In this episode of Subscription Box Answers, Liam delves deep into the intricate world of churn rates for subscription boxes.
What's the acceptable maximum churn rate?
How can it be effectively minimized?
Churn is the most important metric for any subscription-based businesses. Without a grip on it, even the best customer acquisition strategies will hit a wall.
It's not just about getting customers; it's about keeping them.
For those of you with a question or seeking expert insights on subscription boxes, make your way to www.SubscriptionBoxResources.com. Become a part of our thriving community by joining the free Facebook group and share your questions there.
In this episode of Subscription Box Answers, Liam delves deep into the intricate world of churn rates for subscription boxes.
What's the acceptable maximum churn rate?
How can it be effectively minimized?
Churn is the most important metric for any subscription-based businesses. Without a grip on it, even the best customer acquisition strategies will hit a wall.
It's not just about getting customers; it's about keeping them.
For those of you with a question or seeking expert insights on subscription boxes, make your way to www.SubscriptionBoxResources.com. Become a part of our thriving community by joining the free Facebook group and share your questions there.
Welcome to Subscription Box Answers with your host, liam Brennan. You're no rubbish, no crap. Straight to the point podcast with real, actionable tips, real strategies and insights from the industry which will help you start and grow your own successful subscription box business. You ask the question, you ask the questions, liam gives the answers. It's as simple as that.
Speaker 2:You are very welcome to a brand new episode of Subscription Box Answers. I hope you're having a great day. On today's episode, we're covering probably the biggest pain point for the majority of subscription box businesses, or just subscription businesses in general, and that is your turn right. How can you reduce your turn right and what is a good turn right? I've had so many different questions come in over the last few months asking how can you fight churn, what are some proven strategies and do I have any advice? So I'm going to cover it on this episode.
Speaker 2:Now the first thing is right. What is a good turn right for a subscription box business, a direct to consumer subscription business? What would be a good turn right? The maximum turn right you should be aiming for is 10%. If your turn right is 10%, that means you're keeping people signed up to your box on average for 10 months. If you're keeping people signed up for 10 months, you can build a really sustainable subscription business. Now obviously you want to get that better. It'd be even better if you could get it to 8%, because if your turn right was 8% on average, that means you're keeping people signed up for 12 months. So you want to get it as low as possible Right Now. There are some exceptions where you can have a higher turn right and you can still build a really good subscription box business, a really great company. But that is usually if you're charging a high amount for your subscription and you're making a lot of money on each box or if you have a really low customer acquisition cost. But for the majority of subscription box businesses, you want to be aiming to have a maximum turn right of 10%. Okay, so you're keeping people signed up for 10 months. You can build a really sustainable business. Now if your turn rates too high and you're only keeping people signed up for a Few months on average, well then it's going to be nearly impossible to build any kind of Sustainable business because you're just turning over your entire subscriber base way too quickly and it'll be pretty much impossible to get the finances in your business to work or To even be able to scale up, because you won't be able to acquire customers quick enough to replace the ones that are actually Leaving. And that's why churn is so important for any subscription business Really really critical that you have control over your turn rate.
Speaker 2:Now, as Far as strategies go to help you reduce your turn rate. There are a few different things you can do and it really depends on what kind of turn you want to target. So there's two different kinds of turn. There's passive turn and there's active turn. Passive turn is when, like, the credit card expires and you can't charge the customer and eventually the subscription ends up canceling. Now I recorded a entire podcast Episode I believe it was back in February around passive turn. So I definitely recommend checking that out. And but the gist of it is you want to make it as easy as possible For the customer to update their card. You don't want to make that complicated, because if it's complicated and somebody can't remember their password to sign in or it's really Confused, and when they do sign in, you're going to have really high passive turn. But yeah, I definitely recommend checking out that episode because I cover it in detail. But for this episode, we're talking about Active churn, and active churn is when the customer has had enough and they simply want to cancel their subscription, and that could be down to a number of different reasons.
Speaker 2:Okay, now there's a few different things you can do to help with this. Right and number one okay, you can run a reward program and we have done this. Okay, so save somebody signed up for three months. You reward them six months, you reward them 12 months, 18 months and so on, right, and you basically let them know that the Reward is going to be coming up. Now the reward can be activated by them simply Responding to an email. If you don't want to get too heavy into the tech, you can just simply set up all the nations to let them know when these rewards are coming up, and then they reply to the email to claim the reward. And the reward could be credit in your shop, it could be a free product in their box. Whatever you want to come up with, it could be a digital product.
Speaker 2:Whatever you want to come up with right and that can certainly help to a degree if it's implemented correctly. Now, another way you can help reduce churn is by building a community. Okay, you can build a community. You can have a private group. People make connections in there. They enjoy what's going on. They're less likely to cancel if they have connections because it means they have to leave. The community Can definitely help 100%. That can help as well.
Speaker 2:Offers. A lot of the time your churn is going to be tied to how aggressive your offer is. If you come out with a really, really aggressive offer and you do it on a rolling one month subscription, you're going to have really really high churn. That's simply the way it's going to be. Okay, if you do like a free box on a rolling one month subscription, you'll get a lot of people signed up, but you will get a lot of churn and there's not much you can actually do about that type of churn because it's just poor quality Customers coming in and they're taking the freebie. They're taking the free box, the free gift, whatever, and they're planning to cancel. They have no intention of carrying on with the subscription, no matter how good it actually is. They're a freebie hunter, okay. So when you're doing a offer, it's always advised to do it on a 6 or 12 month plan, because at least that way you're giving yourself some protection. People actually have to commit for a long term subscription to actually get this offer, so it filters out a lot of the poor quality customers and freebie hunters. Now I know some people's whole business model is actually giving things away for free and getting people to sign up, and some companies who do this do it on a roll in one month subscription and there actually is a way to make this work. But it's a very particular model and for the vast majority of people listening to this, it will not be the right model for your company.
