Subscription Billing Blog

Minimizing churn by anticipating customer preferences

 

A business operating on a subscription billing model cannot survive unless it keeps customer churn to a minimum. This simple fact involves a surprisingly complex method of execution. To keep churn rates low, businesses must have a subscription billing solution that reduces friction on the customer end by automatically charging designated credit or debit cards, retrying failed payments, sending incentives triggered by specific billing events and offering a variety of payment options. In terms of the product itself, however, companies must create something customers truly desire.

Answering the question “What do customers want?” is just as elaborate a process as reducing churn. How does a company take what it believes is a good idea and design something consumers purchase again and again? Of course, market research is a good place to start, but subscription businesses are doing themselves a huge disservice if they do not use data and artificial intelligence to create targeted offers.

“Subscription companies already have huge amounts of data.”

Using data and AI to predict customers’ choices

The MIT Sloan Management Review illustrated how vital data and AI are for understanding consumers. These tools bring to light information customers themselves aren’t even aware of. What’s more, subscription companies already have huge amounts of data waiting to be compiled and analyzed. By measuring commonalities among customers – ages, locations, payment preferences, frequent purchases and more – subscription businesses can more accurately predict which packages new customers will select. They can then use AI to recommend these packages to new subscribers, reducing the number of steps between product discovery and first use. This, in turn, increases customer satisfaction from the outset and positions these companies as a favorable provider. Nailing this first encounter increases the likelihood a customer will continue subscribing.

In addition, data analytics allows companies to update their products in a similar manner. By evaluating which aspects subscribers use most and least often, they can update their offers to better support the former.

Combining targeted decision making with subscription billing fundamentals

Businesses must keep the following core basics in mind with every update of their products, lest they end up with a great idea that still turns customers away. First, people subscribe out of convenience. Subscription billing is as easy as it gets, but all other aspects of the product must be just as favorable. A digital newspaper, for instance, must make sure customers can read articles just as easily as they pay. In this example, the publisher could use the following steps to remove barriers to its content:

  • Create a free-to-download app that works on desktop, smartphone and tablet devices.
  • Allow automatic logins so subscribers don’t have to resubmit credentials every time.
  • Allow customers to save articles for reading later. 
Removing barriers to both payment and use supports customer satisfaction.Removing barriers to both payment and use supports customer satisfaction.

The second concept to remember is to create long-term relationships with customers. Developers should always ask themselves if the products they design encourage subscribers to return. What reason does the customer have for being a subscriber as opposed to making a one-time purchase? There are three primary answers to this question:

  • The customer gets continuous access to a product (for example, over-the-top content).
  • The customer regularly depletes the product and needs more (subscription boxes and services like Blue Apron)
  • The product consistently renews itself (news and other media).

Keeping these two ideas central to the development process ensures businesses create products that customers find valuable regardless of the data they collect.

About Author

Kevin Cancilla

Kevin Cancilla

Kevin Cancilla is Sr. Director of Marketing at Vindicia. He is responsible for corporate communications, outbound product marketing, demand generation, sales enablement, website and content development, and partner marketing. Kevin is an industry veteran with over 20 years experience in strategic marketing and product management for enterprise software companies such as STEALTHbits Technologies, Tripwire, Epicor, Netcentives, Calico Commerce, Baan, and Adobe Systems. He holds a BSBM degree in Marketing and Business Management from the University of Phoenix.

read more

Nintendo toys with free trials - should you?

3 tips to focus your online marketing and eliminate subscription churn