With subscription businesses supercharged by recent events, the time is right to look at what the key players are doing to keep customers into the future. Facebook’s Head of Technology and Innovation, Jason Juma-Ross, explains why having a concrete retention strategy ought to be a top priority.
I had a customer service experience the other day that you might be familiar with. I rang up a large business and told them I’d like to cancel my longstanding subscription. New competitors were giving me everything I wanted for a lower price. And they were doing it better with less friction. It was time to break up.
Unsurprisingly, the person I spoke to said: “We’re so sorry you want to leave. Perhaps renewing your subscription with a 30% discount might help?”
Which only made me wonder, why hadn’t they offered this rate earlier?
For too many businesses, this kind of firefighting is what passes for a retention strategy. But, show me a business that relies on this approach and I'll show you one that is on the ropes.
It doesn’t have to be this way. The key is having a proactive plan in place to engage your customers so they never decide to pull the proverbial ripcord.
If you’re a subscription business - or are investigating a subscription platform - there is some encouraging news. While this year has been a challenging one, the vastly altered circumstances we face are providing impetus for many companies in this field. Especially those that were ahead of the game digitally before COVID-19 struck.
Kantar research from August revealed that 71% of surveyed Australians said COVID-19 has had an impact on them trying a streaming video service they had never used before*. That’s no doubt why high profile businesses like Netflix are soaring at present. The streaming behemoth added over 10 million new subscribers globally in Q2 as socially isolated people found themselves seeking new forms of entertainment in the home.
Local success stories like Stan, Kayo, and Binge are also reporting impressive numbers but subscription businesses cover more than just entertainment. Canva - whose General Manager of Enterprise, Tiffany Tai, I recently spoke with as part of the Future Now series - is also hitting new highs and launching new subscription products.
Of course, not every business is a unicorn. But the subscriber businesses prospering right now all have a few things in common. It’s not simply that they are good at acquiring new customers, they are masterful at retaining them, especially those they find most valuable.
Unlike in many traditional businesses, the retention process does not begin months after the first transaction. It starts right at the point of sale, perhaps even earlier. When you’re running a business where a customer pays you $10 a month and there is no lock-in contract, you are incentivised to keep delivering value. This imperative informs your communications and product strategy. Churn, after all, is a signal from users that you lack a compelling product.
On the marketing side, retention becomes a consideration well ahead of the first transaction. Smart subscription companies ask how they can target customers most likely to find value in their products. They invest in analytics and machine learning to actively identify prospects who the service will be of most value to - and who will also value the service the highest.
For the traditionally-minded though, retention is still seen as a reflex action to retain dissatisfied customers - a last resort. It’s also something these businesses decide isn’t worth spending money on, because of low returns. When that happens, retention strategies devolve towards stand-alone email marketing. It doesn’t work, so we’re not investing in it, so it doesn’t work.
So, how do successful subscription companies hold onto customers? The foundation is use. If customers aren’t finding value in your products, churn in a few months time becomes inevitable. Worse, users can become ‘zombie customers’ who are reminded to churn when they are prompted by any marketing material.
So if a customer isn’t using the product after a few days, subscription companies will start to promote the content or the features that are likely most useful, gather more information, and build from there. Onboarding and the new user experience can be as critical as the acquisition campaign.
These strategies aren’t just the domain of the streaming behemoths, as illustrated by a company you probably haven’t heard of - 360 Mobile, an app developer based in Beijing. Its flagship karaoke app, StarMaker, lets people pick and sing their favourite songs.
Seeking to appeal to new customers, especially potential high value customers, it ran a retention optimisation campaign that focused its reach on the people most likely to use the Starmaker app.
The targeted campaign drove downloads from quality customers, allowing 360 Mobile to reduce its retention cost by 50% per customer, while improving its return on ad spend.
Ultimately for businesses, it isn’t a question of size that will determine success, but a willingness to test and learn - and to allocate resources where appropriate to keep and grow your hard won customers.
Today, a lot of companies talk about retention, but few do it really well. Which brings me back to the discounted subscription offer I mentioned earlier. For the record, I didn’t renew. Both they and I knew this was just delaying the inevitable.
Which is the lesson in all this. Whether your business uses a subscription platform or not, now is the time to be proactive about hanging on to your customers. Getting ahead on retention does more than just defend you from discounting. It gives you the freedom to invest in content and features your customers will love. Doing that gives companies a shot at reversing a death spiral.
Sources:
*Industry Micro-Shifts Monthly Tracker by Kantar Profiles (Facebook commissioned online survey of 2,004 online general population respondents per wave, ages 18+, AUS, Wave 3, July 28 – August 15 2020.
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