Did you know that in a recent Mckinsey study, they found that nearly 40% of eCommerce subscribers cancel their subscriptions? If you’re running a subscription box business, it’s crucial that you understand what’s at stake when it comes to retaining subscribers, because getting this right is often the difference between your financial success or failure. The best subscription box businesses have learned how to systematically reduce customer churn to ensure success and exceed their growth goals.
“The higher the churn rate, the more difficult it becomes for subscription eCommerce companies to cover their acquisition costs and to scale their revenues.” Mckinsey and Company
In order to truly make it in this industry, reducing customer churn and building loyalty are musts. Here are four ways to reduce customer churn, keep your customers satisfied, and ensure your brand continues to build its base of loyal subscribers.
#1. Don’t Skimp on Customer Service
It’s easy to get wrapped up in the excitement of running your own business. Ideating, experimenting, and finally putting an actual business plan together are some of the most electric parts of life as an entrepreneur. However, making money off of your venture requires customers, and customers have increasingly high standards for how you treat them if you want to reduce customer churn and keep it low as you grow.
Specifically, they expect stellar customer service. In 2017, Microsoft conducted a worldwide study where they picked the brains of consumers from around the world to better understand why some people are loyal to a brand, and others decide instead to cut ties. Some notable findings were that:
- 56% of respondents broke away from a brand because of sub-standard customer service
- 30% of people thought that being unable to contact an actual human being for support issues was the most irritating part of a bad customer service experience
Having the infrastructure in place to field customer questions about their subscription, an order, or anything else they may need help with plays a big role in keeping them on your side.
Screenshot from Nordstrom’s “Trunk Club” Contact Us page
Additionally, 65% of participants around the world and 79% of millennials mentioned they prefer brands offering online customer service portals – forums, message systems (like Nordstrom’s pictured above), and other avenues for figuring out answers on their own. Providing multiple options for your users to solve their problems is another key way to reduce customer churn.
#2. Have a Transparent Return Policy
You may start to see a common thread at this point – communication and being upfront with your customers are essential if you want to keep them happy. If you haven’t put together a transparent, comprehensive return policy yet, it’s time to make it happen.
The best policies include the following information in some capacity:
- How many days a customer has to make their return or claim a refund
- The way customers will be refunded (money back, store credit, a replacement)
- Which products are non-returnable or non-refundable
- Where to send the returned item
- Who pays for the shipping costs (if applicable)
- How long it takes to process the return or refund
Additionally, you’ll want to make sure your policy is visible on your website. If customers aren’t aware of how your system works, it could lead to disputes. Check out how HavenTree accomplishes this:
And in a similar vein, be sure to have your policy written in layman’s terms with clear, concise sections outlining the necessary details. You want your customers to easily be able to read and understand its content, so that when claims arise you’re both on the same page. HavenTree also achieves this with their return policy:
The very first sentence makes Mishi Box’s stance on returns explicitly clear: they are not accepted once shipped (note their use of bolding, which is being used effectively here). Although it may not be what the subscriber wants to read, honesty and transparency will go a long way toward building their trust.
As a subscription box business, you’ll encounter situations where customers are thrilled with certain products and unpleased with others. Establishing clear-cut rules for returns and refunds will help you work things out whenever any issue pops up. Never forget – your goal is to keep users for the long haul, and having a clear return policy gives you a better chance of making that happen.
#3. Reward Loyal Subscribers
This goes beyond finding some cool loyalty programs online and implementing one that suits your business (although it would behoove you to do so). You need to weigh your options, and consider offering one or more of the following:
- Discounts (first order free, recurring discounts for “subscribe and save”, specific discounts for prepaid annual terms, etc.)
- Bonuses (free gift or trial packs, holiday perks and extras, etc)
- Referral marketing programs (free swag, bonus items, or monetary rewards)
Birchbox’s Loyalty Program rundown
Birchbox executes this effectively, with a loyalty program that rewards both referrals, individual purchases and gift subscriptions. They even give an incentive to reach a certain point threshold, where the customer receives “Aces” status – which entails free shipping, more points back, and other perks (encouraging everyone to buy more and to continue and make more purchases).
Your goal is to incentivize every customer, and encourage them to engage in your product. Even better, you’d like them to bring in their friends, family members, and anyone in their network – simply because they enjoy what you’re selling and can’t wait to get loved ones in on the action. If you want to reduce customer churn, then a great way is to give your customers incentives like these to stick with you.
#4. Proactively Engage With Your Customers
Be an active business and not a passive one. Research conducted by Invesp CRO found that finding a new customer is seven times more expensive than retaining one you already have. If you simply let consumers engage with your product and website on their own terms, you’re squandering a great opportunity to solidify their business for the long haul.
Post-purchase dissonance (PPD) is a good example of why you need to be on top of things. Many customers feel regret after making a purchase or signing up for a subscription, so it’s at this juncture that you must alleviate those negative feelings before they turn into a chargeback or subscription cancellations.
To achieve this, let your new subscribers know how excited you are to have them onboard, and what’s in store for them the future. Check out how Birchbox immediately gets new users up to speed after they create their account:
Birchbox’s welcome email is effective for several reasons –
- It’s short and sweet
- It is positive and upbeat (“the fun is just getting started”)
- It emphasizes their loyalty program with bolding and bright red font
- It welcomes questions and feedback from new customers – which provide an early warning system for any issues with new subscribers and helps you reduce customer churn
Through effective email copy, you’ll be able to get things started on the right foot with every customer you encounter. If you hook subscribers from the beginning and convince them your subscription box brings some unique value to their life, they will be more reluctant to ever cancel their subscription (or even better, they’ll turn into a “super consumer”).
Customer churn may be an unavoidable part of operating a subscription box business, but that doesn’t mean you simply need to roll over and accept it. If you can find ways to reduce customer churn, you’ll be able to increase revenue, boost the lifetime value of every customer, and keep your company growing. It all comes down to trust.
If customers trust you to handle their problems quickly and efficiently (whenever they may occur), plus they firmly believe that your business brings value to their lives each time your box appears on their doorstep, then you’ll be in a great position to retain them for the foreseeable future.
Do you do anything special to reduce customer churn in your subscription box business? Share what’s working for you in the comments below.