Due to the rise of the subscription box economy, consumers can now order anything from razors to ready-to-cook meals to be delivered to their doorstep on a regular basis. Today, thousands of subscription services exist, and after years of focusing on growth through acquisition, it’s time for retailers to rethink their strategies.
In Brightback’s second annual State of Customer Retention Survey Report, responses from 435 subscription companies reveal dramatic, if not entirely surprising, new indications that the industry attitude toward customer retention is changing—93 percent of professionals say customer retention is just as or more important than acquisition.
Company-Wide Targets & Priorities
According to the report, there are multiple growth levers for subscription companies, but today’s organizations are focused on the potential of current customers to drive revenue. Expansion is a top three growth priority at 84 percent of companies, with retention at 82 percent.
Retention presents the greatest opportunity for experimentation. Small improvements to retention programs drive compounding results for companies with recurring revenue models. Retention offers a new lever for subscription companies looking to innovate their way to increased subscriber growth.
Perception & the Retention Opportunity
Ever since subscription companies first started ten years ago, the focus has always been to acquire new customers and that will make you more money. Over the years, as consumers continue to change and grow, the focus has now switched to retaining customers. Today, 93 percent of all companies view customer retention as being just as or more important than acquisition, according to the report.
The main reason for the focus being switched to customer retention is because 96 percent of companies said customers cancel for reasons that could be managed or fixed. This is actually good, because it means that brands are listening to their customers needs and seeing patterns that can be fixed.
Taking Action on Customer Data
In order to be a successful retailer in today’s world, you really have to keep track of shopper data. It can help businesses completely change the whole customer experience as well as help to figure out different areas of growth. See what trends consumers are after and what isn’t selling well.
Taking action on customer data should be the key focus for all indie retailers in 2020. 17 percent of respondents in the Brightback report said customer loyalty programs are the top priority for customer retention this year. There was a 14 percent tie between better tracking of why customers cancel and creating or improving automated workflows. Another way businesses plan on acting on customer retention is by creating new channels to be able to engage with customers (11 percent). All of these company priorities were decided from keeping track of customer data.
Retention Tactics: What’s Working
While it’s smart to have customer retention goals for the new year, don’t forget to keep in mind what is already working. According to the Brightback report, discounts are used by half of companies to retain customers. While effective, they’re not a permanent solution. Discounts should create an opportunity to better serve a customer down the road.
Customers today are looking for more choices. Personalized offers based on the reason for cancellation is used by 40 percent of companies. This holds the key to retaining customers long term. Understanding why customers cancel and being able to flexibly meet their needs is a major point of differentiation. From there, companies need to test and fine-tune offers based on how customers respond. A more customer-centric approach will yield higher retention rates.
Cancellation: The New Opportunity for Retention
According to the report, even though most subscription businesses today enable online trying and buying, almost two thirds of companies (64 percent) indicated they require customers to cancel offline via email or phone. Cancellations processed by email and phone may add friction that deters customers from canceling, but it hurts the seamless experience many customers are looking for today.
Today’s online consumer is losing patience with subscription businesses that don’t offer the ability to cancel online. Despite the relative ease with which online cancellations allow customers to leave a service, the benefits to company and customer more than outweigh the risks, including:
- Creating a more personal experience using prior purchase and data history
- Improving the experience for the customer, resulting in higher likelihood to refer and purchase in the future
- Ensuring high coverage of exit intent data by survey all customers at the moment of cancel
- Increasing the data quality by eliminating human error or interpretation
- Testing offers to save customers or identifying customers who may be more likely to retain.