Reducing customer churn is important, especially for organizations that use a membership or subscription revenue model like nonprofit groups, associations and software-as-a-service companies. Fortunately, email marketing is an excellent tool to identify and retain churning customers.
Why retention matters
You've no doubt heard the saying, "Retention is the new acquisition." We've always known that it costs much more to acquire new customers than to retain them. Now, retention will become even more important -- the gap between acquisition costs and retention costs will only increase as new policies regarding third-party cookies, data-privacy and tracking go into effect.
When you put more effort into retaining customers, you can increase their lifetime value and make your acquisition budget stretch farther. We have the numbers to prove that, too! Research by Fred Reichheld of Bain & Co. (he also invented the Net Promoter Score) shows increasing customer retention rates by 5% increases profits by 25% to 95%.
For email marketers, that's a great statistic to use when building a case to invest in email for customer retention. Here are four ways you can put email to work to reduce churn.
Step 1: Get visibility into customer churn data
You need access to customer churn data to track churn accurately. In particular, it is helpful to know which customers are churning, at what point in the customer journey or lifecycle churn happens, and whether churn is increasing or decreasing.
Thankfully, you can integrate this data into your email program no matter how large or small your business might be. Getting information to help you track churn in your email service provider (ESP) will help you track trends and create email strategies to increase retention.
For larger companies, a centralized customer database, such as a customer data platform (CDP), makes access to current data easier for the email team. Teams at companies that don't use CDPs can still integrate customer subscription information easily through direct integrations between the ESP and payment processors like PayPal and Stripe, third-party integration tools like Zapier, or custom integrations made in-house or with the help of a developer.
Step 2: Analyze your churn data to identify common causes
Getting the data is just the start, next is use it to evaluate what's happening and make data-informed decisions in your email-marketing program. Looking for the traits your churning customers have in common is a great place to start.
When looking for commonalities, consider the two types of churn:
Active churn: Your customer cancels a membership or subscription. They could go to your website to cancel, send an email, withdraw a payment service or credit card, call a membership service number or take other steps. When looking at those who actively churn, look for commonalities among your churners to learn how they differ from customers who have not canceled.
Check out both demographics as well as psychographics:
- Demographics: Information about groups your customers belong to, such as race, ethnicity, religious beliefs, age, occupation, income, social class, and education level
- Psychographics: Information about your customers' activities, interests, and opinions
Passive churn: Their memberships are canceled because their payment methods fail or they neglect to renew a membership. It's easy to overlook passive churn or not to have that number reported in your data system. However, it can add up quickly!
As with your active churners, look at your data to discover commonalities among your passive churners. Did they come from the same acquisition source? Do they go inactive earlier?
This is where having a data scientist like me on your team can get a handle on your churn. I can help you make sense of the numbers, look for trends and predict what will happen in different scenarios. Doing this can pinpoint the reasons why churn is happening, indicate early-warning signals and guide email efforts to address them before customers churn.
Step 3: Create email programs to address and reduce churn
Once you understand these two kinds of churn and how they happen in your organization, you can create personalized campaigns that detect and address the warning signs for both. Automating both churn detection and your email responses will allow these programs to run continually in the background.
Consider these approaches:
Automations/campaigns that address active churn
- Re-engagement emails: Send these when your data detects low customer activity, with themes such as "We miss you," "Are you having problems?" "Please take a short survey," "Discover these benefits of your membership," and other efforts to nudge customers back into active use.
- Feedback requests: Use these to gather valuable insights and determine your Net Promoter Score.
- Activity-based emails: These acknowledge customers for their recent activities and invite them to take the next logical step. (like "Thanks for checking out Feature X. Have you tried Feature Y? Here's how it works.") These can help customers discover more benefits of belonging to a membership group or using a service.
- News and announcements: Use these emails to unveil new features and announce membership or service upgrades and new benefits. Tip: Always frame these announcements as benefits, explaining how new features will help customers.
Automations/campaigns to address passive churn
- Reminder emails: Alert customers that their renewals are approaching. For free-trial users, let them know when their trial period will end. Also, trigger emails to alert customers to update or confirm payment details such as credit card or payment-service details.
Automations/campaigns to avoid both active and passive churn
- Welcome emails and onboarding series: Retention begins at acquisition. If you send a single welcome email now, consider upgrading to a series of two or three emails (or more), with each email dedicated to a single purpose such as getting started, member/user benefits, troubleshooting or FAQs or the like.
- Appreciation emails: Say thank-you and show how you value them as members/subscribers.
Step 4: Return to Step 2 and repeat
Working to reduce churn is not a "one and done" process. After setting up your retention email programs, decide how often you want to revisit them.
The best frequency will depend on your business. You might need to check it weekly, monthly, or quarterly. This includes checking in on your automations to ensure they continue to function the way you intended and update them as needed.
Retention takes data and action
Remember my opening comment that increasing customer retention rates by 5% increases profits by 25% to 95%? That's a powerful motivator!
It might seem as if gathering churn data and building email programs to address it are a lot of work. However, you likely already have many of the email campaigns I've suggested here. You just need to review and update or upgrade them with retention in mind.
Getting visibility into your data might be more of a challenge. If you can present a solid business case to your team leaders, you can enlist their aid in getting you the access you need.
But collecting the data is just the first step. Analyzing it, on your own or with a data scientist, will help you understand what’s happening. Finally, designing an action plan will convert your data and analysis into action and help prove once again the power of email to help your organization prosper.
Would you like some help implementing these steps and reducing subscription customer churn using email marketing? Reach out to me, I would be happy to help!
About the Author
Dr. Ada Y. Barlatt helps email marketers to use data to reduce churn and is the founder of Operations Ally.
Operations Ally's powerful predictive reporting helps you translate business data into actionable improvement plans.
Ada earned a Ph.D in Industrial and Systems Engineering, and she loves using analytics to help organizations make better, data-driven decisions.
Today, more than ever before, organizations and business owners have access to a treasure trove of valuable information that comes directly from their own customers’ actions – not just from “best practices” or benchmarks in general. Ada helps you unearth and interpret that data, so you can make sound decisions and grow your revenue. Ready to uncover hidden insights in your data? Visit: https://www.operations-ally.
Company Website: https://www.operations-ally.