When trying to improve retention rates, it’s important to understand that there are two sources of churn — passive churn (payment failures) and active churn (cancellations). The tactics for lower passive churn are not the same as those for active churn. Below are recommendations on lowering active churn. See here for recommendations on passive churn: How do you lower passive churn?
Charge a price consumers view as fair
One of the basics of pricing is customers should perceive higher value than they are paying. If a consumer perceives that a product is worth $100 and is paying $150, they are likely to churn. If a consumer perceives that a product is worth $500 and they are paying $150, then they are likely to stick around.
While high prices are warranted in certain instances, and there are strategies for getting consumers to accept them, higher prices create higher consumer expectations — which can lead to elevated active churn when those expectations are not met.
Focus on onboarding and pre-conversion messaging
For monthly subscriptions, 75% of churn in the first month comes from subscribers hitting the cancel button, which makes monthly churn nearly three times higher in month one than month three. Since the biggest risk period for a monthly subscriber is in the first days and months, it’s important to focus first on the messaging just before and after conversion.
To get subscribers through the initial high-risk period, onboarding campaigns are one effective strategy. These include messages welcoming subscribers, the encouraging of app installs and newsletter sign-ups, and the touting of various subscription benefits. This is all about communicating the value of the offering.
Note that a significant number of subscribers can cancel on the same day they purchase — because they were only interested in a single piece of gated content or didn’t have strong brand affinity prior to purchase. This can make pre-conversion messaging and communication at the point of purchase critical to lowering initial churn.
Encourage longer term subscriptions
Since long-term subscriptions retain much better, adding long-term options can significantly improve retention. While many sites offer a 20% discount to annual vs monthly purchasers, bigger price differences between annual and monthly can push more subscribers towards annual. This can be of particular value to companies new to subscriptions that do not yet have sophisticated retention strategies in place to effectively retain monthly subscriptions.
Keep an eye on your promotion strategy
While trials often drive up acquisition so much that they outweigh a possible retention hit, there are times where promotions can create huge active churn. To use an extreme example, a $1 first-month trial on a $1000 dollar subscription is going to backfire because subscribers will find ways to redeem that trial offer repeatedly (even if restrictions on repeat redemption are put in place to try to prevent it). If the gap between introductory and standard pricing is too big, customers are incentivized to partake in a cycle of canceling and resubscribing.
Leverage machine learning
Models like Piano’s Likelihood to Cancel algorithm can help identify the biggest drivers of cancellation — and enable the messaging of high and low cancellation risk subscribers separately. Such algorithms analyze hundreds of metrics — everything from the referrer at the moment of conversion to whether a subscriber paid with Visa or Amex. With a better understanding of what behaviors are driving cancellation and retention, you can work with your editorial team to encourage positive behaviors and suppress the negative ones.
Use content recommendations
Higher content consumption is generally linked to lower churn. Using Piano's auto-optimized content recommendations to always surface the right content to the right users can double both pageviews and active time on site. While content recommendations are most often thought of from an advertising context in relation to increasing pageviews, those additional pageviews also have churn-minimizing properties.