Customer Retention is a Choice for Subscription Merchants

The choices that subscription merchants make — or don’t make — to address customer retention matter.

Sellers who thought the challenges of the so-called “Great Unsubscribe” were in the past need to think, and plan, again.

“It’s relevant for tough times, and in the new year, people will probably start with the resolution to check out what subscriptions they want to keep,” Vindicia Head of Product Management Ioana Stamate Dayagi told PYMNTS.

And when they do, she said, it’ll be wise for merchants to have some options and answers at hand.

Dayagi pointed to the “organic bundles” that are becoming more common among streaming services as an example.

“This is one of the ways to keep your customers engaged, and it is perceived as more value for your money,” she said. “There are different types of bundles. We see many companies doing organic bundles. We have this with Amazon, we have this with Apple, we have it now with Disney+ and Hulu and ESPN.”

Commenting on the latest Subscription Commerce Tracker®, which examined how merchants can increase retention through improved customer experience, Dayagi said that with consumers now deciding between essentials and nice-to-haves, retail subscriptions are especially at risk, and that calls for creative thinking.

As the tracker noted, the percentage of U.S. consumers who had subscriptions fell from 47% in 2020 to 41% in 2021, with further drops seen in 2022. The tracker found that “nearly two-thirds of United Kingdom consumers plan to reevaluate their subscriptions in the next six months due to cost concerns, and nearly four in 10 have canceled a subscription service already.”

In that kind of climate, Dayagi said companies are “combining different services to keep their customers engaged. I think this is a good experience-based approach to provide more content and real value. As consumers, if we feel that we have value in the service that is provided to us, we will probably keep our subscriptions longer.”

Data Is Your Friend

In moments of flux like the one we’re in now, product managers must turn to their first-party data, figure out what customers want, and provide it before they leave.

“Data is your friend,” Dayagi said. “It’s very important to analyze your data, meaning looking at things like are plans that are one year long better than plans that are monthly. Also, where is your revenue coming from?”

The answer to that often has a generational component, and that’s the type of insight that can prevent a cancellation — if it’s seen early and acted on decisively.

“We see a difference in generations, the way we are consuming services, location and geography,” Dayagi told PYMNTS. “It’s important to look into that. Today we have the tools to be able to pinpoint and to narrow down different segments and understand their behaviors.”

She relayed a personal anecdote about a subscription service that raised its price, causing an outcry from consumers and a wave of cancellations. The service responded by lowering the price.

“Not a lot of companies dare to go this way of taking prices down,” she said. “We are good at giving discounts for new customers because you want to attract new customers, and sometimes you’re forgetting about your base customers that are still paying high prices. Data is very important to look at revenue and to look at your customer lifetime value.”

Read also: Retention Is the Key to Success in Uncertain Times

Mastering Involuntary Cancellation

Involuntary cancellation is perhaps the most frustrating kind as it typically arises from preventable things like an expired card not being updated or a consumer changing addresses. Subscription management platforms like Vindicia are especially useful in avoiding this.

“There are so many parts in between giving your credit card until it reaches your bank,” she said. “Errors can happen. Sometimes systems are down, sometimes systems are old. Sometimes your transaction was marked as fraud and suddenly all your transactions are declined.”

To head off this problem, she said: “You need to keep your customer’s cards up to date, but not in an intrusive way. Don’t send messages every month, ‘Is your card up to date?’ Instead, there are services that the payment providers or the card networks offer that can update a card.”

“You can retry the payment in two days, in three days,” she added. “You need to look at when it’s best to retry it and how many times because today, there are fees attached with retry. You cannot retry it forever. There are a lot of factors behind it.”

Communication is vital to this process, as Dayagi cautioned against only reaching out to subscribers when there’s a problem with their payment method.

Her advice: “Instead of stopping their service immediately when a problem first appears, if you continue to retry and give a grace period for payment to go through, then the problem can resolve itself. You as a consumer would not even know that there was a problem. You’re continuing to get the service, the company gets their money, maybe with a week’s delay, but the revenue is there.”

And a satisfied subscriber is retained, which is the point of the entire exercise.