Picture: Tom Guilmard
For these kinds of companies, especially those that have recently entered the market, it is natural to focus on new subscribers, lead generation and sales growth every month or quarter.
They also pay attention to how the customer ends the use of their service, and deliberately make the process extremely confusing and complex. If you have ever gone through, for example, all the hardships of canceling the cable TV contract, then you perfectly understand what I mean. In fact, if you have ever stopped using any similar service, you know that no one is too much on ceremony with those who decide to stop using their product. If this process is not annoying, it is at least very soulless. What's the point of a company wasting time working on the unsubscribe process for its former clients?
But over time, it has become more and more obvious that leaving customers should now be treated with more respect. Now many people already know the fact, which was noted by one of the largest auditing companies KPMG in its 2017 report on the business model of a software service: "customer churn" is a "must-have statistics" for companies using a subscription system. If these services start to approach the process of unsubscribing customers as thoughtfully as they do to attract new users, they will not only get measurable statistics of customer churn, but they will also be able to understand and analyze this indicator.
But many companies (especially startups) still seem to believe that if it is too easy to unsubscribe, people will be canceling their subscriptions more often, period. At least that's what Guy Marion, CEO and co-founder of a startup company called Brightback , which specializes in customer retention software with a focus on creating smarter cancellation procedures, believes.
Perhaps this opinion of Marian is due to his personal interest in the issue and is not completely objective, but his point of view definitely makes sense. He notes examples where companies (important: non-customers) have gotten very creative with the unsubscription process. For example, he liked the way Audible, an audiobook subscription company, found out that it had a whole layer of customers (university students) who did not want to pay for subscriptions in the summer. The company offered its customers a new option "Freeze subscription". Netflix, in an effort to offer its users an alternative option instead of the standard "continue using" or "unsubscribe", began to offer those who wish to unsubscribe the option to switch to a cheaper plan instead of simply losing the customer.These options are offered in a very simple and straightforward manner, as opposed to the confusing and complex conditions of using Internet + TV packages, and this is what can cause the client to change his mind to unsubscribe.
Almitra Karnik, chief marketing officer at venture capital - backed customer relationship building and retention firm CleverTap , says, “The advantage of a subscription-based business is that the barrier to entry [customers] is very low. But the barrier to exit should also be low. " Using “all sorts of tricks” to make the unsubscribe process difficult just doesn't work. “You are just delaying the inevitable,” says Almitra. And annoying customers in the process.
“The point is for the user to have a pleasant experience when they unsubscribe,” says Brightback's Marion. The process of unsubscribing a customer with a long history of using the service should be different from the process of someone who signed up three weeks ago. But in any case, when canceling a subscription, you need to ask the client a few questions in order to get basic information, in almost the same way as when an employee leaves the company: who does the former client leave to, why does he leave, is there a chance that he will return later. The purpose of such a survey is to find out what is worth changing.
Marion is fond of using the analogy that “the customer who is retained is a new customer,” and obviously he is not alone in this view. Retaining existing customers has always mattered, but now it is getting even more attention as investors are tired of " vanity statistics " - impressive numbers that are meant to shock everyone and show the company's rapid growth, but do not reflect the really important metrics of how many customer companies that continue to use the service. Now that revenue-focused services such as Blue Apron and Uber are popular, it's good to have a fresh concept."Positive unit economics". This is what this beautiful term means, if translated into simple language: let's see if interest and attention is shifting into a stable and prosperous business. For this, the profit from each client's transaction is measured. With this model of calculating statistics, reducing the number of unsubscriptions will play a decisive role.
Every IT company knows how much each new lead costs, and this cost is growing. According to research by marketing analytics company AdStage, in 2017, Facebook ad CPCs increased 136% in 6 months.
So the idea of putting more effort into retaining (rather than replacing) the customers you have already attracted becomes very relevant. Karnik, chief marketing officer at CleverTap, says the priorities of customers and their investors have changed completely. “The largest digital companies have radically revised their budget allocation and directed more resources towards retaining existing customers, rather than attracting new ones,” Karnik says. “Customer churn is very costly for the company. It's not just that you are wasting resources on acquiring a new customer, but also that you are losing the potential 'lifetime value' of that customer. "
When CleverTap was approached by the Indian mobile payment service MobiKwik, CleverTap did research and found that 30% of new customers uninstalled the app within the first week of use. When MobiKwik added various promotions and great deals for new users in the first three to four days after downloading the application, the number of uninstallations decreased by 10%. Then strategies were developed to keep customers who decided to stop using the service. According to CleverTap , as a result of these changes, "the company recaptured 23% –25% of users who previously simply uninstalled the application."
Let's consider how the subscription box services work with some content - the so-called "subscription box". Currently, there are over 3,500 companies that provide a monthly subscription to something-in-a-box (this could be clothing, beauty products, etc.). Most of them first make some kind of tempting offer in order to interest new customers and encourage them to try the service. These could be discounts, a free trial, limited offers - which would ideally lead to a long-term relationship with the customer. "I've talked to a lot of these companies," says Marion, "and they often churn between 50% and 60% of their customers in the first three months of using the service."
One of the reasons is the focus solely on growing sales through constant discounts and warming offers. Companies that take this approach “spend a tremendous amount of resources on lead generation,” writes Moira Vetter, chief executive officer of Atlanta-based marketing firm Modo Modo Agency . "Sometimes it seems like all they care about is making as many sales as possible and getting new customers as soon as possible."
But imagine the value of the statistics collected when customers decide to unsubscribe from the service - it really is the most valuable indicator of which offers are really liked by users and generate loyal customers. Or you may even find that your offer is too generous for the trial period , and users have time to take everything they need from the service, and do not see the need to continue using it.
Marion cites the results of a case study study , which includes the case of one of his first clients, the web analytics company Crazy Egg.... (It should be noted that most of Brightback's clients are B2B clients, but they are also working with two B2C startups as a pilot project.) Using Brightback's unsubscribe analysis software, Crazy Egg found that a significant number of customers unsubscribe not necessarily because they were not satisfied with the service. Customers simply didn't have enough time to figure out how to use the product or get the results they wanted. These clients can still be reached to retain them.
Although Brightback's business model is very specific, they have a valuable idea of what to pay attention to users who decide to unsubscribe. This is especially true for companies that are more interested in retaining customers, increasing their loyalty and, as a result, gradual and steady growth of income, rather than empty (but impressive) numbers of new subscriptions. The goal of the company should be “to understand why the customer decided to leave and to make him a lucrative offer that will interest him and encourage him to continue using the service,” says Marion. "The client shouldn't have any unpleasant impressions."