Subscription Retention Strategies: How to Reduce Churn & Increase LTV

TL;DR

Understanding why and when customers typically churn from their subscriptions can unlock opportunities for improving subscription retention.

When thinking about how to successfully progress subscribers past traditional drop-off points in the subscription cycle, consider strategies such as:

• implementing optimised dunning messaging;
• leveraging targeted win-back incentives;
• improving subscription management for customers;
• leveraging AI to anticipate overstock;
• building personalised subscription pans to prevent overstock;
• surprising subscribers with unexpected gifts;
• structuring your loyalty program tiers around high churn points; and
• providing exceptional customer support across channels.

Why is subscription retention important?

With DTC competition and customer acquisition costs continuing to rise, it’s never been more important for retailers to invest in customer retention. The most successful ecommerce brands are those leveraging data to create optimised customer experiences that nurture long-lasting relationships.

For subscription brands, long-term customer engagement can be particularly challenging. Reducing subscriber churn – both passive and active – remains a key focus in order to protect and increase customer lifetime value (LTV), as well as make the most out of acquisition spend.

In this article, we will explore some of the most effective subscription retention strategies, along with the platforms and tools you need to implement them.

First though, let’s consider the importance of churn analysis and how the resulting data can inform which strategies you employ.

Churn analysis: When and why are subscribers churning?

A good place to start when it comes to improving your subscription retention metrics is churn analysis. As always for ecommerce retailers, understanding the underlying data and uncovering common pain points is the key to identifying opportunities and unlocking potential growth.

Churn happens when subscribers cancel their subscription. When do your customers typically churn? Why is this happening? Is there a point of particularly high retention for subscribers?

The answers to these questions can inform the strategies you use to reduce churn and increase retention.

For example, our churn analysis for a leading pet supplements retailer identified a large drop-off after one month (when the discounted trial ended), but high retention after three months (this corresponded with the point at which pet owners would start to see the benefits of the product manifesting). With this in mind, we suggested that the brand launch a three-month subscription trial, discounted for three months rather than just one month. This was effective at increasing subscription sign-ups and reducing churn.

How to retain subscribers

Once you have diagnosed your churn problems and have an understanding of when and why subscribers are cancelling, you can strategically implement tactics to prevent this.

1. Tactically reduce passive churn with dunning

Passive churn, also known as involuntary churn, is the unintentional loss of customers from a subscription. This is typically a result of failed payments, caused by expired cards or insufficient funds.

Implementing an optimised ‘dunning’ cycle is an effective way to reduce passive churn. In this context, dunning refers to communications sent to a customer after a subscription payment is declined.

Churn Buster offers a popular automated dunning solution for ecommerce retailers – one that Swanky often recommends to clients. This makes it easy for your support team to recover more payments, whilst improving the experience for subscribers. Features include branded dunning emails personalised with customer properties, last-chance offers, enhanced card retries, and SMS nudges.

It’s also worth noting that, as of February 2024, passive churn reduction appears on Recharge’s upcoming release roadmap. According to the platform’s support materials, users will soon have the ability to “build custom strategies to notify customers in a dunning cycle to tactically reduce passive churn”.

2. Offer customised incentives to prevent voluntary cancellation

Voluntary – or active – churn refers to customers choosing to cancel their subscription.

There are a whole host of reasons behind voluntary subscription churn, including dissatisfaction with the product or customer service, finding a more suitable alternative from a different brand, and lack of flexibility with orders.

We’d recommend implementing an exit survey to find out customers’ exact reasons for cancelling. You can then try to prevent cancellation by immediately presenting them with a  customised incentive.

For example, if a customer says they’re cancelling because of a build up of product, you can automatically suggest that they simply skip their next shipment rather than getting rid of their subscription altogether. Or, if a subscriber says that the product is no longer suitable, you can suggest swapping to a different product without having to cancel.

Recharge’s Customer Retention Strategy feature allows retailers to do just this, presenting customised cancellation reasons and providing incentives to encourage retention.

Data from exit surveys, combined with general customer cohort and order data, can also be used to anticipate at-risk subscribers before they request to cancel their subscription.

3. Leverage SMS for streamlined subscription edits

At the heart of a positive customer experience for your subscribers is easy and convenient subscription management. Making them tackle a convoluted log-in process every time they want to make a change will send them in search of the cancellation button before long.

Instead, we often recommend Relo’s log-in-free Subscription Manager software for streamlining subscription management. With this solution, customers can manage their orders from a text message in just one click, without the hassle of logging into their account. It’s a quick and easy way for a customer to pause an order, for example, before they build up too much product at home and feel pressured to cancel.

So, not only does this provide the ultimate convenience for consumers, ensuring their subscription seamlessly fits around their lifestyle and any changes to this, Relo’s SMS management feature could help to prevent churn before it becomes a possible issue.

4. Provide a customer portal for flexible subscription management and product recommendations

Continuing the theme of easy subscription management, providing a user-friendly customer portal can be important for keeping subscribers retained. By making it as easy as possible to pause, skip, reschedule or even cancel a subscription via an easily-accessible, intuitive portal, you can help to mitigate the fear of subscription commitment.

