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With subscriptions, customers have more flexibility than when buying a product; they can decide whether to leave when they want (if there’s no fixed contract period or penalty), or to stay for a longer period with your Product-as-a-Service company. Hard times hit all types of companies, and it is extra crucial to retain your current customers.
Keeping customers for a longer time means more value for both your Product-as-a-Service (PaaS) subscription business and your customers.
Typically the costs of acquiring a new customer (CAC) are higher than retaining the ones you already have, that’s why it is important to make a marketing strategy that keeps your customer at the center and invest in ways to maintain a high customer retention rate.
According to research, it cost you 5 times more to attract new customers than retaining the ones that you have. Depending on your market segments, around 80% of your revenue will come from 20% of your existing customers.
Of course, no matter how great your efforts are, some customers will still leave, so your job is to make sure that you are doing what it takes to retain the customers you already have before even attracting new customers.
The rate at which you lose PaaS customers is also known as Churn rate. The Churn rate can be calculated by the users at the beginning of the period - users at the end of the period divided by the users at the beginning of the period. Churn rate is a crucial metric to analyze the health of your Product-as-a-Service business.
You can keep your Churn rates low and still ensure to retain customers as much as possible. Here is some advice we give our customers on how to improve their retention rate while ensuring to capture all their subscribers.
1. Data analysis
Do you use data to understand your customers better?
Before acquiring new customers, understand better your current customer base. Learn from your customers' behavior, find the best ways to keep your customers engaged based on the data you have.
Divide your customers into segments and analyze which channels they are engaging the most, how often they interact with your brand or product, and which channels work better to communicate with them.
Not all subscribers are equal in terms of value for your Product-as-a-Service company. Some of them are more valuable to your company than others. You can identify who your high-value customers are, by defining your customer lifetime value (CLV).
CLV is the potential net value of a customer during the time they are engaged with your product and spend with your customer. Calculate it periodically and give an estimate to each of your customers.
Use data in your favor, have a big picture of your customers, build your customer journey, make the onboarding process more efficient. Build personalized experiences that cater to your customer segments to deliver custom messaging and services.
Useful information to learn from your Product-as-a-Service customers:
- How are customers using the product?
- Which interactions are customers having with your company?
- Which demographics do they have?
- Are all support tickets solved?
- Which is the level of customer satisfaction with your brand and product?
2. Customer Experience
Happy customers are a good foundation to build a sustainable business. Don't underestimate your customer support and the overall customer experience if you are looking to reduce churn.
Don't guess what your customers want. Start by gathering more feedback if you are not doing it until now. Ask them, understand which issues are customers experiencing with your product; if they are leaving, then ask them why they will cancel their subscription or what could have done the process better.
You can fix what is bothering your subscribers and adjust quickly your product to their needs if you know them better.
Find a way to receive feedback as quickly as possible from subscribers and get a sense of what he/she prefers the most and give them more personalization on their service. Make them feel special by sending them occasionally exclusive promos or targeted content, specially targeted for them, and use it as cross- and upsell touchpoints.
3. Win back customers
Re-target ex-subscribers. Make sure to include re-activation links through your product or any digital channel. For example, you can include special promotions on their last package or month and offer an extra discount if they continue with you. Offer add-ons items that customers can add, put control on your customers' hands to choose what they prefer. Make them stick with you.
If you have your customer journey defined, you can find interactions where you could offer something special at the right moment.
4. Be consistent on your communication
Remember that customers over the long-haul will provide stability and reliable revenue for the future of your Product-as-a-Service subscription business. Make them feel involved in your community. Retention depends more than just setting the right pricing; customers are looking for value.
Engage with customers digitally, be consistent with your messaging, and have clear communication with your customers not only on Social Media but in any interaction you have with them. Explain the long-term value to them that justifies a monthly subscription charge.
Here's a churn checklist you can use on your subscription business:
- Was the onboarding easy and efficient for your customer needs?
- Do you have constant feedback from customers?
- Do you know if customers are happy with your product?
- Are customers feeling supported?
- Have tickets been completed successfully?
- Do we need software to help us with some administrative load?
When capturing and retaining customers, it is essential to track your customers and identify real-time data. You can calculate your Churn rate and your CLV to analyze your business's health.
Make better experiences that add more value to your customer. Reward customers for referring friends or offer loyalty programs with exclusive promos. Incentivize longer subscriptions by providing some subsequent purchases to customers to continue with their subscription, and lastly, make them feel part of your company at all times.