How to beat the silent killer in your subscription business
Ever tried to fill a bucket with water…with a sieve?
No, of course not. That would be silly.
Because no matter how much water you put in that sieve, not much of it would get into the bucket.
The bucket would stay frustratingly small and empty (or an eighth full, if you’re an optimist).
And you might start to feel like maybe, just maybe, this whole activity isn’t worth it.
Does it have to be this way? No, not at all.
Here’s how you can fill a bucket grow your subscription business more efficiently.
This week we're solving for:
Problem: Involuntary churn (the sieve)
Solution: How to retain customers without reminding them to cancel your subscription
Spotlight: The good, the better and the “better luck next time”
Let's get into it!
Problem: Your Involuntary Churn Is Quietly Killing Your Growth
If you have anything to do with running subscription-based businesses, you know how dangerous churn is.
High churn rates can have a disastrous effect on your CLTV, CaC, revenue and growth rates as your customer base dwindles.
Look how much of an impact just a 1% difference can make to your bottom line...
(image from Heap)
While voluntary, or active, churn (the customers who leave you intentionally) tends to get the most focus, involuntary churn can be a silent assassin.
Unlike voluntary churn, involuntary churn is usually due to an operational issue, like failed payments, expired credit cards or bank account blips that lead to unintended subscription cancellations.
That’s your customers just falling out of your business because life happened and no one was looking.
And according to Profitwell, it can make up 20-40% of your overall churn.
So it’s worth paying attention to.
Solution: Dunning Emails, But Make Them Customer-Focused
Here’s the tricky thing about solving involuntary churn:
When customers pay for a subscription, they’re trusting you to be an essential part of their business or lives.
If your platform or product suddenly stops delivering, you create a whole bunch of problems for your customers - and damage that trust in your brand.
BUT
As soon as you remind your customers that they’re paying for your product or service, they’ll instinctively re-evaluate whether they should opt-in again or look for a new solution. And because they’re already churning, all they’d have to do is…nothing.
There’s no awkward cancellation process. No friction.
It’s too easy - and human’s love easy.
So how do you write successful dunning emails that retain your valued customers and don’t remind them that now is the easiest time to opt-out of your subscription?
Time it right
These days, most payment platforms (like Stripe, Braintree or GoCardless) automatically update and retry failed payments.
Before you needlessly contact your customers with an issue, check how your payments platform addresses failed payments and allow enough time for automatic retries to take effect.
Then build your dunning flow to catch the customers that slip through.
Keep it concise
People are busy. Updating details is a pain in the *ss.
So keep it friendly, but get to the point fast.
If you’re in marketing, you’ve likely heard the saying “What’s in it for the customer?”. Well, with dunning emails it’s keeping access to something they already have. So let’s keep it tidy.
Keep the email short. Make it easy to find the link to update their details. And limit your links to ONE clear primary CTA, and a possible secondary CTA for customer service.
Just let them click through to update their details and get on with their day.
Build desire and FOMO
Never stop building desire for your product.
Especially in pivotal moments when your customer may take a beat to re-evaluate its value to their lives.
Remind them of why they signed up in the first place by placing your value proposition in subject lines and headlines. When you do this, your customer doesn’t have to think about what value they’re getting, because you’ve put it right in front of them.
Or, you can tap into loss aversion and FOMO.
Loss aversion is a cognitive bias that describes the way humans feel the pain of loss twice as much as the pleasure of gain. Activate this by explaining what they’ll lose when their subscription ends.
See how YouTube taps loss aversion and FOMO in their dunning emails…
Use trust Indicators
Because of the internet and its many, many scams, trust is critical when you’re asking people for their credit card details.
Ideally, each email should have at least 2 of the following trust indicators:
A recognizable “From name” - keep your sender name consistent. If your customers are used to seeing your brand name or a “Name at Your Company” as a from name, keep it the same for your dunning emails.
Consistent brand voice - speaking of consistency, make sure your brand voice also follows through from your usual emails. Your tone should be more professional and concise, but your brand voice should stay recognizable to your reader.
Social Proof - third party proof provides unbiased trust markers for your brand, customer service and product. Remind your customers you deliver what you say you do with proof from other happy customers.
Personalization - the more you clearly know about your customer, the more trustworthy you seem. Go beyond first names (although, this is useful too) and add personalization elements like order details, plan details, or partial card numbers like butcher box…
Spotlight: The good, the better, and the "better luck next time" of dunning emails
Now we know what makes a good dunning email, let’s take a quick look at some dunning emails in the wild.
The Good - HULU
Hulu keeps it friendly and professional, but there's definitely room for better personalization and customer relationships nurturing.
The Better - Storerocket
Storerocket kills it with their dunning email. Clear, conversational, personal...they've got it all.
The "Better luck next time" - Squarespace
Squarespace manages the bare minimum and ends up sounding like a debt collector. On a positive note - they've got lots of room for improvement!
Last word
Involuntary churn is an unavoidable and unignorable challenge for any subscription-based business.
But follow a few simple guidelines and lead with a customer-focus and you can turn them into a relationship-building (and business growing) opportunities