Subscriber churn: it’s one of the biggest threats to your business. Also known as “attrition rate” and is used to speak about the opposite of “retention”, churn is the percentage metric that quantifies the total number of people who cancel during a given period, based on the amount of people subscribed during that period. For example, if you had 100 customers and 10 left, you had a 10% churn rate (# loss / total # = churn).
In other words, it shows how many customers you’re losing throughout the course of your month, quarter, or year.
Trying to build a successful subscription business with high churn is like trying to fill a bucket up with water when it has holes in it.
Clearly, this is an important metric. At Subscription School, we’d even go as far to say it’s one of the most important metrics, right up there with conversion rate and profit margin. In an effort to bring more clarity to this concept and how you can influence it in your business, we’ve created the following infographic:
Thanks for this great post. I have a question about a different type of churn – I lose between 5- 10% of my renewing subscribers each month because their credit card transactions fail. The reasons vary from credit card expirations, billing address changes, lost/stolen credit cards, overcharged cards, etc. Our system sends a notice letting them know that their renewal has failed and some do update their information to come back. However the majority of these “lost” customers don’t return. Are there benchmarks around what’s typical for this type of churn and best practices to mitigate it?
5-10% of your whole customer base seems very high. Generally, I suggest people aim for 8-15% churn rate, with 15% on the high range. Usually, 2-3% of this is related to card failures.
One note: because of the new chip system with cards, many people may have just received new cards. I had a big bump when this affected me a few months back.
For getting them back: One thing to do is export your customers based on failed cards, then put those people into an email campaign or drip campaign. Remind them a few times, then incentivize them to come back with an offer. Another way to mitigate it would be to get proactive with update emails ahead of time – ie. 60 days before a card expires, make sure people get notices.
Hope that helps!
Thanks for that information and advice, Jesse. Are there any payment parameters that you suggest enabling/disabling that would help? For example, we require a CSV and billing address match via authorize.net right now. We are basically following authorize’s recommended settings, but I sometimes wonder if they are too conservative and causing more failures than necessary. In speaking with authorize, we were advised that loosening up the settings would cause our payment processor/credit card company charges to rise. Is this something I should push back against, with specific adjustments, in your view? What would those adjustments be?