Speaker 2:Now what you really want to do is right. You want to dig into your cohorts and you want to analyse what offers give you the best churn and what offers give you the worst churn so you can avoid them. And to do that you would simply do a cohort analysis of all the customers who came in on, say, offer A, and you would look what happened with those customers over a 6 to 12 month period and if you noticed the churn was really really high, you would avoid that offer. Then you would look into your go performing offers and you would identify which ones have the best churn and you would double down on those offers or similar offers. Now we're signed up to Chartmowgle to analyse our metrics. It helps us look deeply into all of our subscription metrics and it actually allows us to look deeply into our cohorts so we know what offers perform the best in terms of good churn and high LTV and what ones are actually the worst. So I'd highly recommend doing this in your business, looking into it deeply and identifying what is actually going to give you the most sustainable subscriber base and then just focus on that.
Speaker 2:Other things which can help is given the customer's flexibility over their subscription. So one of the big reasons why somebody will cancel a subscription box is they have too many things poiling up. So to fight that, you want to give customers flexibility. You want to give them the option to actually go in and skip a month or, if they want, switch to a boy monthly subscription so they're no longer getting a box every month, but they're getting something every two months A lot of the time. That can help keep people signed up for a longer amount of time and look it's better that somebody's paying something rather than canceling and paying you absolutely nothing. So you should definitely be flexible over what options you give your customers around their subscription terms. Okay, cancellation savers and training up your support team to be very good at retention. And that will involve having scripts for every reason why somebody is looking to cancel and then coming up with a solution to that reason. For us, one of the main reasons is the dog destroys the toys too quickly, so we have really detailed scripts explaining exactly how to fight that objection and it helps us save a lot of customers. So, yeah, it's really important that your team are trained up and they understand how important retention is to the success of your business.
Speaker 2:Now, I covered all of that stuff, right, because all of that stuff can help. Okay, it can 100% help, and you should definitely consider doing some of it and thinking deeply about it. But I'm going to explain something and I'm going to be very clear. Right, you see so many different people talking about different ways to improve churn, different tactics, different strategies and, yeah, some of them can help, but the best way to fix your churn is actually fix the problems which are causing people to cancel. That's simply it.
Speaker 2:Look, if you're offering a rewards program or a community, but there are some big problems with your subscription box. They're not really going to help that much. They're not really going to help drive down the churn. Yeah, maybe they will a small bit, but if you really want to cut down that churn, you have to identify the big drivers which are causing it, and to do that you want to look into your data deeply and you want to pick out the two main drivers. What are the two big reasons driving up your churn? And then you want to come up with solutions to fight those reasons. I'll give you an example. Imagine one of the main reasons people were leaving your subscription was because of your delivery speed and you were signed up to a courier who were absolutely terrible and they kept losing boxes and boxes were arriving late. Do you think a customer would really care too much about a reward program if they were receiving their box late every month? No, eventually they would get really angry and they'd simply cancel.
Speaker 2:Okay for us, like I previously mentioned, one of the big reasons why people were canceling was the dog destroyed the toys too quickly. So to come up with a solution to fight this objection and to reduce our churn, we came up with a strong chewer box. So if somebody comes in and that's what they're not happy about, we'll give them the option to switch to a tough chewer box so the dog can't destroy the toys so quickly. That's us addressing one of the main drivers of our churn, and it works great. It helped us take down our churn significantly.
Speaker 2:Okay now, the reason why I'm saying that you need to pick out two main drivers is because it's going to be pretty much impossible to fight every single reason in your business, and sometimes it may not even be worth it. There may be a small bit of churn being caused by a very specific reason, but to solve that problem it would require a massive investment and a lot of work and it would only bring down the churn by a tiny amount, aka, it would not be worth it and to actually do it. So that's why you want to identify the two main drivers, look into your data, see why these drivers are causing people to cancel and come up with solutions for them. And if you come up with solutions for those reasons, that will have the biggest impact by far on reducing your churn rate. It will beat everything that I just covered before I got to this point.
Speaker 2:So remember all of that stuff that will cover that at the start of the podcast. Yeah, it can definitely help and it's definitely important to analyse and to come up with perks and stuff that will keep people signed up for longer, and to look deeply into your cohorts and identify what offers are the best for building a sustainable business. All of that stuff is important, but if you really want to make a big impact on your churn, look deeply into your data and identify the two main reasons which are causing people to cancel. Then fix those problems and that will bring down your churn overnight. Now the thing about it is right sometimes it won't be easy to fix those problems. They might be really really tough issues to fix and it may take a period of time to actually come up with a solution, but you should be working on them and making things better, because when you solve them, it will work wonders for reducing your churn.
Speaker 2:Now, I hope you found this podcast helpful. I wanted to cover the tips and tricks at the start and, honestly, we could talk about churn all day or do another podcast in the future talking about specific strategies in really deep detail, but for today I just wanted to do a blanket answer to all of the questions that have been coming in over the last few months. We'll be back next week at the exact same time as always. If you have a question you want to answer, then the show. Please head over to the free Facebook group at SubscriptionBoxResourcescom. Join it and post your question there. Chat to you next week. Have a great day.