Investing in customer retention is fundamental to the success of any business. By reducing the churn rate of your subscription club, you not only save on acquiring new customers, but also increase your recurring revenue.
In this article, we will explain what churn rate is, the common reasons customers cancel their subscriptions, and effective strategies to build loyalty and ensure the success of your subscription club.
Before we dive into each point, let’s start with the basics:
A subscription club is a business model based on customers paying a recurring fee to receive products or services on a regular basis. The frequency can be monthly, quarterly, annual, or even more flexible, depending on the business.
Subscription clubs come in all shapes and sizes, from coffee and record clubs to supplements, skincare products, and beyond.
What is churn?
Churn, or churn rate, measures how many customers stop using your product or service within a specific period. Understanding and tracking churn is critical for assessing your business’s health and identifying ways to reduce customer turnover.
Since churn reflects the rate of subscription cancellations, it’s particularly relevant for recurring business models like subscription clubs.
How to measure churn?
The formula to calculate churn rate is quite simple:
Churn Rate = (Number of customers who canceled in the period / Total number of customers at the beginning of the period) x 100.
For example:
If a coffee subscription club started January with 1,000 customers and 50 canceled by the end of the month:
Churn Rate = (50 / 1000) x 100 = 5%
This means that 5% of customers canceled their subscriptions in January.
You may be wondering: “What is considered a healthy churn rate?”.
Unfortunately, this varies greatly for each type of segment. Therefore, it is important to monitor it constantly to understand if the number is stable or has increased over time.
Even if your churn rate is stable, developing strategies to reduce it is always worthwhile.
Before diving into the key strategies, let’s take a moment to explore the main reasons why customers cancel their subscriptions.
Why Do Customers Stay in a Subscription Club?
A survey conducted by PagBrasil in partnership with On The Go showed that exclusivity is the main reason to stay in a subscription (46%), especially among those who spend more on their subscriptions.
Rewards are valued (43%), especially by those with lower family income, between 18 and 30 years old and over 41 years old.
Ease of contact is valued (41%), especially among women and those who invest more in subscriptions.
Continuous access to the product is an important factor in maintaining subscriptions (41%), with a preference among women.
Competitive prices or shipping (32%) are attractive, especially for the age group between 18 and 30 years old and those who spend less on subscriptions.
What are the main motivations for customers to “abandon” a subscription club?
The motivations for canceling a club subscription are diverse. The most common reasons for churn include:
Cost: the increase in the price of the product, or the difficulty of keeping it on the budget, are the motivations to give up the subscription.
Product quality: if the products do not meet the customer’s expectations in terms of quality, they may choose to cancel.
Lack of personalization: if the customer wants to receive a product every two months, but the business only offers monthly recurrence, the customer may cancel the service, avoiding the accumulation of the products.
Delivery issues: Late deliveries, damaged goods, or poor packaging can drive cancellations.
Difficulty canceling: if the cancellation process is complicated, the customer may feel frustrated and choose to cancel even if they did not initially intend to.
Problems with customer service: poor customer service can generate dissatisfaction and lead to subscription cancellation.
How to avoid churn in subscription clubs?
Knowing about your club’s churn and the reasons for cancellations, it’s time to think about strategies to reduce the rate. Check it out below.
1. Offer Outstanding Customer Service
By offering fast, efficient, and personalized service, you demonstrate that you care about your subscribers and that you are committed to providing the best possible experience.
In the face of feedback, be empathetic and show yourself truly willing to help.
Offer various service channels so they can choose the most convenient way to contact your business. And finally, invest in continuous training for your team so they are always prepared to offer high quality service and solve any type of problem.
The concept of Customer Success is fundamental to your business in this context. This approach goes beyond reactive service, aiming to ensure that your customers achieve their goals and get the most value from your products or services.
By closely monitoring the customer journey, anticipating their needs, and offering proactive support, you not only increase customer satisfaction, but also strengthen the relationship and drive loyalty.
From this close monitoring, you should gain valuable insights and anticipate problems that can lead to churn.
2. Analyze your customers’ behavior patterns
Both customers who have been in your club for a long time and those who leave can give clues through their behavior.
By identifying these patterns, it is possible to predict behaviors and the possibility of losing customers, or guarantee the permanence of those who are already loyal.
For example, customers who frequently change their products may indicate a search for new products, while those who prefer known products tend to always choose the same items.
