The subscription-based retail market has exploded over the last five years. The number of online visits to subscription-based retailers has increased almost nine-fold, from 4.7 million in 2014 to 41.7 million in 2018. 

Despite the growth, customer retention has become a serious issue for subscription retailers. According to the National Retail Federation, the majority of consumers subscribe to individual plans for less than 6 months. 

 

Product pile up is a key reason why customer churn occurs.

 

Customer Churn is an Epidemic, but Customer Experience is a Panacea

Why the churn? Recurly found that almost 13% of subscribers to “box of the month” subscriptions cancel each month; one-third of the consumers who sign up for a subscription retail service cancel in less than three months, and more than half cancel within six. Often, subscribers will cancel once their introductory discounts run out. 

The continuous cost of replacing lost subscribers makes it difficult for any company to sustain growth. According to Forrester, it costs 5 times more to acquire a customer than to retain and invest in current customers. Subscription retail services should shift their focus on keeping the subscribers they already have by providing an exceptional, end-to-end customer experience. 

In a recent PwC study, 73% of respondents said that providing a positive customer experience is central to influencing their brand loyalty. Subscription service companies should look for opportunities to build a connection with a customer at every stage. From your sales and marketing strategies, to pre- and post- purchasing processes, there are opportunities to build customer retention strategies with every click and tap on your site. 

Just because one customer may have a base-level subscription, it doesn’t mean they’re less valuable than a premium customer. According to a CCW Digital study, 90% of customers share their particularly positive or negative brand experiences publicly. When armed with a negative experience, customers have the power to dissuade potential high-revenue customers from getting a subscription themselves. 

Dollar Shave Club is one of the most popular subscription-based retail services, and has a billion-dollar valuation. Source: Camino financial.

Bottom line: even though popular online subscription-based retailers like Ipsy, StitchFix, FabFitFun, and BarkBox have exploded in popularity, disappearing loyalty continues to remain a concern.

Here are 4 tips any subscription retailer can use to get ahead of the dreaded ‘unsubscribe’ button.

Here are the 4 Tips on How to Avoid Customer Churn and Burn

 

Consumers subscribe to products and services when they are confident about cost savings and convenience, but a great customer experience is what makes them stay.

Know the Red Flags

Customers cancel their subscriptions for a variety of reasons, many of which have to do with disappointing product quality, or product pile-up. The good news is that we can predict when a customer is about to jump ship. According to Retail Touchpoints, consumers will display certain measurable behaviors. Some examples are demonstrating interest in competitors or similar one-time purchase products, decreased online engagement, and an overall decrease in spending by downgrading their subscription. Create alerts within your customers’ profiles when one or all of these signs begin to show and get ahead of unsubscribes before they arise.

 

Get More Personal

Consumers expect their subscriptions to know them and to become more tailored towards their preferences over time. Companies who create personalized web content experience an almost 20% increase in sales. According to the joint Gfk and NRF study, 50% of U.S. consumers report the brands they buy from are an expression of themselves, and 63% of millennials prefer when a website keeps track of their activities and makes recommendations to them.

If, for example, a customer complains that the assortment of products isn’t personalized enough, work with the customer to curate an assortment that better fits their needs. Companies can also leverage the power of AI to automate and create more targeted product suggestions. If a customer is overwhelmed by an excess of products, adjust the frequency of delivery, or empower the customer to control the timing of shipments. 

 

Implement a “Save the Sale” Mentality

The customer service arm of subscription-based retailers should harness a “save the sale” mentality. If a customer is at risk of cancelling, the CX team should proactively reach out to the customer and identify the problem so the next order can be adjusted. To accomplish this, it’s important that subscription retailers increase their subscription and product options. Dollar Shave Club for example, enables its premium members to downgrade to a less expensive subscription option when they are looking to cancel. Since the lifetime value of subscribers is central to company longevity, retailers must prioritize customer flexibility.

 

Reward Loyalty

If a subscription-based retailer acquires customers through initial, heavily-discounted deals, those customers will expect those prices to stay. Although retailers use this to attract new business, it actually works against them in the long term. Instead, companies should flip that method on its head and reward customers for continued loyalty. Custom curated samples, products, and discount offers for friends and family referrals goes along way.

For subscription-based retailers, the practice of acquiring and keeping customers ultimately comes down to a consistently great experience over great products or service offerings. Attractive initial discounts only motivate customers short term, and they usually unsubscribe once those discounts expire.

Ridiculously good customer experience gives subscription customers a reason to stay loyal to the brands they love.

 

To stay on top retail trends and topics throughout the year, subscribe to our newsletter.

 

Bailey is a North Carolina native and graduated from North Carolina State University. She kicked off her professional career at IBM, where she focused on developing digital transformation strategies for the retail and distribution industry. Bailey made the switch over to TaskUs in 2017 on a mission to work with retailers and eCommerce brands on their customer experience strategies and provide solutions to create ridiculously good customer experiences.

Bailey Boyd

Business Development
August 15, 2019