Can subscription retail solve its retention problem?
Through a special arrangement, presented here for discussion is a summary of a current article from the Retail TouchPoints website.
With churn rates seen as high as 40 percent, subscription retail has a serious retention problem. And there’s no simple one-time solution, either.
“Adjust your mindset because customer retention is not a problem to be solved — more like a chronic condition to be managed,” said Carl Gold, chief data scientist at Zuora, which specializes in subscription models and their associated data strategies.
A first step is identifying “at risk” customers. Signs indicating a customer is about to churn include erratic search behavior (i.e., a food box user starts searching for “recipes” or competing services); decreased app or online engagement; drop in overall usage or spend; and decreased social interactions with the service.
Once potential “churners” are identified, retailers can deploy the following strategies — which also can be used after a customer has actually dropped the service:
- Align acquisition tactics with retention. Many consumers churning quickly suggests companies overinvesting in free trials or heavy discounts without a clear payback. “Acquisition has everything to do with retention,” said Mike Zappulla, director, Paid Social for Elite SEM. “If customers are acquired through aggressive discounting, they will want more of that to stay. Find your most relevant prospects and acquire them through value instead of deep discounts.”
- Increase subscription and product options. Multiple subscription and product options offer more reasons for subscribers to stay and spend more. Clothing subscription retailer Stitch Fix lets customers order as frequently or infrequently as they like. High-end jewelry rental site Flont has partnerships with 65 different brands and offers five different monthly subscription options, with prices ranging from $59 to $379. Gaming subscription site Loot Crate has 22 different options for product boxes. “As this business model proliferates, expanding subscription options becomes a competitive necessity,” said John Fetto, senior analyst at Hitwise.
- Find Partnerships To Scale: Blue Apron got more attention for its retention problems than for the solutions it developed to address them. One of these has been partnerships, including those with celebrity Chrissy Teigen and Weight Watchers. Partnerships give subscription customers more reasons to interact and more reasons to spend.
DISCUSSION QUESTIONS: Are high churn rates a chronic problem for subscription retailers or more easily solvable? What advice would you have for those attempting to improving retention rates?