How to Reduce Customer Churn for Your Subscription-Based Business?

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    Most business owners find a revolving pattern in their subscription-based business. People enter your business model, indulge with your services for a while, and then lose interest or drift away.

    Customer retention is one of the biggest challenges, especially for subscription-based/SaaS businesses. It becomes more of a concern if you charge recurring fees, be it monthly or annually.

    You win customers by employing the most effective SaaS marketing strategies. It begins with a happy note — they find your service useful and enticing. However, gradually, their interest can fizzle out, and the customer churn rate begins to increase. As a matter of fact, more than two-thirds of UK B2B SaaS products are found to have an annual churn rate of 5% or more in a year.

    So, if you fail to keep an eye out at reducing customer churn, you will be hurting the Average Customer Lifetime Value (ACLV) and burning the marketing money.

    To avoid this situation, we are here to show you the hacks you can use to increase your customer retention and reduce churn. But before we get to it, let us first understand briefly the concept of churn in a subscription-based business model.


    Pro tip: If you’re not sure how to calculate your ACLV as a SaaS business, check out our blog — How to Calculate Customer Lifetime Value for SaaS Companies 


    What’s ‘Churn’ in a Subscription-Based Business?

    Churn, also known as customer churn or subscriber churn, is a metric that defines the percentage of customers who stop using your product or service within a specific time period. It is calculated on a monthly basis or depending on your subscription model.

    The key to reducing churn is to keep your customers satisfied. Unhappy customers cancel their subscriptions quickly and move to the competitor’s business. There are other reasons too for the presence of churn in a subscription-based business, that is defined by its two types — 

    • Voluntary Churn: It occurs when a customer voluntarily decides to discontinue the subscription. It can be due to budget issues, change in lifestyle or perception, negative service experience, or dissatisfaction with the product or service.
    • Involuntary Churn: It happens when the discontinuation of subscription is not a choice but happens naturally. The reasons involve an expired credit card, a change in bank information, a server error, or insufficient funds.

    Seven Smart Hacks to Reduce Subscriber Churn

    1. Identify the ‘Why’

    The most primary step to reduce subscription churn, in the long run, begins by recognising the ‘why’ of the customers. In other words, why are your customers unsubscribing your business model? What is making them discontinue your services?

    To find the solution to these questions, you first need to identify the specific problem your customers are facing. Be it a voluntary churn or an involuntary churn, you need to circle back to the customer data and analytics. One thing that you should strictly avoid here is assuming the reasons for churn. It will distract you from finding out the underlying pain points of your customers that are causing them to cancel in the first place. 

    Another way to counteract is to increase your active engagement with your customers. It’s because customers rarely voice their thoughts publicly about a business. Therefore, use frequent customer surveys, phone calls, social listening tactics, and win/loss calls to gauge the moves of your customers and understand their actions.

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    2. Know What Your Competitors are Doing

    While it may sound obvious, there is no better way to learn things about your business than assessing your competitors.

    The SaaS industry has two main areas of focus to attain growth — customer acquisition and customer retention. While the former gains your entry-level customers, the latter helps you keep them. Your competitors are either struggling with the latter or have found a solution. Either way, you can learn from your competitors’ strategies.

    However, do not forget that your competitive advantages glue your customers to your service, Therefore, keep track of your competitor’s actions. As new facilities enter the market, the needs and demands of your customers shift. Ensure that you make enhancements to your services and be in sync with the latest trends and technology.

    3. Learn Your Metrics

    One thing you need to know is customer churn is a part of subscription-based businesses. Therefore, you need to start taking action before it begins dropping. If you’re waiting until a customer leaves, you’re already late. To do so, use your data analytics and essential SaaS metrics to figure out the pattern and take proactive actions.

    Analyse the facts about your customers. For example, when do they churn frequently? Discover the months that have the highest drop in customer retention rate. Which is higher for your business — voluntary or involuntary churn rate? Also, keep a track of both subscriber churn and revenue churn. 

    Once you’re done learning and understanding the metrics, you’ll find typical churn circumstances followed by your customers. Put them together to forecast the next mass churn and take re-engaging steps to avoid it.

    For example, if you find your customer not interacting with your business model after a few months, you can send them a personalised email to remind them of the benefits of the subscription. Effective email marketing lifecycles are crucial to keeping your customers engaged and interested in your product. 

    4. Formulate Smart Customer Service Strategies

    According to Microsoft, around 58% of consumers tend to switch companies if they experience poor customer service.

    Efficient and fast customer service is an integral part of businesses today. Customers reach out to the company when they have an issue unresolved. When you succeed in providing a convenient solution, you turn them into loyal and happy customers, who are likely to refer you to their known ones. Imagine the consequences when customers seek you for their problems but find your customer service problematic.

    Therefore, integrate smart customer service strategies into your business to extend quality support. While chatbots and machine automation can be useful, the best recipe for custom-tailored customer service is to enhance your human relationships. It works seamlessly since dealing with humans needs a little more than marketing automation — it involves empathy and understanding of emotions.

    Gravy Solutions, a leadership development company, provides interaction with your clients beyond the capacity of automation. They focus on nurturing your current clients and boost your current customer service to increase your customer retention and reduce your churn rate.

    5. Deliver Concrete Value — Seek Ways to Upgrade Your Product/Service

    If after several attempts, you are still facing difficulties in increasing your customer retention rate, give customers a reason to stick around. You can do so by offering them an upgrade or incentive to the service.

    A small effort of surprising your customers by delivering value through unexpected means can go a long way. It shows that you care about them and lays a foundation for connection. Not to mention, if they are disappointed with your service, a surprise upgrade will incentivise them to give your business another chance.

    Here, you need to figure out two aspects — what to provide as an upgrade and when to provide it.

    You can provide promo codes, discount offers, or loyalty programs. These work exceptionally well to increase customer lifetime value and reduce customer churn. To determine when to surface these incentives, reassess the patterns of your customer churn. It will indicate the high-risk points, and one of the times you can interfere is right before the arrival of such circumstances.

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    6. Say Yes to Referral Bonuses

    The word of mouth strategy is among the most effective methods even today, just in the changed format. People are more likely to indulge with your services when they have a known person recommending them.

    Referral programs are highly lucrative for businesses. To begin with, you can enhance the value of your subscription by giving them a referral bonus by signing up a client they recommend. Moreover, such programs can generate quality leads for your business. It also creates positive brand awareness.

    You have various options to activate referral bonus programs. Bonus cash is one of the most popular and effective methods, used by brands such as PayPal. Redeemable reward points also work well to increase retention.

    7. Last, Take Your Customer Feedback Seriously

    One of the most common reasons for customer churn is customer frustration. When a customer doesn’t find relevant information for a particular product or service or faces confusion, they get irritated.

    To solve customer frustration, creating a customer feedback loop is essential. Show your customer that you are committed to improving your services. Surveys, ratings, and reviews are effective ways to gather feedback.

    However, most businesses do not take customer feedback seriously. They either forget to act on it or act too late. It is essential to take immediate actions on your customer’s feedback as if complaints are attended to, dissatisfied customers are likely to remain loyal to your brand. This way, your business will improve and your customers will stay put to your brand.

    Wrap Up

    As a subscription-based business, you cannot afford to lose customers. However, keeping them is challenging. Therefore, to prevent customer churn, being proactive and working through the aforementioned hacks will help you keep your customers.

    Keep reducing churn rate and increasing customer retention at the top of your priority list. It will make your business more profitable for the years to come!

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