Every subscription business owner wants loyal, happy customers. The goal is to provide subscribers with so much value in your product that they say, “I’ll never cancel!”
The question is, how do we create and sustain that value for a longer customer lifetime period?
Studies by McKinsey show that more than one-third of subscribers cancel within the first three months, and more than half cancel in less than six months. The most common reasons for these cancellations have to do with the customer experience — if the subscription doesn’t meet their individual needs, they won’t see the value in it.
We sat down with Patrick Campbell, Founder and CEO of ProfitWell — a revenue-automation tool that serves to increase customer lifetime value (LTV) — to discuss what subscription business owners can do to maximize the value they provide to their subscribers.
Read on to learn how to increase your LTV by identifying and retaining loyal, satisfied subscribers.
Finding the Right Customers
While it’s appealing to think of building a subscriber base that will never cancel, remember that you don’t need to hang on to every single subscriber you get. Not every customer is right for your business. In fact, there will be some you’ll want to lose.
With that in mind, always make it easy for customers to cancel when they want to. No one likes to be held hostage, and creating a negative cancellation experience only sours the overall subscriber relationship. Instead, focus on understanding which customers are right for you and how to continuously win them back.
To do this, you’ll need to go beyond your audience demographics to the heart of their preferences. According to Campbell, this is an ongoing process. It requires repeatedly creating and then validating a customer segment constitution that paints a detailed picture of who those ideal buyers are — and who they’re not.
“With subscriptions,” Campbell says, “your job is to clone the customers who are great for you, and not worry about the ones who aren’t great for you.” Finding the right subscribers is not an exact science, but it does take plenty of qualitative and quantitative research into your target audience.
Customer Lifetime Value & Loyalty
If your goal is to create loyal customers, you must first understand what loyalty really means.
The longer a subscriber sticks around, the higher the customer lifetime value will be. But, realistically, you shouldn’t expect people to subscribe to your product or service for their entire lives. So what expectations should you have?
First, define what loyalty means for your business. Is it a customer lifetime period of at least three months? Six? 12?
Once you define that threshold and get the right customer to it, you can experiment further. How can you get a six-month subscriber to continue for another 12 months? How can you convince them to stay with you even longer than that?
Building Customer Lifetime Loyalty
According to Campbell, the subscription business model itself is all about relationships. “It’s the first commerce in the history of humankind where the relationship with the customer is baked into how you make money,” he says. “That means that this relationship needs to be more true. It needs to be reinforced.”
Reinforcing the relationship means reinforcing the value that you are offering your subscribers. More than just money or products, focus on what the customer is really looking for.
Once you’ve identified measurable values, reinforce them through communication. For example, if proceeds from the subscription go to a humanitarian cause, be sure to let the customer know on a regular basis how many people they’ve helped, and remind them of this when they go to cancel.
Beauty brand Thrive Causemetics does this by compiling impact reports, donation records, and more on its website. For another example, Dream Girl Box includes goal-setting materials in each box to help customers stay focused on what they are working to achieve.
Also make sure to prioritize every single box that you send out. One of the biggest mistakes we see subscription businesses make is sending out a great first box, but then the next one looks like it was carelessly thrown together. If you want the customer to value the relationship, show them that you value it, too.
Give Customers a Reason to Stay
Even the right customers won’t stick around if they aren’t given compelling reasons to do so. It’s important to demonstrate that you are actively listening to feedback and improving the subscription experience each month by:
- Showing progress in the company. Announce changes that are coming based on the input of actual buyers. This creates excitement around future developments and ignites curiosity about what’s coming up and how customers can be a part of it. Newsletters, blogs or homepage updates can help you achieve that and build even more loyalty.
- Showing progress to the customer. Present subscribers with stats and reminders of just how much value they’ve gotten from the subscription relationship, and how much more they can get in the future.
- Avoiding heavy-handed FOMO manipulation. Don’t destroy trust by making people feel pressured or compelled to stay subscribed. Customers can see through fake FOMO tactics, and they won’t be excited to see you using them.
- Creating touch points to sustain the relationship. Identify the ideal customer experience at every possible level. Each milestone will act as a way to bring the subscriber more value or remind them of the value they get from their subscription.
When your subscribers feel personally invested in the subscription and the value they get out of it, they’ll be much more likely to stay subscribed for longer, and their customer lifetime value will increase.
Customer Loyalty Is a Long Game
Ultimately, the subscription business is, in Campbell’s words, “a game of inches.” He points out, “If you focus on perfection, you’re never going to do it. It’s already something you’re putting on the back burner.”
Instead, take things one step at a time. Start with the tactical pieces to build value and learn your customers’ preferences. As you involve them more in the subscription relationship, you can slowly get creative by trying one new thing per quarter.
Over time, you’ll build a strong, loyal subscriber base with a great customer lifetime value.
Looking for more ways to grow your brand? Discover the latest trends on how subscription businesses can expand by attending SubSummit!
