Businesses operating on a subscription billing model know that customer churn has a major impact on their bottom line. These companies aim at minimizing voluntary churn, meaning those cases when a customer willingly cancels a subscription. Involuntary churn has to do with those cases when subscriptions are canceled without action on the customer’s part. The latter cases aren’t paid much attention to but play an important role in maximizing profit.
A Recent Involuntary Churn Report
According to “The Art and Science of Reducing Involuntary Subscriber Churn” report released by one of the e-commerce companies, churn, the loss of a paying customer, may not only affect revenue but also hinder innovation. The report is based on a survey of over 200 subscription and recurring payments professionals. It was conducted by Forrester Research Inc.
Based on the mentioned report, involuntary churn is mainly caused by payment-related failures. In these cases, the recurring payment failures occur because of insufficient funds or a technical reason. 66% of the companies having participated in the survey say they’re able to retain 66% of their subscribers, but lose an average of 34% to churn.
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What Steps to Take?
The Vice President of solution innovation at the mentioned e-commerce company notes consumers now focus not on a desire to own something outright but on a desire to have access to the latest and greatest. Even brands offering physical products are choosing subscriptions as a way to enjoy increased access to their products.
When asked what the involuntary churn was caused by, 59% answered insufficient funds. 42% mentioned a credit card limit. Other reasons included changes made to a card (a different expiration date on a replacement card), which made up 40%; technical issue with a payments processor, which accounted for 32%; credit card restrictions, which represented 30%; and other technical failures, which made up 29%.
According to Forrester, if you don’t manage involuntary churn proactively, it can get challenging to replace the volume of lost customers required for your company’s growth. Forrester suggests the following steps that payments companies can take.
- Technology enabling an ongoing review of credit card data with automatic system updates prior to the renewal date
- Better communication with customers
- Automatically extending expiration dates for expired credit cards
Involuntary churn affects your business to a great extent and it shouldn’t be overlooked. Take the necessary steps to manage involuntary churn so not to lose your customers.