If there is one big mistake that online subscription-based services do not know they are making, it is focusing too much on active churn rates. These are customers who deliberately stop or cut short subscription services for one reason or another. Many companies go through great lengths to prevent active churn, pouring in massive marketing and customer satisfaction resources.
However, a potentially bigger underlying issue is involuntary churn. These are customers whose subscription terminates for reasons beyond their control or knowledge. For instance, a customer moves residence and inadvertently forgets to update his or her membership information in the subscription service.
One of the most common scenarios is that the customer fails to update payment information when he or she receives a new credit card. The subscription service hooked up on automatic billing on the expired credit card is thus automatically halted by the system. Exceeding data, usage or credit limits also prompt automatic system diversions.
All it takes is one bad experience
This brings to light one of the top reasons why it is important to address involuntary churn, and that is because one seemingly small inconvenience—or any change or disruption in the customer experience, for that matter—is enough for a customer to change their mind about keeping the service altogether.
An online customer will not bother to reactivate or renew subscription, much less if it was not his or her conscious fault that it stopped in the first place. It is important to understand the way online customers think and behave. Brand loyalty in the Internet does not exist in the traditional sense of marketing psychology. Thus, creating a consistent and undisrupted customer experience is vital, if not even more pronounced, in the online arena.
It affects more people than businesses think
In a research conducted by IBM, it was found that as much as sixteen percent of subscribers simply decided not to continue with a service when they received a new credit card and were not able to update their subscriber information.
This not only gives insight into how online subscribers think, but it also shows how substantial involuntary attrition is within the overall customer base and how it can increase even further. This is another reason why it is important for businesses to deal with involuntary churn, because it affects more subscribers than they actually imagine—many churn by accident rather than by choice.
It definitely affects the bottom line
Obviously, involuntary customer attrition will hurt revenues in the long run. Consider a simplistic scenario where a content provider spends $300 to acquire each customer. With a monthly subscription rate of $25, it would take a year to turn a profit on that particular individual.
If that customer forgets to update his credit card information at some point within the year and ends up a passive churn, not only is the revenue stream lost but the company will also post a loss in profit. The company will also have to spend more on marketing, either enticing the customer to sign up again or to find new subscribers.
A subscription billing platform is one of the most effective and efficient solutions for content providers to maintain the revenue stream and prevent involuntary churn. The subscriber base can be safeguarded from fallouts through automated functions ensuring subscription billing and payment, and the subscriber base can even be grown further through more effective marketing initiatives and promos based on demographic analytics and reports.
The key is to create a consistent and seamless customer experience that will not give any reason for the subscriber to act in a manner disruptive to the status quo.