Customer Retention’s A Top Priority for Subscription Businesses: What Tactics Are They Using?

February 19, 2020

Brightback Subscription Biz Customer Retention Tactics Feb2020With the benefits of greater revenue, higher profitability and predictability that recurring revenue programs bring, subscription-based companies rely heavily on retaining their existing customers. Indeed, 9 in 10 B2B and B2C subscription businesses put customer retention at a higher (62%) or equal (31%) level of priority than they do customer acquisition, per a report [download page] from Brightback.

The focus on customer retention is especially true for B2B subscription businesses, where 90% say that retention is one of their top 3 priorities when it comes to subscriber growth this year, ahead of expansion (83%), acquisition (72%) and onboarding (53%). While 4 in 5 B2C subscription businesses say that retention is one of their top 3 priorities this year, it ranks below expansion (84%) and acquisition (82%).

Although churn rates vary depending on the industry, keeping customers from churning is a company-wide responsibility for the businesses surveyed, with 80% reporting that they have a published, company-wide churn target. However, more B2C companies (85%) appear to be making the entire company accountable for customer retention than are B2B companies (69%), where churn targets are more likely to be departmentalized.

Retention Tactics

The majority (86%) of companies surveyed think that customers cancel for reasons that can be managed or fixed. As a result, they have tactics they use to retain customers who are planning to cancel. Half of all of the companies surveyed say they use discounts, although more B2Cs (51%) than B2Bs (44%) use this tactic. Surprisingly, earlier data from Brightback that focused more generally on large businesses found that B2B companies were far more likely than their B2C counterparts to test a range of discount orders to reduce churn.

Two-fifths (40%) of companies say they use personalized offers based on the reason for cancellation to re-entice at-risk customers. And, while another 39% of all respondents say they use bundles or cross-selling promotions, this is actually the second-most popular tactic used by B2B companies (43%). The second-most popular retention tactic used by B2C companies is giving an option to downgrade (40%), which by comparison is the tactic used by the fewest B2B respondents (24%).

For about one-third (34%) of subscription companies, getting in touch with at-risk customers through email or phone is a tactic used to retain customers who are planning to cancel. This is another tactic that B2B companies (42%) are more likely to employ than B2C companies (31%).

These various tactics appear to be paying off, as slightly more than half (52%) of companies say that they were able to save 1-25% of customer cancellations by either engaging with the customers or using offers.

Retention Challenges Still Exist

Even though subscription companies are seeing success with some of their tactics, they still face challenges when it comes to improving customer retention. One-third (34%) say that one of their top 3 challenges is a lack of cohesive approaches to engaging customers across departments, while others say that being unable to automate tailored outreach at the right time (31%) or the lack of predictive methods to identify who will cancel in the future (31%) are top challenges.

To find out more, the full report can be downloaded here.

About the Data: Results are based on a Q4 2019 survey of 4335 subscription companies with at least 250 employees and $10 million in annual recurring revenue.

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