The Ultimate Guide to Automated Customer Retention

As a subscription-based business, you've put your all into customer acquisition. But despite your best efforts, you haven't quite solved your biggest business challenge.

Churn.

The average churn rate across industries and business types is 5.6%. So, managing churn is critical for growing your business — especially when research shows it costs up to 7x more to acquire a new customer than to retain an old one.

After working with [hundreds] of subscription-based businesses, we've seen firsthand the value of winning back customers at the point of cancellation. Yet, thousands of companies are overlooking this massive opportunity.

Why?

They don't realize that automated customer retention solutions exist or how these solutions help companies like yours:

  • Reduce churn
  • Increase retention
  • Grow revenue

Now, we're not promising we can help you eliminate churn entirely. Instead, we want to help you discover the role an automated customer retention solution plays in decreasing churn and keeping your customers renewing again and again.

5.6%
avg. churn rate
7x
new customer acquisition cost compared to retainment
$
increased retention leads to increased profits

What is automated customer retention?

If you provide a subscription-based service, you already know the business model has plenty of built-in advantages — like more predictable revenue streams and the chance to create longterm customer relationships.

But there are some disadvantages, too.

To achieve long-term growth and profitability, you need to retain existing customers because finding new ones is much more expensive.

That's where automated customer retention comes in.

Some of the world's biggest brands use automated customer retention tools to save customers at the last second with persuasive offers, discounts or incentives. Plus, the solution helps brands understand why customers wanted to leave in the first place. For example:

  • Are customers more likely to churn after a certain period of time?
  • Is there a seasonality to when more customers tend to churn?
  • What are early red-flag indicators that a customer is considering canceling?

With these insights, you're in a much better position to develop highly effective win-back strategies and deliver the right messages to the right customers at the right time.

The result? Less churn and more profit.

5%
customer retention
Increasing customer retention by only 5% can increase profitsanywhere from 25-95%.

How automated customer retention works

Let's take a closer look at the automated process. Here's how it works.

1

Step #1 — Create a cancellation flow

We'll help you create a beautiful cancellation experience designed around best practices, and you can also customize the flow. Now, you're ready to collect customer feedback and respond quickly to changing needs.

Embed the form — Seamlessly integrate the ProsperStack cancellation flow directly into your product with minimal dev time.

Learn from cancellations Collect actionable data from customers when they cancel and customize your survey questions at any time.

Prevent churn with offers — Automatically present coupons and other incentives to retain customers based on their answers and segments.

Analyze and win back — Use the insights you've gathered to improve your product and re-market to lost customers.

2

Step #2 — Refine and optimize as you learn

Once you have a foundation in place, you can customize freely to discover what works best for you. Just mix and match our reusable components to create a unique cancellation experience.

Here are some ProsperStack customization features our customers appreciate:

You can make changes quickly - you can act quickly to make changes to your cancellation flow at any time. And the best part? You don't need a developer. It's just a few clicks and you're done.

You can create sophisticated rules — that deliver the best offers to a customer based on their responses to a survey. For example, say your customer offers feedback that your pricing is too high for them. You can respond with an offer to save 25% for six months. Or give them the chance to pause their subscription rather than cancel it.

You can discover what's working with A/B testing — we're big fans of putting different offers headto-head so you know what’s performing best. For example, when ProsperStack is connected to your payment processor, it can automatically:

  • Apply coupons
  • Extend trials
  • Change plans
  • Pause subscriptions
  • Create your own offer with custom development
ProsperStack integrates with the most popular billing platforms to automate the entire cancellation experience:
StripeChargebeeRecurlyPaddleChargify
You can be up and running with just a few lines of code. Really.

How automation helps with customer retention

When you know precisely why customers are leaving, you have a much better chance of keeping them. That’s the main point of this entire guide.

You’ll also have data and insights that help you make a better product, pricing and marketing decisions and address potential retention issues further upstream.

Just think what you could do with:

  • All of your customer exit survey data in one place
  • Direct correlation between lost monthly recurring revenue (MRR) and the reasons customers are leaving
  • Sentiment from customers’ free-form answers

This data gives people at every level of your organization tremendous problem-solving insight. Then, rather than vying for limited development resources, your teams can work together to tackle your most significant retention issues.