A portal also provides a place for retailers to recommend other relevant products for a customer to add to their order, either as a one-time purchase or as part of their recurring order. Helping subscribers discover other items that complement their existing subscription product can be an effective way of reducing churn, by boosting customers’ confidence in your brand’s offering and demonstrating that you have their needs in mind.

5. Leverage AI to anticipate overstock

A popular reason for subscriber churn is overstock – a buildup of excess product. We talked earlier about how, if a customer requests to cancel their subscription because of overstock, you could incentivise them to simply skip their next shipment rather than cancelling altogether.

However, subscription platform Ordergroove goes a step further and anticipates these overstock instances before subscribers seek out the cancellation button. It uses Anticipate AI™ to do this, predicting churn by determining which customers have excess product. Retailers can then prompt customers to skip their upcoming order via personalised messaging.

This is a great way of preventing churn and protecting LTV. What’s more, proactively reaching out to at-risk customers and inviting them to delay their order before they’ve had to raise the issue themselves will boost their confidence in your brand and encourage things like loyalty and advocacy.

6. Build tailored subscription plans for customers

Another strategy for tackling the problem of overstock involves helping your customers work out how much product they need and at what delivery cadence, depending on their unique needs. With a personalised subscription plan, it’s less likely that subscribers will get to the stage where they have an excess of product at home.

In order to gather the information you need to recommend an appropriate plan, consider implementing an on-site quiz or some sort of interactive recommendation tool.

Petcare brand YuMOVE leverages a quiz to ask pet owners for their dog’s weight – the answer to which is used to recommend a suitable number of supplement tablets for monthly subscription.

This strategy could also be used by coffee brands, for example. By asking a customer how many cups of coffee they drink per day, if anyone else in their household drinks coffee, and how often they wish to receive a delivery, brands can suggest an appropriate subscription plan.

Not only does this help to prevent overstock and therefore reduce frustration and possible churn, the personalised nature of the plan will likely appeal to consumers.

7. Surprise and delight customers

With a ‘surprise and delight’ subscription retention strategy, ecommerce retailers give their subscribers unexpected perks, thereby boosting satisfaction, nurturing loyalty and increasing LTV. This type of strategy can be useful for nudging subscribers past points of typical churn, as well as encouraging customers to buy more from a brand.

And, if executed effectively, a surprise and delight model can also motivate word-of-mouth marketing – amplifying your brand and its offering to a host of potential new customers at low cost.

Examples of surprise perks include:

• personalised discounts that are exclusive to individual subscribers and their purchase history;
• invitations to VIP events that match a subscriber’s interests;
• gifts based on a subscriber’s customer profile; and
• random handwritten notes of thanks, with specific mentions of past purchases.

Note how each of these examples relies on an understanding of subscribers on an individual level and the relevant application of data to inform perks offered. Tailoring surprises to each unique subscriber can maximise the impact of a surprise and delight retention approach, making customers feel valued. We explore more benefits of a targeted approach like this in our article on the ROI of personalisation.

For retailers using Pro or Custom Recharge plans, Surprise and Delight Flows enable the sending of incentives to customers, such as free gifts and discounts, to increase retention. These gift flows can be A/B tested to determine the most effective incentives.

8. Implement a loyalty program or VIP scheme

One of the most popular subscription retention strategies amongst retailers is implementation of a tiered loyalty program or rewards scheme. Giving subscribers the chance to earn increasingly appealing rewards throughout the program is a great way to reduce churn and increase LTV.

To maximise the impact of your program, try structuring your tiers around the common churn points you identify during your churn analysis. For instance, if subscribers typically churn after four months, why not set this as the point at which they’ll enter the next program tier and receive some enticing rewards?

We typically recommend solutions like Yotpo and LoyaltyLion for brands looking to build a loyalty program. You can find out more about how to create a successful ecommerce loyalty program in our comprehensive guide to loyalty program strategy.

9. Provide a fast and helpful customer service experience

High-quality customer service is a key ingredient in the recipe for ecommerce success – and something that today’s consumers have come to expect as standard. A poor customer service experience is a common reason behind subscription churn.

Subscription retailers need to make it as easy as possible for their subscribers to get the help they need, when they need it. You can provide a top-tier customer service experience by:

• providing a comprehensive and easily accessible FAQ page for customers that anticipates common queries and provides clear answers;

• curating a hub of helpful resources on your ecommerce store, including video tutorials, guides and forums, for subscribers to navigate themselves; and

• implementing a help desk solution like Gorgias, which will enable you to deliver automated, yet meaningful, customer support across channels, including your ecommerce site, emails and social media.

Read more from Swanky about the features of exceptional customer service.

Talk to Swanky about retention strategies for your subscription brand

Our in-house data analysts, strategists and marketing specialists consult on, implement and optimise data-driven subscription retention strategies for brands of all shapes and sizes – helping to reduce churn and increase LTV.

Connect with our solutions team to find out more about how we can support your brand’s digital growth.