7 Tips to Reduce Customer Churn for DTC Subscription Businesses

Reducing customer churn means better retention, more satisfied subscribers, and increased customer lifetime value. Here's how subscription brands can do it.

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    The dreaded unsubscribe button. It’s an inevitable reality for DTC subscription brands. Part of the beauty of subscriptions is that consumers freely choose to remain subscribed even though they know they can leave — which also means they can just as easily choose to cancel. 

    This loss of business is the definition of customer churn, and for subscription brands that heavily rely on their loyal repeat customers, it hurts. But the good news is that the rise of the eCommerce post-purchase experience has transformed the subscription landscape and opened up the door for countless opportunities to improve the overall customer experience. In other words, unlike the set-and-forget model, the new post-purchase and customer-oriented model leaves a lot of room to greatly reduce your churn rate. 

    While there isn’t ever a way to fully churn-proof a brand, here are 7 proven strategies and tips that can substantially reduce customer churn for your Shopify subscription brand.

    What is Customer Churn?

    Smartrr cancel reasons

    Customer churn refers to the customers who have unsubscribed from your brand. Your churn rate is a way to calculate the exact percentage of people who have unsubscribed to help you gauge your retention rate.  

    There’s also a term called revenue churn, which specifically looks at the lost revenue (as opposed to lost customers) that you experienced in a given period of time. This can apply to subscribers who haven’t churned but chose to downgrade their subscription, which is common among B2B SaaS companies. 

    Why is Reducing Customer Churn Especially Important for Subscription Businesses?   

    Of course, all businesses want to retain their customers and minimize any lost business — but decreasing churn is especially crucial for subscription businesses. That’s because subscription brands operate and rely on recurring revenue, which is generated by, you guessed it: subscribers. 

    In general, subscribers are far and away the most valuable customers, as repeat customers are worth 22x more than the average customer. Plus, with customer acquisition costs (CAC) higher than ever, retaining loyal subscribers is proving to be the best strategy for long-term growth and increased customer lifetime value.

    How to Calculate Churn Rate

    The churn rate formula is simply a mathematical approach to understanding how many subscribers are leaving your brand in a given time period. 

    To calculate it, identify a set period where you’d like to assess your churn rate. Then, take the number of subscribers that you started with at the beginning of this period and subtract the number of subscribers from the end of that same period, plus any subscribers you acquired in this time. Newly-acquired subscribers can mask your actual churn rate, so factoring them in helps give you an accurate sense of your subscriber churn.

    Customer Churn rate Formula

    So, Why Do Subscribers Churn?

    Before we dive into churn-reducing tips, we have to discuss an important topic: why subscribers churn in the first place. 

    Even though there will always be unique individual reasons why subscribers may leave, there are still overarching common reasons behind subscriber churn — and understanding these factors can help inform key retention strategies. 

    First, we have to acknowledge that there are two types of customer churn: voluntary and involuntary

    Let’s take a look at voluntary churn:

    Why subscribers churn
    • Pricing. If subscribers feel like they’re spending too much money every month, they might cancel in an effort to cut back. And with 74% of consumers reporting that pricing influenced their buying decisions, this is becoming increasingly common. Similarly, believing your product isn’t worth the value of its sticker price (even if the customer can afford it) is another common cause of churn.
    • They switched to a competitor. Another reality of business in general. Sometimes, you lose customers to a competitor — whether it’s because the brand is less expensive, offers an element that your brand doesn’t, or provides a great sign-up deal to subscribers who switch. 
    • They didn’t love your product. Hey — it happens. Sometimes it really is just a personal taste thing, although it could ultimately reflect on your brand not yet having found a good product-market fit (more on that later).
    • Their customer experience was bad. Customer experience matters a lot nowadays. As technology strengthens, customers increasingly expect to have an engaging and seamless experience coupled with strong customer support. About half of consumers will switch to a competitor after only one bad experience, and that figure climbs to 80% after more than one bad experience with customer support. 

    As for involuntary churn, that happens when a subscriber accidentally churns due to elements that have nothing to do with your business — like an incorrect credit card expiration date, a card getting lost or stolen, an incorrect billing address, or a rejected payment due to insufficient funds or a customer exceeding their credit limit. 

    Remember — identifying the underlying cause of customer churn can ultimately help you make important optimizations to your subscription offering. 

    Reducing Customer Churn: 7 Tips to Lower Your Subscription Churn Rate & Boost Customer Retention

    Now that we’ve covered the definition of customer churn, why it matters for subscription brands, how to calculate it, and why subscribers churn in the first place, let’s talk about some tips and strategies that subscription eCommerce businesses can use to reduce their churn rates.  

    Implement Failed Payment Notifications

    Our first tip is a super easy one. With failed payments accounting for almost half of all subscriber churn, one of the quickest and most effective ways to prevent involuntary churn is to make sure you have failed payment notifications set up. That way, your subscribers can find out instantly if something has gone awry with their payment information. 

    And pro tip — you can also set up our Smartrr and Shopify Flow integration so that you also get notified whenever a subscription transaction attempt fails. 

    Utilize Cancel Reasons

    Joggy subscriptions cancel reaons

    There is a powerful question you can ask a subscriber who is trying to cancel: how come? 

    This one question can help you instantly identify if a subscriber is leaving for a reason you can easily address. For instance, Joggy asks in their cancellation flow if the reason is due to an address change or a surplus of products. In both instances, the subscriber can quickly make these changes (switching their address or decreasing their subscription cadence, respectively) directly in their customer account portal. The cancellation reasons feature basically acts as a filter to catch any unnecessary unsubscribes who are leaving for invalid reasons. 

