Consumers want to pay for what they use – the rise of the subscription economy5 min readReading Time: 4 minutes
Consumers want to pay for what they use, in booming 437% rise of the subscription economy
Subscription is the trending buzzword, with more and more people opting to access products, services, and identities through the subscription model. In 2016, when subscription services weren’t as popular, 55% of UK citizens had up to five active monthly subscriptions.
Subscription services have caught on so well that over the last decade that revenue from subscription companies outpaced that of their product-based counterparts. According to research, revenue from the Subscription Economy Index [SEI] grew by 11.6% while the S&P 500 sales declined by 1.6%.
So, what does this mean for the economy, and how can businesses use this trend to their advantage? Continue reading to find out more.
Accelerating factors: The rise of the subscription economy
The subscription economy has consistently grown over the past nine years thanks to digitisation and the rapid adoption among younger consumers. However, the lockdowns in 2020 and 2021 caused by the COVID pandemic helped accelerate the popularity of subscription services even further.
Besides safety from the spread of the COVID virus, consumers enjoyed the convenience of accessing goods and services on demand at the comfort of their homes. Businesses also found that they made more profits in the long run when customers spent a manageable monthly sum on their products and services instead of a large one-time purchase.
How can businesses take advantage of the subscription economy?
As a business, you need to convert your existing customers into subscribers. You also need to encourage new customers to subscribe instead of making one-time purchases, all while minimising churn.
What is churn?
Churn is an indicator of the number of customers that stop buying from a business by cancelling their subscriptions. Churn prevention is among the top priorities for most companies, seeing as the subscription is now the way to go.
Besides reducing the number of active subscribers, churn also increases marketing and outreach expenses. Earning the loyalty of new customers could cost you between five to 25 times morethan it does to maintain the loyalty of existing customers. Therefore, your business needs to pinpoint ways to prevent subscription churn while increasing the number of active subscribers.
How does churn occur?
In every economic sector, there is an acceptable amount of churn. However, problems start when your business drops more customers than a sufficient number. Here are a few factors that can increase your churning rate.
• Your customer loses interest: Customers may feel your products and services can’t meet their needs anymore, or their needs are no longer there.
• Your competitors have better product or service offerings or ask for less than you for the same.
• The customer may experience poor or negative customer service from you and choose to walk away.
• Finally, your customer may feel frustrated by your stringent payment authorisation process. While security is critical, some hurdles could prove too much for customers. This factor accounts for almost half of all subscription churn.
How do I ensure churn prevention?
1. Find out why customers are leaving
You need to understand why customers are leaving before you can devise solutions. For example, you need to analyse customer feedback to know why customers cancel their subscriptions. With so many variables in play, you could end up taking the wrong action. Furthermore, different customer segments have various reasons to cancel their subscriptions. Taking a blanket action could have negative consequences.
2. Realign your customer care with customer needs
A large portion of subscription churn stems from customers feeling you don’t care for them. When customers reach out to your company for help and experience poor reception, they’ll change their attitude. Some move on immediately, while others need one more push, however slight, to move on. You may have the best products and services, but that won’t prevent customers from leaving due to poor customer service.
It’s essential to have online and offline customer support channels. While you can address most customer concerns online, customers should feel well-received when visiting your premises. Combine such excellent offline treatment with an intuitive and informative website and blog. Despite the complexities of your business, make it easy for customers to access support and information through all your online channels. For example, place the Help button conveniently on each web page of your online channels.
3. Review the onboarding and renewal processes
Another critical area to address is getting customers to subscribe and what happens after. You need to make the process as straightforward as possible. Ensure customers know how to reach you if they encounter any problems. Check how well your team knows your products and services and how they address customer concerns. Once customers understand your offerings and get help when they need it, they’ll comfortably subscribe.
You then need to streamline the renewal process. Customers usually don’t have time to engage in each month’s renewal process. While automation is the answer, ensure customers understand the process and are comfortable with it. Furthermore, ensure you send timely notifications of the renewals to avoid surprising customers with deductions on their accounts.
4. Update your products and services
You need to constantly tweak your product and service offerings to align with your customer needs. Subscriptions work best when they are in harmony with other aspects of your customers’ lives. Your competitors are always looking for new ways to make better offers to your customers. You can easily deal with such advances by integrating your products and services deep into your customers’ lives. Besides listening to feedback, take surveys to find ways to improve what you’re selling.
Subscription is the future of business for most industries. Therefore, you need to find ways to retain customer loyalty while onboarding new customers. Happy customers see no reason to look elsewhere, especially if they have subscriptions with you. However, certain factors lead to subscription churn, which you need to identify and take proactive action before it’s too late.
The churn identification process can be resource-intense and complex. Therefore, adopting a customer retention platform like Upzelo can help make work easier for you. We provide data on why customers are cancelling and offer guidance on how to minimise churn. We also curate the most effective retention tactics for your business to drive retention rates. Get in touch with us today for more information about our services.