payment card and didn’t update it on the subscription website, they moved and now the ZIP codes no longer match, a fraud alert shut off the card temporarily. This is the easiest form of churn to prevent, but many subscription providers still lag here.

“It’s up to the providers to make sure this does not happen,” Khoury said. “It’s very important to differentiate between voluntary and involuntary churn. Involuntary churn is a huge thing that sometimes providers underestimate and don’t realize the impact of. You can’t get away from involuntary churn if you’re talking about subscriptions. It’s a big problem.”

See also: Why the Great Unsubscribe Is More Like the Great Rethink

Avoiding Missteps

Despite the inflation-recession pressures of 2022, much commercial activity returned to pre-pandemic patterns, and that’s also had an impact on subscriptions that must be proactively and even creatively managed, not only to prevent churn but to improve customer experience.

Khoury’s checklist includes subscription commerce companies “keeping track of your data, keeping your analysis up to date, making sure that you’re using data efficiently for your needs to see, ‘Is it something that I’m doing that these consumers are frustrated with and canceling over, or do they really not need it?’”

Conceding that more consumers are not salvageable due to issues like economic hardship, she said there is a vast group of wavering subscribers who can be retained with the right set of actions.

“There’s the set of consumers that will always come back and try to cancel or call to try to get more. I see that a lot in streaming TV or phone services or bundling. It’s like, OK, I am subscribed to this streaming service, but if I go with this, I’m getting more, are you willing to lower my bill?”

She shared a personal story about her home security vendor  with whom she had been a loyal subscriber for 16 years. When the aging system started glitching out over Labor Day weekend, she called customer service, and it was closed. When she did reach a rep, instead of fixing the problem, they offered a pricey upgrade  — and an installation wait. She canceled.

“The lifetime value of 16 years paying at $50 a month, that’s got to be worth something, and this consumer still needs the service. Providers must get creative to survive,” she said. “Between the sales, the marketing, the ads that you have to do, acquiring a customer is costly. As a provider, you want to try to avoid that as much as possible.”

See also: The Subscription Commerce Tracker®

Proactive and Creative Win Out

More subscription platforms have introduced features like subscription pause, allowing consumers to self-suspend their account until they can afford it again. The sector needs more of that kind of thinking to keep increasingly sophisticated digital users subscribing.

While things like medication subscriptions are essential  to the consumer, certain categories are somewhat insulated from economic impacts, but not most.

“The ones that are not essential, I think those will be tricky,” she said of the 12 to 18 uncertain months to come. Nonessentials like retail subscription boxes for apparel and specialty food items — even many streaming services — “will need some kind of creativity, whether it’s promotions or campaigns or offering more bundling, partnering with other companies and giving them free perks.”

“Providers have to get very creative if they see that they are offering a service or a product that is not essential. The market is heading toward that.”