    This tactic can also give you invaluable insight into overarching patterns in your churn data. Let’s say you’re noticing nearly everyone is unsubscribing due to your pricing (and remember, pricing is one of the key reasons people unsubscribe in the first place). This might be an indicator that it’s time to revisit your subscription pricing. Chances are other subscribers may hold a similar sentiment even if they haven’t unsubscribed yet, and addressing the complaints brought up by your lost audience can both increase retention and strengthen subscriber relationships all around.

    Neuro Gum PDP

    Even if you can’t make a permanent change regarding the subscriber’s reason for canceling, this is still an opportunity to offer them a temporary retention perk — like a one-time discount if they complain the product is too expensive.  

    Brands that implement Smartrr’s cancellation flow have seen impressive results, with some brands even retaining more than 40% of what would’ve been lost subscribers after implementing cancel reasons. 

    Leverage Your Subscription Data

    Your churn data tells a story even beyond cancellation reasons. Once again, we advise that you look for overarching partners. For example, ask yourself: is there a period of time when subscribers are more likely to churn? 

    We’ve often seen that brands can pinpoint a month when engagement drops off (which typically ends up being around the three-month point, but not always). Identifying this high-risk time means you can offer additional discounts to everyone right at this three-month mark to heighten engagement and incentivize subscribers to stick around. 

    Another great question to ask yourself is whether you can detect any warning signs that a subscriber might be about to churn. An example we’ve seen is subscribers choosing to skip their orders more than a couple of times in a row. That way, the next time you identify a subscriber who has just skipped their order for the third time in a row, that’s a great chance to reach out with a discount, a free gift, bonus loyalty rewards, or something else. 

    Lean Into Flexible Subscription Management — And Don't Forget to Communicate It! 

    Offering flexible subscription management is one of the most sure-fire ways to improve your retention and reduce churn. Allowing subscribers to have complete control over their subscriptions means they can truly mold your brand into their lives, even and especially as their needs change. 

    Flexible Subscription Management Smartrr

    This means they can…

    • Skip an order
    • Gift an order
    • Swap out items
    • Edit their subscription frequency 
    • Delay an order 
    • Pause their subscription
    • Update their address
    • Update their payment
    • … and more

    If need be, you can always utilize cancellation reasons as your last-ditch effort to educate subscribers about the flexibility and control that their subscription offers. But ideally, your subscribers should be well-versed in this flexibility simply by being a subscriber. And the way to do this is in your communications. 

    From your social media to your email & SMS marketing, you should be promoting the many perks of your flexible subscription offering wherever you can. That way, a subscriber won’t even attempt to cancel their subscription if the only thing that’s changed is their address — because they’ll already know they can easily adjust their settings in their customer account portal.

    A bad customer experience is one of the main drivers that causes subscribers to churn. Ensuring that they can easily and clearly control their experience in an intuitive customer account portal is an excellent way to reduce your churn. 

    And P.S. — Smartrr makes it super easy to offer an array of flexible subscription management options. All you have to do is choose what you want to display and easily toggle these features on or off.   

    Offer Exceptional Customer Support

    We’ve already talked about how quickly customers will abandon a brand if they receive bad customer support. It’s also helpful to remember that customers often contact customer support begrudgingly. In fact, 73% of customers would rather solve an issue on their own than get help — and this same report found that most people would actually prefer to clean a toilet than get support. Yikes. 

    So what does this mean? For one, it means you should take every effort to lean into subscribers’ self-sufficiency (see flexible subscription management section above). This can also take the form of “how-to” resources or helpful FAQs that proactively answer subscriber inquiries. But it also means your customer support must be stellar. Because poor customer support can scare away customers faster than a bee on a playground. 

    Whether you’re outsourcing support or providing it internally, be sure to invest in the best support team. Support should be friendly, helpful, responsive, and personalized — and don’t ever be afraid to give away discounts or free products to keep subscribers satisfied. 

    Customer support surveys are also a key tool to utilize. They’re one of the best ways to monitor the success of your support offering and make immediate improvements if need be. 

    Build In Rewards For Staying Subscribed

    “Subscribe and save 10%” is great for acquiring subscribers — but that’s not enough to hold their attention long-term.

    Whether it’s an engaging loyalty program or unlockable loyalty discounts that remain in perpetuity, building in meaningful rewards and incentives is key to boosting subscriber retention. 

    You can also provide birthday perks, anniversary gifts to celebrate milestones, subscriber-exclusive products, random free products, and more. All of these unexpected touchpoints will delight your subscribers and encourage them to stay subscribed to see what other surprises you have in store.  

    Pause & Reconsider Your Audience

    If you’ve tried many of these strategies and are still seeing a high churn rate, there’s a chance that you either haven’t yet found or are failing to attract your niche audience. And that’s okay. 

    Take Unbloat, a gut health supplement for people who bloat. Technically, bloating can happen to anyone — but Unbloat didn’t start seeing impressive growth until they identified their target audience: women undergoing big hormonal changes (in pregnancy and in menopause). 

    Pausing to ensure you have a solid product-market fit through market research, satisfied customer surveys and customer profiles, as well as looking at who competitors are attracting can be just what you need to recalibrate. Drawing in the right audience is a necessary prerequisite to lowering your churn rate.  

    While customer churn is unavoidable to an extent, that certainly doesn’t mean that subscription brands are at its mercy. By creating an engaging and flexible subscription offering, listening to subscriber feedback, leveraging data, and refining product-market fit, brands can substantially reduce their churn rate and foster life-long customer relationships. 

    Want to learn how Smartrr can equip you with the subscription tools you need to keep your churn rate low? Get in touch.