Churn is bad. We all know that. Your churn rate has a direct impact on your ability to grow your business. Therefore finding ways to eliminate customer churn and retaining your existing customers are critical to your business growth. But remember that revenue can be a lagging indicator of success.
At Evergent, we believe it is important for you to address payment declines so credit card failures don’t also turn into customer churn. It is also important to understand what keeps your customers satisfied, create better customer experiences, and always optimize your opportunities. As an example, in looking at customer retention rate, there is a difference between voluntary and involuntary churn. With voluntary churn, you can boost customer satisfaction and cultivate stronger customer relationships. The options with involuntary churn aren’t quite as clear.
Yet churn in general is by far the most important concept in any subscription-based business. Your churn rate is defined as the number of customers that discontinue service divided by the average number of total active users you have during a specified period. Call it attrition, turnover, cancellations, defections and those users — sure you can call them traitors too if it makes you feel better. But the reality you may not want to face is this: churn is the direct opposite of growth. Customer churn leads to revenue churn. Consider this: 80 percent of your future revenue will come from 20 percent of your current customers. Yet a five percent increase in customer retention rate will increase profits by a staggering 25 percent to 95 percent. And if you implement best practices, you can reduce both voluntary and involuntary churn.
We see two fundamental challenges with any video subscription service: acquisition and retention.
With your acquisition efforts, you have to continually maximize/optimize offers to grab new users, offer new, innovative promotions that differentiate you from your competitors, promote coupons that draw users to your service in the first place, and provide a wide range of payment methods.
With retention, you must continually stay on top of making your offering more exciting and inviting, align subscription offers, reduce payment failures, and communicate with your customers on an ongoing basis so you always know what they want and about the latest trends.
To learn more about this important topic, you can watch the replay of a webinar we held on the best ways to combat customer churn issues.
Here’s a trick question to entice you to watch the webinar: Let’s say you run two different marketing campaigns that both cost $100,000. The first one brings in 5,000 subscriptions and the second brings in 2,500 subscriptions. Do you know which is better??