Sales in the Subscription Economy

Retention Over Acquisition

Many companies in the subscription service industry have shifted their focus to retaining customers over acquiring new ones. With the right approach, current subscribers will send new people to the brand via word of mouth. Businesses must cater to their existing base to secure growth and increase revenue.

The Shift to Retention Versus Acquisition

The Subscription Economy Index reports a 437% expansion in the past decade. As said economy grew, businesses collected data and could better analyze profitability. It turns out it is more lucrative to focus on retaining current subscribers — firms spend less money than on acquisition and see higher profits from each.

To remain competitive, subscription-based enterprises must offer excellent customer experience and cater to the needs of their current audience. Benefits of shifting focus to reducing churn include:

• Improve customer experience (CX): Approximately 83% of companies believe predictive analytics will improve their CX and give them a competitive advantage.
• Create advanced products: Long-term users can fill out surveys so customer service can gain insight into their needs to develop higher-level options.
• Build loyalty: Businesses focusing on retention create more engagement. Customers have no reason to look elsewhere and feel loyal to a brand they know they can trust.

When you tailor your offerings and increase customer satisfaction, you’ll reduce churn. The long-term financial benefits of retaining subscribers give businesses more predictable revenue streams and lower marketing expenses.

It’s crucial enterprises understand that focusing more on retention doesn’t translate to completely ignoring acquisition. Focusing on word-of-mouth marketing and encouraging current clients to recommend the company to their family and friends spurs rapid growth.

How to Leverage Data Analytics to Make Subscriptions Lucrative

Retaining subscribers has many long-term financial advantages, such as stabilizing revenue and lowering marketing costs. Some tried-and-true methods for success are as follows.

1. Focus on Customer Experience (CE)

Although excellent customer service is a good place to start, the CE can determine whether a client stays or leaves for a competitor. Creating a customer journey map and evaluating each buyer’s touchpoint allows enterprises to address poor reviews or complaints.

According to a 2021 Gartner survey, 73% of chief marketing officers aimed to direct their attention to existing customers for growth. The more seamless the CE, the less likely they will cancel. Brands should proactively improve customer satisfaction with policies, review those changes and rectify negative feedback.

2. Analyze Customer Profitability

Net revenue retention (NNR) sheds light on which customers to retain. Some people are more profitable than others, so companies must analyze and identify those who consistently bring in the most revenue.

NNR ideally looks at funds accrued per person minus services offered, cost of products, and the time and resources used to track them down for payments. An NNR above 100% shows profitability and indicates which clients are most valuable financially. As such, attention to detail is essential for higher revenue when working on retention.

3. Offer More Than Expected

The most successful subscription services deliver more than they promise. If the person signs up for a weekly subscription box containing one product, throwing in a freebie, sticker or discount for a future purchase goes a long way.

Brands should also consider a loyalty or referral program. Balancing acquisitions and retention spurs growth.

4. Tap into Artificial Intelligence (AI)

Analyzing internal data can take a lot of time and effort. Fortunately, AI developments allow companies to see what products sell best and which customers match the buyer personas of current subscribers. These tools also shed light on weak spots.

Around 56% of businesses use AI chatbots for customer service. Advantages include the machine sorting through data in seconds and offering valuable, accurate insights.

5. Provide Flexibility

One way enterprises can retain customers is by giving them options during the cancelation process, such as a smaller package or a la carte services. The more flexibility one can offer, the more likely the person will change plans rather than completely leave.

Add-ons to initial services are other possibilities. For example, an internet service provider offering a monthly website hosting package might provide domain name management or web design services.

6. Monitor Churn Signals

Subscribers may signal they are getting ready to unsubscribe, such as engaging less with social media accounts. They may also send a question about prices, or post customer service or shipment complaints online. Companies should pursue a last-ditch effort to retain customer loyalty by requesting they fill out a survey to make improvements and identify their needs.

Care About Your Customers

It’s tempting to keep adding new subscribers because each one is worth revenue. In application, focusing only on acquisition isn’t as profitable as balancing the two efforts. By leveraging data analytics to understand subscriber behavior, brands learn their preferences and understand how to solve pain points. They can then tailor offers to fix problems, creating customer loyalty and satisfaction.

Devin Partida writes about investor technologies, big data and apps. She is also the Editor-in-Chief of ReHack.com.