Customer retention is crucial for all businesses, but it plays a particularly important role for subscription companies. When customers subscribe to a service, the aim shifts from selling a single product that provides pleasure or functionality to ensuring ongoing satisfaction derived from a product or service that is used on a month by month or a year by year basis. Often, businesses go all-out to impress new customers and sweep them off their feet, but there’s no better way to boost subscription rates and improve customer service than keeping existing clients on side. If you’re wondering why retention matters within business management, or you’re looking for ways to boost retention rates for your subscription services, this guide should prove useful.
The importance of customer retention
Customer retention is beneficial for several reasons, and it should never be underestimated, especially for subscription companies. The main reasons why retention matters include:
- Gauging the efficacy of your business: if you have high customer retention rates, this is a good indicator of high performance levels. Clients are using your service, and they’re choosing to stick with you. Customer retention rates are useful metrics for seeing how effectively you can acquire subscribers, but also how well you perform once the introductory offers and free trials are a distant memory.
- Saving money: research suggests that repeat and returning customers spend more and visit a virtual store or website more frequently than new users. Targeting long-term subscribers and those who have remained with you after an initial trial period is a cost-effective means of building your client base. Existing, loyal customers are not only more likely to spend more, but they also play a vital role in championing your cause and recommending you to friends and family. According to the Harvard Business Review, it’s between 5 and 25 times cheaper to keep customers than to try and acquire new clients. The HBR also suggests that improving customer retention by just 5% can increase ROI (Return on Investment) by 25-95%.
- Reviews and testimonials: did you know that around 90% of web users now check reviews before buying products or signing up for services? Reviews and testimonials can make or break a company, with 5-star ratings likely to bring customers in their droves. If you treat your customers well, and you have a high retention rate, they will be more likely to leave positive feedback and recommend you to others looking for similar subscription services. This is a modern take on word of mouth, and it’s hugely influential.
- Brand image and reputation: high retention rates create positive impressions among prospects and potential leads. If a company has a loyal client base, this suggests that the service or products are high-quality and that standards of customer service are high. At a time when the subscription economy is booming, your reputation can make the difference between keeping and losing a customer.
Challenges facing subscription businesses
Retaining customers is difficult, especially at a time when competition is fierce. The truth is that subscription businesses face multiple challenges when it comes to keeping hold of subscribers. Here are some of the most significant hurdles:
- Responding to competitor pricing strategies
- Offering discounts without leading existing customers to question the value of their subscription
- Keeping existing subscribers interested
- Competing against incentives offered by rivals
When aiming to improve customer retention rates, it’s important to be aware of the challenges facing your business and to monitor your performance so that you can try and identify and implement solutions. Take time to analyse data and highlight potential causes for concern. If you seem to be losing customers at a certain point after subscription, for example, after 6 or 12 months, conduct research and collect and evaluate feedback. Contact subscribers who have left you, and ask questions about their reasons. This will help you make improvements in the future.
Effective ways to increase retention rates
Research shows that there are several benefits of having a high customer retention rate, but how do you go about increasing the proportion of subscribers willing to stay with you in the long-term? There are several effective ways to boost client retention and ensure customer satisfaction, including:
- Prioritise customer service: no matter how fantastic a product or an experience is, poor service can contribute to a customer choosing a competitor. A customer may really enjoy using your app, but if they can’t solve a problem or find an answer to a question, or they have to wait for ages to get through to advisers online, this could render the quality of the product insignificant. Put your customers first, add a personal touch, respond to queries quickly, and try and preempt potential problems. Even simple things like addressing people by name in email subject lines and providing an FAQ section or links to help guides could make the difference.
- Don’t make promises you can’t deliver: even the most loyal customer will question a subscription if you fail to deliver on promises you make. If for any reason, you can’t provide the level of service expected, make sure you communicate with your customers, explain the issue and offer a solution.
- Use feedback: feedback is incredibly valuable for any subscription service. Listen to your customers, be willing to make changes and learn from the negative comments, as well as the positive.
- Reward loyalty: many of us are guilty of having our heads turned by incredible deals and incentives and this can pose a problem for businesses trying to hang on to long-term subscribers. A customer might feel like they could get a better deal from a competitor or that they’re not getting much for their money with you if they stumble across an advert or a friend mentions an offer to them. To nullify the lure of new subscriber gifts and discounts, make sure you reward loyalty. You could set up a scheme or send your subscribers personalised offers every 3, 6 or 12 months, for example.
Use retention to improve your business prospects
Customer retention is critical for subscription companies because you want as many subscribers to stay with you for as long as possible. The aim is not to satisfy a customer with a one-off purchase, but to impress them on an ongoing basis. A high retention rate will enable you to grow your business at the same time as improving the service, increasing the chances of referrals and cutting costs.