Churn comes in two flavors…

…and while both flavors affect all sorts of businesses, subscription businesses are often particularly susceptible to churn. But what is churn? In a nutshell, churn refers to the percentage of customers who unsubscribe from a service at the end of a given billing cycle. The corresponding percentage of customers that stay provide the yin to this metric’s yang — retention rate. It’s one of the most important metrics a subscription business entrepreneur can track, and it can be measured at any interval. Weekly, monthly, and yearly are not unheard of, but if your products ship or release at other frequencies, you can base your calculations around them too, of course.

The two main types of churn are voluntary or involuntary (sometimes referred to as active and inactive respectively). Both should be reduced as much as possible. It’s near impossible to have a 0% churn rate, but low single digits is definitely worth aiming for. 

Voluntary vs involuntary churn: a comparison

Let’s find out more about the differences between voluntary churn and involuntary churn.

Voluntary Churn

Voluntary churn is simple to understand. It occurs when customers (actively) choose to end their subscription. Why would they ever do this? Well, just because they were happy to sign up doesn’t mean that they’ll be fully enamored with your offer once they’re in, and remain happy to stay in the long term.

It’s not all doom and gloom though! If customers are willing to leave voluntarily, you can probably persuade them to stay voluntarily, too. In order to reduce voluntary churn, it is crucial to understand the following two points: when and why they’re canceling their subscriptions. It’s harder to reduce this kind of churn because it’s an active choice on the part of the customer, which requires a more sophisticated approach to help you get to the bottom of it.

Tips to address voluntary churn

The active nature of voluntary churn is reflected in what is needed to address it — active reflection. Normally, if you were able to hook someone in, they had some expectations of what it would be like to experience your product offering. As we said, once you’ve hooked them, they’re yours to lose. What’s great though is that it’s always a learning opportunity. If lots of people choose to leave, find out why! You’ll be surprised what you find out, whether they expose flaws in the customer experience or challenge your pricing or product quality.

Here’s how you can reduce voluntary churn: 

  1. Set up a survey to collect feedback when people cancel their subscriptions
  2. Provide an option for customers to get in touch in real-time, through a call or a video chat
  3. Keep collecting data from these sorts of cancellation interactions and use them to inform your product offering and future roadmap
  4. Identify when people abandon your product, and improve that particular part of the customer journey
  5. Identify why people cancel, and address those problems with FAQs or adjust your product or service around their cancellation reasons
  6. Keep people engaged by communicating with them throughout the onboarding process and beyond

You should also know that the customer journey doesn’t end upon cancellation. Once you’ve covered these basics, you can even set up a reactivation program. The right kind of reactivation campaign, set up so former subscribers can read about it and hear about it even after canceling, is a strong way to keep brand awareness and one of the cheapest ways to win the customer.

Involuntary Churn

Involuntary churn is also pretty straightforward — it occurs when someone’s subscription ends with zero active input on their part. For example, this can occur when someone’s credit card declines or their direct debit bounces for some reason, or when their card is expired or automatically canceled due to theft. 

Tips to address involuntary churn

Involuntary churn can be optimized using dunning tools, but at some point this just won’t be as effective enough. 

For the unfamiliar, dunning refers to the process of asking customers to pay the money that they owe to a company. Often, dunning occurs when a customer doesn’t have enough funds in their account or their payment method gets declined.

An optimized dunning process might have some nice custom emails that engage the customer to a point where they’ll make an effort to rectify their payment, but if they ignore it and their subscription gets canceled automatically, it’s involuntary churn. 

Here’s what we’d do to bring those numbers down:

  1. Preemptively send reminder emails (possible on some platforms using built-in functionality) before cards are set to expire.
  2. Make it easy to update payment details, i.e. through automatically generated secure links that don’t require subscribers to sign in.
  3. Set up your subscription to enable customers to receive their current month’s subscription even if they change their payment details after you ship it out.
  4. Set up a friendly and encouraging dunning process that emphasizes the advantages of resolving any payment issues while still giving them a finite amount of time to do so.

Managing churn as a subscription-first entrepreneur

We’ll reiterate it again – obtaining customer feedback (alongside other general data) during the tense period separating churn from retention is a unique learning opportunity that many non-subscription-first businesses don’t get. The more data you have, the stronger your arsenal will be when you need to find new ways to delight customers and incentivize them to stay in the long term. This applies to voluntary and involuntary churn, too.

Experts in the subscription space have noted how subscription businesses can gather customer data much faster than their traditional competitors, citing brands like Stitch Fix, Dollar Shave Club, IPSY, and Birchbox in the physical subscription space and Netflix, Spotify, and Peloton in the digital subscription space as examples of companies that adapt their offering based on data and personalization.

A good way to start is to look at your churn numbers over time – perhaps a month, or a year. By identifying recurring chronological peaks and troughs in the graph, you’ll be able to get the low hanging fruit. Dig deeper, and you might even be able to trace individual shipments (indicative of a certain type of shipment) that led to a noticeable decrease in subscribers. If you’re then able to transpose data, filter it and perform a visual cohort analysis, you’ll find it even easier to spot useful patterns. 

Once you’ve got a baseline level of knowledge, you can create offers designed to mitigate cancellations based on the most common reasons for unsubscribing. If you require customers to call to cancel, it’s an even better chance to dive deep into why they want to leave you, and provides a special opportunity to give them a personal (i.e. from your voice to their ear) discount, just for them. Wouldn’t you feel special too?

In addition, a reduction of both types of churn can be achieved by building an integrated customer journey. This means ​​designing a customer journey that is in store, online, offline, on-session, and off-session. The customer experience is ongoing, it doesn’t stop when a purchase is made or a shipment is received. In this context, delighting your customers means hitting above their expectations, which can reduce their likelihood to leave. 

Here are some final, general suggestions on real-life techniques you can use to delight your customers and achieve your churn reduction goals:

  • Create a thoughtful, world-class experience from the packaging choice to your delivery and customer support response time
  • Surprise customers with unexpected extras as gifts in their packages
  • Provide a discount on related products after a certain period of time
  • Award customers with a discount on their 6th month subscription anniversary
  • Offer a free shipment after 12 months

It's your churn now...

There’s a lot of problems that can arise due to churn, but with an analytical mind and some rigorous deep-diving, your retention rate can grow dramatically. Take your time and tackle problems one by one — remember, if Rome wasn’t built in a day, a perfectly optimized customer retention machine can’t be either. 

By Zaki Gulamani
Сontent creator at Subbly