Customer retention is just as important as acquiring new customers, if not more so, a survey of 435 recurring revenue company executives found.
The findings take on special relevance as companies struggle to offer value to consumers and businesses preoccupied with upheaval caused by the novel coronavirus outbreak.
Almost 95% of executives in the survey released just as the outbreak was spreading in the United States say their company success is tied to keeping existing customers because marketing channels to attract new subscribers are becoming saturated.
This makes this "the retention era" for subscription businesses, says Guy Marion, CEO of Brightback, a subscription-service technology company.
The survey of finance and other executives was conducted by consumer research company Centiment and found widespread agreement among executives that most customers leave for reasons that can be prevented.
Customers leave in part because they're never properly onboarded and, as a result, they don't learn how to use the full capabilities of the service. They think they can't do something when they can, they have trouble getting help from the company, or they never get comfortable with the user experience. It might also be that the user experience isn’t well thought-out and needs to be improved.
"They’re looking for something more sophisticated or more simple," Marion told CFO Dive in an email exchange. "They have a bad customer experience or they’re not feeling heard or valued."
Marion, whose company worked with the survey researchers, said the data provides a good picture of what CFOs can do to keep customers.
For the CFO, who controls the collection of and access to data, the starting point for improved retention is changing what you collect and when you collect it, Marion said. By collecting a broader range of data, including negative data on customers leaving, and collecting it as close to the point of action as possible, you can work with other executives to design interventions that keep customers on board.
Among the data to collect: customer activation rate, renewal rate, expansion rate, contraction rate, churn rate, and cancel save rate, along with cost metrics like long-term value, costs per lead and customer acquisition costs.
"Enrich the customer data platform with cancellation as well as purchasing and product activation data," he said.
Marion recommends automating the capture of cancellation data at the point of cancel, allowing the customer retention team to step in with a battery of interventions such as “extend my plan” offers, free periods of use, flexibility to switch to a different plan, free training, a “take a break” option or an “extend my plan for free” offer.
If the data indicates they never learned how to use the service fully or had trouble getting help, offer a "let us fix this for you" service.
More broadly, based on the range of data collected, you can develop a staggered pricing model that increases long-term commitments by offering, say, discounts of 30% to 40% for customers who commit to annual or multi-annual service.
You can also automate an aggressive dunning process that offers a series of options to customers in the months before their subscription expires.
The survey found that, in retention efforts, companies struggle most with engaging customers in the right way, time and place. That’s where the CFO can step in as the executive with most control over data: using the right metrics to see the problems early and timing the collection of data so the interventions can work.
In the survey, 43% of executives said they’ve saved between 6% and 25% of customers at the point of cancellation by intervening quickly and with a well-targeted remedy.