As part of our “Best of Subscription Show” members-only series, we’ll look back at some of our most popular speakers and sessions and share key takeaways that show why this information remains relevant and how you can use it to grow your subscription business or inform your decision-making. In this article, Robert Skrob, founder of Membership Services Inc, shares his insight on how to create a cancellation process that helps retain subscribers or win them back.
This piece accompanies another from Skrob titled: Why Customer Onboarding is the Most Important Process in Your Company. Check it out to understand how to effectively bring your customers into your business.
It happens: customers unsubscribe. There are a variety of reasons why subscribers decide to leave, including subscription fatigue and involuntary churn. And, if subscription businesses fail to personalize experiences, they could see customers leaving quicker than they think.
Of course, there are many strategies to minimize churn and increase the lifetime value of subscribers. But every business will reach the point where some of their customers are bound to hit the “Cancel Subscription” button.
While this may be an emotional time for the business owner, when seen from a different perspective, it’s also an opportunity to win back the customer. When it comes to creating an effective cancellation process, businesses should focus on three concepts: trust, save and upsell.
“Our market is limited. The number of people who are going to buy our stuff really is more limited than we’d like to think,” says Robert Skrob, founder of Membership Services Inc. “And if you create a system that systematically pisses off your customers, you’re not going to have any customers very quickly.”
However businesses decide to structure the cancellation process, they should strive to create a process that 1) engenders trust, 2) attempts to “save” the subscription from being canceled, and 3) includes upsells that give customers options to continue doing business.
Much like the onboarding process, there are five critical elements to the subscriber cancellation process: ease, upsell, downsell, confirmation and recovery.
Not only is ease an element of a well-done cancellation process, but it’s also the law. It’s a legal requirement in the subscription industry, and more subscribers are expecting ways to cancel their subscriptions virtually.
So why does the process have to be easy? Wouldn’t a difficult cancellation process decrease churn? There are cancellation strategies that focus on creating an onerous process so customers will give up and remain customers. This strategy, however, often doesn’t engender trust from the customer. And, when a customer is unhappy with a company, they usually tell their friends.
As the number of steps, pages, clicks and action items customers are asked to take to cancel their subscription increases, so does the perception of difficulty. When the cancellation process seems difficult to customers, they get mad and frustrated.
“There is no doubt that [a complicated cancellation process] lowers cancellations,” says Skrob. “I’m concerned about your long-term health and relationship with your customers and the reputation that you have with your subscribers. I think it is more important in the long-term than even your churn rate this month.”
Before opting for this strategy, companies should consider how they want to be perceived by their (soon-to-be) former customers and if they want an opportunity to re-engage in a relationship with them in the future.
In addition to making the process of opting out easier, companies should consider utilizing upsells. Though most business owners are often able to grasp the trust and save components of an effective cancellation process, Skrob has seen very few companies try the upsell portion.
“I have found that [upsells] can actually work better than downsells,” says Skrob.
An upsell is when a business persuades a customer to buy a more expensive subscription. Sometimes customers cancel when they’re not getting enough of what they want or need from their subscription. Upselling these customers can help them gain more value from the subscription and increase their lifetime value.
Though it seems counterintuitive, if a small number of customers end up subscribing to the upsell, it can result in positive cash flow, especially if they’re opting for a more expensive option.
“Depending on what type of subscription business that you have, I know that having something that’s 10 times the value of your current subscription may sound ridiculously hard, but that’s really the foundation that the subscription business was founded on. The subscription model is really one of multiple tiers,” says Skrob.
One of the keys to running a successful subscription business is increasing the lifetime value of customers but also having customers ascend the pricing tiers. Showing the tiers available to customers as part of the cancellation process can increase conversion and get the customer to stay.
As subscribers move through the cancellation process, showing them the implications of leaving can be a powerful tool. What are they going to lose? How will it impact them? And, most importantly, how will it take away from the joy they receive by being a subscriber?
“You want to maintain the relationship with the customer and show the benefits of shopping at your company even if they choose to cancel the membership,” says Skrob.
Additionally, businesses can show customers how many days are left on the current subscription and ask them if they want to wait until the billing cycle ends. This gives them the option to derive as much benefit out of what they’ve paid for as possible. If a customer chooses this option, businesses can then create a countdown follow-up sequence that upsells the customer. This turns the customer back into a lead and reintroduces them to the sales funnel with some tweaks.
Some subscription businesses choose to implement an upsell, while others choose a downsell strategy.
A downsell is when a business offers a less expensive or discounted offering to a customer who is considering leaving. Instead of trying to upsell customers into a higher price tier, companies instead offer the current subscription at a discount. As Skrob has seen with his own clients, this frequently works. It often encourages the customer to remain a subscriber and can increase the lifetime value of the customer.
However, this kind of strategy can get out of hand. For example, some subscribers may realize that trying to cancel their subscription gets them a discounted rate. They, in turn, then share it with their networks and, suddenly, the company is converting a high number of people, but only keeping them at the lower subscription price.
Eventually, this strategy turns into a numbers game. Businesses need to calculate if they can operate and still increase their bottom line in this scenario. If not, they may decide a downsell strategy may not be the right option for them.
Regardless of whether a subscription business plans to utilize upsells or downsells during the cancellation process, they must close the loop. This goes back to the first of the three goals of the cancellation process: trust. It’s critical to inform subscribers that they are officially no longer subscribed via email. This relieves them of the stress of not knowing whether or not they are financially committed to the business, and it builds their trust in the company that there was indeed a way to extricate themselves from the business.
Of course, there is nothing stopping businesses from placing an upsell or downsell in that final email to encourage the customer to return.
In addition, during the confirmation process, businesses can utilize exit surveys to gain insight into exactly why subscribers are leaving. This can be a goldmine of information that will help business owners create more informed decisions around how to retain the rest of their customers.
Is it better to offer customers discounts? To decrease the number of promotional emails sent to subscribers? To increase the number of offerings within a certain subscription tier? To change prices? To create flexibility within the billing cycle? These are just a few questions that business owners can try to get answered by their former customers. This is considered first-party data and if exiting customers are willing to provide it, businesses should collect as much information as they can.
Once a customer is officially no longer subscribed, businesses have the opportunity to kick off a win-back campaign. This can take place over any amount of time – 60 days is often a popular choice – where offers continue to increase in value in an attempt to lure subscribers back.
Changing the pricing of an offering doesn’t always have to be the hook; it could be a new bonus, a new process, or something exclusive that they didn’t have access to before. Instead of simply decreasing the price, Skrob urges business owners to focus on increasing the benefits.
“What can I do to help accelerate their success or simplify their journey?” Skrob encourages businesses to ask themselves. “Can I remove obstacles to get them to their destination faster?”
This could be a PDF that includes a guide explaining the process, a book, or another tool that can be offered as a bonus to get the subscriber to return. Whatever the offer is, it should attempt to provide returning subscribers the transformation they seek.
With the three goals and five elements of the cancellation process in mind, what’s the right combination for each subscription business? It depends! Ideally, business owners will use a mix of subscription intelligence as well as best practices to create a cancellation process that is effective and hopefully retains customers instead of simply letting them leave.