This detailed analysis allows you to offer more relevant recommendations, personalized promotions, and other actions.
Another example: let’s say you have identified that there are a considerable number of customers who cancel their subscription in the fifth cycle of receiving the product. How about offering a discount on shipping for the following cycles, or a special gift to maintain recurrence?
3. Seek to innovate, anticipating needs
Even if you have loyal customers to specific products or services, introducing new solutions can be a welcome strategy. These innovations can anticipate needs that your customers didn’t even know they had.
It was with this attentive look at customers and focus on innovation that SetYou, a company that develops personalized formulas for performance and well-being, developed a new line of solutions in 2024.
“When we started our annual planning, we realized that there was something very clear: our customers were asking for more. It was then that we made the decision to innovate, but in a way that made sense for those who already follow us closely,” says SetYou CEO Juliana Duarte.
She details that the first step was “to deeply understand who SetYou’s most recurring customers are. We already knew a lot about their health, energy, and sleep habits, but we wanted more. So, we conducted detailed research to understand even more about their routines and behaviors.”
The research brought very important data, which supported the creation of the new formulas.
For Juliana, “listening to customers is, without a doubt, the best way to offer them the best possible service”.
SetYou manages its subscription club through PagStream®, PagBrasil’s intelligent subscription management platform.
4. Give your customers autonomy to manage their subscriptions
Allow your subscribers the freedom to control and personalize their subscription plans easily and intuitively.
By providing this autonomy, you facilitate the journey and make their experience better.
It is important that they can edit their subscribed products, skip a cycle, pause the subscription, or even cancel it on their own.
5. Offer various payment methods
By expanding the available payment options, you not only make life easier for the consumer, but also demonstrate a genuine concern to meet their individual needs.
This flexibility makes the shopping experience more convenient and practical, reducing the cart abandonment rate. By accepting different forms of payment, you reach a wider audience, including those who do not have a credit card or prefer other methods.
In addition, this practice contributes to building a positive image for your brand, associated with flexibility and adaptation to customer needs.
PagStream® as an enhancer of subscriber loyalty strategies
Establish a lasting relationship with your subscribers through PagStream®.
PagBrasil’s intelligent subscription management platform offers features that optimize your team’s work and provide the best experience for your subscribers.
Complete Subscriber Area
Changing items: your customer has the autonomy to modify products in their subscription, via PagStream®, in an environment hosted by PagBrasil. The merchant can configure in the PagBrasil tool which products will be available for customers to include in their subscriptions through the subscriber area.
Another great advantage is that the customer does not need to cancel the subscription if they want to change products. Simply edit the items in the current subscription.
Changing or updating payment method: the customer can choose the best payment method to receive their products on a recurring basis. If the customer, who currently pays by credit card, chooses to change the card used, they can access the logged-in area and make this change. Thus, they do not stop receiving their subscription products and the merchant retains the customer.
Inclusion of single items in the subscriber area: your customer can add single items within the subscriber area. The additional products are delivered together with the recurring product only in that cycle.
Possibility to skip, pause, or cancel the subscription: pausing indefinitely or skipping the next subscription receipt avoids many cases of cancellation. These are highly desirable features for situations where, for example, the customer is going to travel or has not yet finished consuming the products received previously. Thus, skipping a cycle or pausing until it is convenient avoids cancellations.
Promotions engine
The PagStream® promotions engine provides a unique experience in terms of subscription automation, as it is possible to automate processes that were previously done manually via the dashboard and individually.
From simple combinations, it is possible to create rules that define actions to be executed when certain conditions are met, taking advantage of important dates such as Consumer Day, for example.
Greater variety of payment methods
Offer the main payment methods, including our exclusive PagBrasil Pix and Boleto Flash®.
Effectiveness in charging:
Multiple retries: the platform repeats the charging attempt on multiple days if the transaction is declined.
Switching acquirers: PagStream® repeats the charging attempt using another acquirer in case of failure.
Card updater: in case of card replacement or expiration, this exclusive feature checks if the user has a replacement card and repeats the charge the next day without the customer having to take any action.
Conclusion
Reducing churn rate and increasing customer loyalty is critical to the success of your business.
By implementing the strategies presented in this article and relying on PagStream® technology, you will be taking an important step towards building lasting relationships with your subscribers.
Contact us now and discover how we can help you transform your subscription club into a true success.
