When you’re starting a subscription business, it can be complicated to learn all the complex words and lingo that’s unique to the recurring payments industry. That’s why we’ve created our Billsby Explains video series, where we tell you all about the words and lingo you need to know if you’re starting your subscription business. In this video and accompanying article, we’ll explain what churn is, the two types of churn, and give you some handy tips to reduce churn in your business.
If you’re already running a subscription-based business then the dreaded C word needs little introduction. Churn is when customers leave your product. So if at the start of the month, you have 100 customers and 15 new customers sign up, but at the end of the month you only have 110 customers – that means 5 customers have churned.
Because you had 100 customers at the start of the month, and only 95 of those 100 stuck around, this means your churn rate is 5%.
Calculate how churn will affect the growth of your business
Customers churn for two reasons which we call intentional churn and involuntary churn. Intentional churn is when customers choose to leave – maybe they were frustrated by a niggling clammed up issue, have moved to a competitor or that new feature you released just didn’t work for them.
Surveying your customers when they cancel can help you identify the reasons people leave – maybe you’ll notice something interesting – like cyclicality in your business – for example, a bike rental service might see drop-off in the winter.
We’ll also show you how features within Billsby can help you implement these techniques quickly and easily, so that you can grow your business and get a head start on your competitors.
Involuntary churn on the other hand happens when customers don’t intend to stop using your service, but do anyway – because their card information is out-of-date, or their card hard declines because it’s been lost or stolen, or soft declines when it hits its limit.
To reduce involuntary churn you need your billing software to handle it well – sending reminders to customers, encouraging them to provide a new card and automating reattempts of payments. The easier you make it for customers to get back on the right track, the lower your churn will be.
Customers who rate their experience poorly could be added to a special list and reached out to, and customers who rate the service well could be invited to leave a review to help attract more customers to the service.
So, that’s everything you need to know about churn. If you need subscription billing software that handles intentional and involuntary churn like a pro, give Billsby a try. You can make $50,000 on us with a free trial of Billsby.