Why you should be using automated customer retention software

Customer retention and business health go hand-in-hand. So, if you’re not aggressively managing retention, you’re missing out on healthier financials, improved customer satisfaction, and even a better product.

Here are a few reasons you should be using automated consumer retention software.

More predictable and stable revenue streams

Shifting from a pay-once model to subscription-based billing allows better insight into your revenue forecast. If customers don’t leave, you can count on that ongoing revenue. In turn, a subscription model reduces your volatility because revenue is no longer tied solely to new customer acquisition. As you lose fewer customers, your overall profitability improves, and your ability to predict future revenue becomes easier.

Optimize the customer experience

When you have exit-intent data, you’re not left guessing why a customer didn’t renew. You can identify trends to improve your product, business or customer experience on a broad scale. And you can leverage user-specific intel to tailor your response for each customer.

Better product-market fit

Many people believe that your customer retention metric is the single best indicator of product-market fit. Why? Because if your customers continue to renew, it means they find lasting value in your product. Let’s extend that perspective even further. By understanding why your customers leave, you can identify opportunities to improve your product and add even more customer value.

Insights to help the whole team
  • Customer success — help your team understand why customers leave and give them a reason to reach out to at-risk customers who have viewed your cancellation page.
  • Marketing — give your marketing team a chance to create better win-back campaigns and tailor your offers and messaging based on why customers are leaving (and understand the best time to reach out based on a customer’s exit reason).
  • Product — allow your product team to make the most of the data you have, whether that’s identifying product problems or understanding when bugs, missing features, or product performance correlate to customer retention.

Automated customer retention strategies

Now that you understand the importance of customer retention, let's look at the most effective strategies to reduce churn and increase customer lifetime value.

Understand why you’re losing customers

The first step to improving customer retention is to invest in understanding it. Start by calculating your churn rate using this basic calculation:

(
Lost Customers
Total Customers at Start of Chosen Time Period
)
100 = Churn Rate

Next, you need to understand why you’re losing customers. An automated cancellation flow that asks customers tailored questions at the point of cancellation helps you know what issues you need to address.

Segment users to prioritize your best customers

Once you understand why you’re losing customers, use the data to segment customers based on factors like:

  • How long they’ve been a subscriber
  • The reason they’re canceling
  • Likelihood you can win them back

Your goal? To determine the most profitable customers and prioritize your efforts.

Develop win-back strategies most likely to convert

Armed with data about what customers are the most profitable and why they’ve opted to leave, you can determine the best incentive to win them back. For example, don’t be afraid to offer new or extended discounts (remember, the cost to acquire a new customer is likely much higher than a discount). However, it isn’t always about price. Maybe they’re on too high of a usage plan, and an alternative is better suited for their needs. Or perhaps a feature you’re just about to roll out is something they’ve been wanting, and an offer to be an early beta tester will be the push they need to give your product another chance.

Look for opportunities to add value

Customers keep their subscriptions when they feel they’re getting good value for the price. So, even though subscriptions are designed to build long-term relationships, you must continually look for ways to add and then showcase even more value.

How to choose the best automated customer retention for your business

Not all automated consumer retention software includes the same features and benefits. Here are some criteria you can use to assess whether a potential partner can build a program that grows with your business:

  • Ease of integration — will the software easily plug into your existing billing platform and CRM?
  • Flexibility — does the user interface allow you to customize and adjust quickly based on what's happening in the business?
  • Growth roadmap — are they adding new features and functionality to keep up with the ever- changing nature of a subscription business? (View ProsperStack's changelog)
  • Performance measurement capabilities — can you easily measure the effectiveness of your customer retention efforts? Do you know whether the solution is improving your bottom line?

Ready to get started?

It's hard to build a thriving subscription business. But it's easy to integrate an automated customer retention flow into your customer retention efforts.

Really easy.

You can have a ProsperStack hosted cancellation flow live within a few hours — retaining customers, reducing churn and growing revenue.

Let us handle your offboarding so you can get back to what you do best.