If you’ve sensed a growing sense of urgency from your streaming provider or meal delivery service lately, you aren’t just imagining things.
Subscription companies are under pressure to keep customers, and more and more of them have been hitting the reset button. A lot.
Justin Shoolery, head of data science and analytics at sticky.io, told PYMNTS that churn is proving to be a significant challenge for companies that offer products and services via subscription models. However, there are several strategies that can be used to reach out to customers before they vote with their thumbs and cancel.
It’s basic Economics 101: Inflation has consumers reconsidering everyday expenses — and in many cases, cutting the number of monthly subscriptions they’re paying for. As evidence of that shift, PYMNTS research revealed monthly subscriptions expenditure fell by 46% in March compared to last fall.
Read more: Inflation Forces Change or Churn Dilemma for Subscription Companies
It seems that the “Great Unsubscribe” is underway. In the meantime, Shoolery said, the merchants offering subscriptions have had to rethink their business models.
Done well, he said, “Subscriptions add more predictability to the business model — and especially to the revenue model.” That visibility is critical when managing complex supply chains, in managing inventory (when there are physical goods to deliver) and managing costs.
“It’s important to drive costs away from acquiring new customers,” he said.
Varieties of Churn
At the center of it all, of course, lies churn — namely, the percentage of consumers who, for a variety of reasons, stop their subscriptions. It takes time and money to get them back onboard, Shoolery said.
And there are variations on the theme, he said. There’s voluntary churn, of course, where a consumer executes on a conscious decision not to continue receiving goods or services and stops payment. Then there’s also involuntary churn, typically tied to back-end processes gone awry — perhaps because a merchant wasn’t able to continue billing in the first place.
No matter what the case, continued Shoolery, there are a number of technological tools at hand that companies can use to keep top-line momentum, and satisfied customers, in place.
Related: Study Finds Subscribers Pay Up for Convenience, Even With Inflation
Among those tools: Using credit card updaters to keep current card details on file, which helps limit declines due to expired cards. Firms such as sticky.io, he said, leverage data to provide platform-level optimizations that help merchants reprocess declined cards and generate higher approval rates.
“All of this will reduce churn,” he said, noting that for a significant number of companies, “reducing churn can really be as easy as kind of clicking a button and taking advantage of a tool that maybe they were not taking advantage of yet.”
Tracking churn as it happens can lead to improvement, too, Shoolery said. Granular insight, again aided by advanced analytics, can help subscription firms pinpoint just where the friction lies.
Perhaps, in month three — to give a hypothetical example — there may be “oversupply” of a product, or a loyalty or rewards offer might be enough to incentivize a consumer to remain on board if people are cancelling because of price.
“Targeted solutions are what’s needed — and you don’t have to apply these efforts to everyone in the subscription chain,” Shoolery said. There’s also the ability to locate inefficiencies in the supply chain itself, as defects in a product might be spurring cancellations; individual companies can address quality control with specific vendors as they seek to “get ahead” of churn.
Tools That Work
A proactive, personalized approach can help companies attract younger consumers, who are of course essential for any digital business model to thrive. In recent months, their loyalty has proved elusive, as PYMNTS data show that as many as 14% of those individuals (millennials and bridge millennials) are churning away from their subscription providers.
See also: Study: Consumers Keep Subscriptions for the Fun Factor
Millennials in particular are becoming more and more sensitive to the customer experience, he said.
In an inflationary environment such as the one we’re in now, Shoolery said, free trials offer an “excellent way” to drive conversions and new sales while keeping costs down. But there’s the danger of an inverse relationship to churn.
Churn might actually increase when that first billing cycle hits and consumers are faced with the end of that free trial, he noted. However, some of that can be avoided if merchants offer a range of payment options at the point of checkout.
“Digital wallets and buy now, pay later options can have dramatic, positive impacts on conversion rates,” said Shoolery.
Looking ahead, he said, merchants will find success as they utilize machine learning and artificial intelligence (AI) to personalize and contextualize subscriptions and payments, bundling products and services on a bespoke basis.
“Giving the consumer what they want, when they want is extremely valuable,” he told PYMNTS.
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