Company owners would like to know how to deal with involuntary churn, a significant factor in subscription billing loss. The tricky part is that involuntary churn is a phenomenon that “creeps” up on businesses rather than happen in an instance. Generally, companies would have difficulty identifying its occurrence, especially when they have other churn sources.subscription business models
Do you have an involuntary churn situation on your hands? It’s essential to take a holistic approach to handle the case, as you wouldn’t want to repeat the solutions. This article explains the concept of involuntary churn content and how it can drive down your churn levels. It also sheds light on practical ways managers can evaluate the different churn types they face in a given period.
What’s Involuntary Churn?
Generally, customers can have their subscriptions canceled at specific points for various reasons. These cancellation ratios would contribute to your churn rate at each month’s end. Unfortunately, some subscription-based business owners don’t realize that churn rates aren’t always from the customer’s end.
Churn risks are an inherent risk for subscription business models because they handle customer payment information. Each customer’s first transaction gets logged into the system and would be a valid data point throughout the subscription’s duration. However, it means that the system only reflects the first payment log, no matter how long the subscription gets renewed.
As such, the recurrent subscription payment itself can fail at any point for numerous reasons. That gets exacerbated because the churn risk becomes higher the longer the customer renews their subscription.
Therefore, involuntary churn consists of the percentage of your customers that had their subscriptions “accidentally” canceled. It can result from a system upgrade, an expired payment card, or outdated payment information. In most cases, neither the business nor the customer is aware of the situation until the latter no longer has access to a paid account.
Effects of Involuntary Churn
Once a customer becomes accidentally unsubscribed from your service, they have the choice to review their payment information and get back on your service plans. However, that might not always be the case, as they also have the options to turn to a competitor or scrap the service altogether.
Therefore, involuntary churn can put a dent in your business’ revenues. In addition, if the customer doesn’t go through with paying the pending invoices, you can lose a few months’ subscription worths until they fix that.
In other cases, these customers might never get around to adding a piece of new valid payment information, thereby permanently locking out all revenue prospects you might have on them in the future.
Unless the paying customer is moving to an alternative – which they inevitably will in most cases, involuntary churn is a lose-lose situation for them and your business. They’d endure the slight inconvenience of not using the service for a while due to no fault of theirs, and you’d lose some revenue as a result of a small error in the system.
Use your Content to Show Other Approaches to Dunning
You can avoid losing a subscribing customer to involuntary churn by reminding them of upcoming payments. It would be best if you did this without sounding obtrusive. Customers may not appreciate getting reminded of a subscription they automatically pay for anyway.
Dunning emails are an effective way to get the job done. These emails allow you to notify users of an impending payment issue gently. If you get the timing right, dunning emails won’t come off as the business is trying to collect its debt. Instead, they’d call the client’s attention to a potential sore point in their payments and hint them on how they can fix it.
However, dunning emails aren’t the definitive solution to customer churn. They don’t always work on every user to which they get sent. Even more, these emails may have the opposite effects on the customers and turn them away. For instance, customers get turned off if the dunning emails they receive from a business become repetitive and persistent.
Therefore, it’s best to explore other options to complement the dunning approach. Other content types can significantly lower your churn rates. Below are some different dunning approaches you can consider:
Segment your Customers
While it might sound discriminatory, customer segmentation in a subscription-based business isn’t about classifying patrons based on discrete personal details. Instead, you can segment them based on their payment statuses.
These classifications enable you to know the percentage of clients that are still on board or lost. You can keep the following prominent segmentations for your customers:
This category would hold the details of customers at the risk of canceling their subscriptions at any time. Knowing the at-risk customers would allow you to apply dunning emails with much more accuracy, and your chances of recovering your revenues would begin to look up.
Lost Customer Segment
This category would be for users that are already out of your service’s subscription. Typically, lost customers are much harder to reach out to, and it might be challenging to get them to re-subscribe. In addition, since their details are still in your payment system, there’s still a minimal chance the business can get payments from them.
However, you’ll have to commit more content to lost customers to improve your chances of convincing them. Overall, segmenting your customer base gives you a broader insight into sending dunning content to them.
Make a Call Instead
Dunning emails can get monotonous over time, and you can switch things up by calling the customers with the intent to get them to re-subscribe. Bear in mind that the idea is to sound more organic as you convince them to continue your service.
Therefore, your calls shouldn’t be a word-for-word script of the emails you’ve previously sent. Instead, you can talk to them by recapitulating their history with the business and finding out first-hand why their payments failed.
Go Through Previous Support Chats
Customer chat support is pretty resourceful for your subscription business in two significant ways. First, it’s the go-to medium for customers who don’t have the time to talk informally with their service companies.
