Churn management

4 Churn Management Strategies to Increase LTV

October 15, 2021

How can you win back a customer who has decided to cancel? It may seem like an impossible task, but it’s really about putting yourself in the mind of the consumer and looking for opportunities to win their trust and add value to their lives. Before we dive into the different strategies, it’s important to understand what type of churn you are dealing with.

Types of Customer Churn

Average churn rates vary widely across industries, but range from 16% on the low end (Business Services) to 37% on the high end (Media). With stats like that, it’s hard to ignore the effect that churn can have on your business.

We recommend companies break customer churn into two main categories, since each requires a different churn management approach.

Involuntary Customer Churn

The first is involuntary (or passive) churn – this is when a subscription doesn’t renew for reasons other than the customer choosing to cancel. More often than not, a payment failure or bank decline is due to something like a changed or expired credit card, maxed credit limit, or the like.

Voluntary Customer Churn

Then there are two types of voluntary (or active) churn.

  • Top of funnel — this is when a subscriber decides to cancel within the first few months after sign-up. Perhaps they completed a free trial or took advantage of some other sign-up offer and have decided not to convert into a long-term customer.

  • Churn at point of cancellation — this type of churn could happen at any point in the customer lifecycle. Despite what many companies believe, there is a massive opportunity to convince a customer to keep their subscription even after they’ve reached the point of cancellation. I find that this is often the most overlooked type of churn, so let’s dive into what an end of funnel churn management strategy might look like.

Churn Management: A Guide to Keeping Your Customers Coming Back for More

Churn Management Strategies

The following 4 techniques can get you on the right path for reducing churn and increasing your overall LTV.

  1. Be transparent – if you’re trying to keep customers from cancelling it might be tempting to make the act of cancellation difficult. I cannot stress this enough — don’t do this. The goal of your churn management strategy should be to nurture the customer relationship and show them the value that your product provides. You want to convince them to choose to stay subscribed. It’s just like that ex who tried desperately (and unsuccessfully) to win you back, making cancellation difficult is going to cause frustration and erode trust.

  2. Invest in listening and learning why customers churn — the best way to understand why a customer is canceling their subscription? Ask them. Investing in a hosted cancellation flow that starts with asking the customer why they are leaving will give you the data you need to begin to understand your churn. Use this intel not just to inform your win-back strategies but also look for patterns that can feed your product roadmap, pricing strategy, or other business initiatives to address churn higher in the funnel.

  3. Use proven persuasion techniques to entice customers to stay — once you know why a customer is leaving, you can serve up proven techniques to convince them to stay.

    • Perhaps it’s all about price — is there a deal you can offer to convince them to sign up for another three months?

    • Perhaps they aren’t getting the amount of use out of your product they initially anticipated — can you drop them to a lower-level or a more usage-based payment plan?

    As you test these win-back strategies, keep a close eye on the data to understand what works; not just in the immediate win-back, but in forging loyal, long-term customers.

  4. Provide continuous value through the lifetime of your customer relationship — at the end of the day, whether or not a customer churns comes down to one thing: does the customer think they are getting good value for the cost. Your business needs to become hyper-focused on value: building value, adding new value, and showcasing the value over and over again. Think about it – would you still subscribe to Netflix if they were mailing discs? Do the celebrity chef recipes on Blue Apron make you more inclined to subscribe? These continued value-add initiates matter. By looking at the data of why subscribers churn you can begin to build initiatives that align with what your customers actually want.

Churn is inevitable. It’s a part of every subscription business and cannot be ignored. Luckily, there are proven tools and tested strategies to help you build a successful churn management program to grow your customer LTV.

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