If you run a subscription based business, whereby you have regular recurring revenue coming in on a monthly basis; your churn rate can be one of the most important factors for your business. Simply put, the churn rate is based on the number of paid subscribers who cancel their subscription in a given period of time. It’s the percentage of customers who choose to discontinue using your service.
In order to grow a business, many people focus on increasing their existing paid user base. However, it can cost as much as five times more to acquire a new customer, compared to retaining an existing one. It can also be very easy to neglect those customers who have signed up to a subscription, then cancelled afterwards. This situation can be compared to a leaky bucket that you’re constantly trying to fill; water is escaping from the bottom and if you don’t fix the leak in the bucket, your efforts in filling the bucket will be wasted.
You can however rectify this issue in a number of ways. One of the ways you can do this is by improving your product in response to any negative feedback you’re receiving by customers who have cancelled their subscription. This can be useful, but most of the time by this point it’s too late – you’ve already lost that customer.
The second and most effective method that you can use to prevent this issue is by using customer retention software. With latest technologies and Artificial Intelligence, this type of software is able to assess your customer data and analyse the reasons why some of your customers cancel.
Not only does customer retention software predict when your customers are most likely to cancel, but it also gives you a full insight into why your customers are churning. This is perhaps the most useful type of information you can gain from using customer retention software; as you’re then able to make the appropriate changes to your product to prevent this issue from happening again.
Over time, you’ll naturally add new features and make changes to your software to stay ahead of your competitors and provide as much value to your customer base as possible. However, with every change you make there will be different outcomes as a result of these changes. If a large number of your customers dislike the changes, they may decide to cancel. At this point, if you’re already using customer retention software you’ll instantly be able to gain an insight into which aspects of the new changes have caused your customers to cancel their subscription.
Whether this is 1% or 20% of your current customer base, using customer retention software can drastically reduce your churn rate, meaning more of your customers will stay. This in turn means that more of your budget can be used for growing your business and attracting new customers.