The other reason is that support chats happen in real-time. Studies show that users prefer to get answers to their requests in real-time. They like to reach out when they have a genuine issue at hand.
Due to its nature, you’re more likely to find a subscription issue in a previous live chat with a customer. The premise is that customers might have witnessed a payment failure, and the system didn’t allow them to retry. If your business has numerous cases like that, revisiting customer support chat can prevent involuntary churn cases.
What are your Customers Getting Out of your Content?
The customers can be pretty sensitive to the tone of your dunning content. They’ll react if you come off as persistent and robotic. It might push them further from your services in some cases. So the recommendation is to employ persuasion, spaced out to preserve their attention.
However, what other values can you offer your customers with your content? When trying to recoup lost leads due to involuntary churn, your content makes the real difference. It can reassure lost or at-risk clients of your service’s commitment or convince them to stay.
Below are some of the points that you can include in your content development:
Reiterate the Customer’s Journey with your Business
If you have cause to believe that specific customers have made up their minds to ditch your service, you can appeal to them by reviewing their journey with you so far. As earlier stated, long-standing customers are often at a higher risk of dropping out of the system due to involuntary churn.
Therefore, reminding them of their loyalty to the brand and how the relationship is worth keeping can change their minds.
Have a Cohesive Plot
Do you start a new dunning email from scratch without reference to the ones you’ve sent before? Chances are, your customers aren’t gaining much from your content. If they know that you keep sending new unrelated emails about the same thing, customers might become slow to respond.
Instead, create a cohesive plot around the emails you send. It’s best to have a central theme and create new content with subtle references to the previous narratives. This strategy might convince your business customers to take a more hands-on approach to get back on your service.
Highlight Reasons Customers Can Suddenly Leave
Involuntary churn is almost invisible to the company and the customers. The former might only recognize it as leakages in their revenue streams, while the latter may notice much later when they no longer get billed for the service.
You can remedy the problem by educating the clients on various ways involuntary churn can happen. That way, they can take steps towards becoming more active with their payment patterns and recurring subscriptions.
Are you Highlighting all the Different Types of Churn?
Involuntary churn doesn’t exist in insolation within a subscription business model. It combines all the other churn kinds, some of which might have positive effects. As with any people-based service, consumer behaviors are theoretically unpredictable, thereby leaving numerous outcome possibilities.
Therefore, the business needs to highlight the various kinds of churns they might have. That way, they can evaluate the churn rates and how they affect revenues negatively. Some common churn types you can highlight include:
Short-term churn is the situation where the customer leaves the service shortly after signing up. It happens on the premise that churns are premeditated actions by the customer, often hatched long before they onboard your service. Thus, the client signs up intending to churn after a short period.
One way to understand the short-term churn rate is by implementing an exit survey that allows outgoing users to tell you why they’re leaving. Also, you can have a more extended trial period so that people with a short-term need for your service don’t commit unnecessarily.
Bad Customer Churn
This churn type is somewhat favorable to the business. It’s when a “bad” customer exits your subscription plans, much to the relief of the customer service department. However, wrong customers aren’t necessarily ill-mannered ones. Once the user isn’t sure of why they need your business service, they may be a bad fit in the long term.
As a result, they’ll take up significant support resources as they try to acclimatize to the business model. Shedding these “bad” customers allows you to focus on the “good” ones. However, if the bad customer churn rate is significant, you may consider segmenting your customer base to help you handle the situation better.
Net-Zero Churn is one of the few churn types with an apparent advantage for the business. It’s when paying customers to leave your service, and that doesn’t affect your overall revenue. The idea is that the users leave the service for another one directly or indirectly under the same brand. That way, the business still gets to make profits, as customers own the service and its alternative.
Net-zero churns seldom happen in most industries, as there’s a minimal chance that you also own the competitors to your service. However, these churn types reflect one of your products doing better than the other, and you can take surveys and analyze why that’s so.
Involuntary churn often sees customers leaving a business unknowingly, often without a way to help it. Companies may also experience revenue leakages due to involuntary churn. It would help if you had long-term customers to keep churn rates to the minimum.
Unfortunately, it’s not a discrete phenomenon, as both the consumer and service provider might not recognize it until it’s already begun to lower profits. Nevertheless, the methods discussed above can assist you in better understanding involuntary churn and give you an idea of how you manage it at the various organizational levels.
Generally, churn rates are often a product of several actions or delays over a period. Therefore, it’s best to improve the business’ customer communication system and educate the users on how not to get thrown out of service abruptly.
Andrej Fedek is a digital marketer. He recently started his own blog about digital marketing called InterCool Studio. His passion is to help startups grow and thrive in a competitive environment.