Customer retention is the ability of a company or a product to retain its customers over some specific period. The more customers you retain, heightens the retention rate.
Why Is It So Important?
A study by Bain & company states that if you improve your retention rates by 5%, your company’s profit can grow anywhere between 25 to 95%. That’s the positive impact retention can have on a company’s growth. This proves that businesses should focus on retention as much as they focus on customer acquisition; in the case of some specific companies’ retention is even more vital because here, recurring revenue is the lifeline, be it a SAS or membership business or a box business. Consumers try to conserve their financial resources during an economic downturn like the ongoing covid-19 situation.
This means they’ll evaluate all their existing subscriptions and cancel the ones that they feel are unnecessary at the moment and are already happening. A recent article by the wall street journal states that the covid-19 impacts various subscription businesses. Some, like, online tutoring and tv streaming or gaining a lot of attention. But for most companies, the synapse has dropped, and the cancellations have gone up, unfortunately. But, how does a recurring billing tool come into the picture as a business owner? When you notice that the cancellation rates are rapidly increasing, you might feel overwhelmed, and things might seem out of control, but a powerful recurring. The billing tool can offer you the right matrix and insights to prioritize your efforts toward retention. I’ll explain this, keeping Zoho subscriptions as an example. For those new, Zoho subscriptions are a powerful subscription management application that can help you manage your complete recurring billing processes. Now I’ll be sharing a few tips on how you can retain your customers during a crisis and how you can do it. Yes, you can do it right now. We’ll send a complete recording of this webinar so you can try those steps later. To brief you all. Here are the tips I have in mind to help you with customer retention
Step to Retain Customers
When you focus on retention, it’s always good to start with the current cancellation trends of your customers. Knowing your current churn rate helps you get the actual rate your customers leave and leaves no room for any assumption. Zoho Subscriptions offers more than five different reports to monitor your channel. You can click on reports on the left menu and move to the chum category to view these reports. I’ll be covering each of these reports in due course. But first, you can click on the churn rate report to know your current cancellation trend.
As you can see, the churn rate is calculated this way. It’s the number of cancellations in a day divided by the total number of customers at the start of the selected date range. I have generated this report from the 25th of March to the 24th of April. So this means point one seven percent of my customers. As the 25th of March has left on the 13th of April, you can customize this report to a different date range.
This can give you an overall idea of what percentage of your customers have canceled their subscriptions. If you want to know the details of these customers, you can generate the churn subscriptions report.
Now that you know who has left, it’s time to focus on why your customers choose to cancel their subscription; you should ask them if they would like to give a reason for any business, the cancellation can happen in two modes, either their customers can request you to cancel their service through a phone call. Your team can cancel it, or the customers can cancel it themselves through the customer portal for those who know customer portals. You can offer a self-service portal to your customers by logging into the portal. They can view their subscription and payment details update their contact information, or cancel their Zoho subscriptions. It gives you the option to obtain a cancellation reason in both cases. Let’s take the first case where your customers request the cancellation, and you do the process. In this case, you can click on the subscription, choose more on the right, and choose cancel subscription. When you do this, the system will ask. If you want to cancel the subscription on the next renewal or if you want to do it immediately, either way, once you choose an option, you will be asked for a cancellation for a reason.
Let’s take the second case where your customers cancel the subscription themselves. Now, this screen is how the customer portal would look: if they want to cancel the subscription, all they have to do is click on subscriptions, click on the subscription, where they want to cancel, and choose to cancel a subscription. It’s on the right, so they will be provided with the same options you saw. That is, whether to cancel it immediately or at the end of the current billing cycle. It was an option. They will be asked to enter a cancellation reason. Once or twice a week, you might want to go through the calculations that happened that week and analyze them based on the cancellation reason; for this, you can go to reports and choose churn subscriptions. This gives you a breakdown of all your cancellations and the corresponding reason entered, and if you want to make this cancellation recent as mandatory, you can click on settings. Preferences and subscriptions are on the left. And cancellation preferences. You can enable the checkbox to make it mandatory and click save. Also, in our previous example, we saw this text box to enter the cancellation threesome as an alternative. You can provide a more advanced option where you give your customers predefined options to choose from. For example, you can add covid-19 as a reason to add a new reason; you can use this option, and after you add them, you can hit save.
Now It’s Time to Prioritize.
Subscription cancellations broadly fall into two categories, voluntary churn and involuntary churn. Voluntary churn is when your customers choose to cancel the service. It could be either through you, or they could do it themselves. The next kind is the involuntary gesture. Involuntary churn is where the billing system cancels the subscription due to non-payment. While you should take steps to mitigate both kinds of churn, the priority now should be involuntary churn. It’s because these customers did not choose to cancel the service themselves, or in other words, they still want to do business with you, but you to a payment failure, their subscription was canceled. Since your new purchases and sign-up might have taken a dip during the crisis, you should do everything possible to retain your customers who are still willing to do business with you. That’s why you should give up most priority to involuntary churn.
These are the top reasons for involuntary churn. It could be either your customer’s card expired, or it’s declined with the bank temporarily. In these cases, subsequent attempts to charge the customer’s card or bank account can lead to successful payment.
You can retain those customers; this is trying to charge a customer’s card, our bank account. After a decline is called dunning management; let’s see how you can do this in Zoho subscriptions. First, to know, which subscriptions will be canceled because of non-payment, you can switch to reports. And run this report called under risk. Now, for this demo account, there are no subscriptions that will be canceled because of non-payment, but in general, if you have any subscriptions where Zoho cannot charge them, they will be listed here. This will also have the contact details of these customers, so you can choose the export option on the right, export this report, and send it over to your sales or customer retention team so that they contact the customers and make sure it’s taken care of.