Churn Management: What it is and why you need it

Subscription commerce continues to dominate with no signs of slowing down. Recent estimates value the global subscription e-commerce market at $13.23 billion. What’s more, it’s expected to reach $478.21 billion by 2025.

Companies across industries are building out subscription models to meet customer expectations and create a predictable, recurring revenue stream.

But as any SaaS business leader will tell you, building a successful subscription offering isn’t as simple as setting up recurring payment options and watching the revenue flow. As subscription savviness grows, consumers are doubling down on making sure they find value in each and every one. Thus, requiring subscription businesses to implement sophisticated churn management strategies to keep pace.

churn management guide

What is churn management?

Churn management is the process of identifying why subscribers cancel and deploying strategies to retain them. If done correctly, it is more than just a program that sits within a single department. It’s a concept that should be ingrained into your company’s DNA.

Over and over, we find companies have the most success with churn strategies when every department is invested in understanding why your customers buy your product and continually identifying new opportunities to add value. For example:

  • Marketing teams can determine how best to entice subscribers who signed up with a free trial to convert to long-term paying customers. Or they can assess after what time duration a subscriber is most likely to churn and create promotions to win them back.
  • Finance teams can evaluate the sweet spot of how much a customer is willing to pay for various subscription levels. Is your product better suited for monthly or annual renewal terms, for example? How about a usage-based model?
  • Product teams can use churn data to learn what features and functionality customers want to prioritize their roadmap.
  • Customer success teams can ensure that value is being communicated effectively and often. For example, this could include user-specific updates highlighting usage reports and trends (think, Spotify’s Year in Review).

While companies love the set it and forget it nature of subscription payments, the reality is that recurring customers regularly evaluate one thing: does the value that I get from this product align with the cost?

Successful churn strategy ensures that the answer to that question is a resounding “yes.”

4 benefits of successful churn management

Decreasing your churn rates is essential to the health of your business. The benefits of churn strategy management range from healthier financials to increased customer satisfaction and can even lead to a better product. The following are four benefits to building a churn management program.

  • Offsetting high customer acquisition costs — you spend a lot of money to acquire a new customer from sales and marketing tactics to limited-time offers and even giving away free trials. But the value of winning a new customer is only as good as your ability to keep them long-term. Lowering your churn rates increases the value of every dollar spent bringing new customers in the door.
  • Increase profitability and lifetime value (LTV) LTV is the total amount of money you receive from a customer throughout their entire lifetime as a customer. One of the primary benefits of a subscription model is that it’s tailor-made for high LTV. But that’s only true if you can keep your churn rates low. If you have a high churn rate, it means that subscribed customers aren’t gaining the value to keep paying for your product. Each subscriber you keep from churning improves your business’s overall profitability.
  • Uncover opportunity for product enhancements — Investing in churn strategies specifically at the point of cancellation can arm your company with an abundance of data to help better understand your buyer. Use this data to identify insights and trends on new features or functionality that would add value for subscribers and keep them from canceling.
  • Identify opportunities for up-sell and cross-sell — It’s not just added functionality that you can identify within your churn data. Look for potential new add-ons you can build into your product suite and offer your customers as up- or cross-sell opportunities.

While no subscription business is immune to churn, even small decreases can positively impact your revenue. Start by understanding your churn, putting yourself in your customers’ minds, and build a churn management approach tailored to your business.

Looking to better understand and nurture your churn, maybe even prevent churn before it happens? Check out how ProsperStack can help your business grow while saving customers!

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