Between March 2020 and January 2022, the number of Shopify stores grew by 200% [1]. 2.5 million new online stores emerged over the pandemic period, but now we’ve come out the other side with supply chain issues, a scaling war and a cost of living crisis. Inflation is the highest it’s been in 40 years. Those with disposable cash are resuming life outside the internet and visiting brick and mortar stores, while others cut back on luxuries to make ends meet. This, coupled with soaring acquisition costs and advertising blockades (otherwise known as iOS updates) is throwing the subscription market into jeopardy.
More than ever, DTC subscription brands need to hold onto the active base they’ve got to survive and thrive. It’s estimated that 80% of revenue comes from 20% of existing customers [2], and it costs up to 7x more to acquire new customers. There will be winners and losers in this space - only the most resilient will stand the test of time.
With this in mind, let’s look at a few tried and tested ways to reduce subscription churn.
Keeping customers on subscription is thirsty work. Humans are fickle creatures. Financial situations change, lifestyles change and everyone is in flux. While typical subscription churn rates hover at around 6% in other industries (gym memberships, cinema memberships etc), 20% is considered good for subscription boxes [2]. Nevertheless, with an estimated 40% of DTC raised money going directly to Meta and Google for acquisition costs, can you afford to lose 20% of your existing base?
Understanding why subscription customers leave is the first step towards a churn contingency plan as if you know why they leave, you can put steps in place to prevent it. We interviewed hundreds of DTC brands to find out why subscribers churn, they said...
It’s a necessity for brands to offer subscription flexibility to adapt to the changing needs of their customer. However, Lowri Rhys, Head of CRM at Pact Coffee says one of the brands biggest challenges in preventing subscription churn is communicating the flexibility. She says, “Customers don’t want to feel tied into a subscription and a set price, even though it’s actually £1 per bag cheaper to buy us on subscription than through the store.”
Pact offers a huge level of flexibility to subscribers including skip, pause, delay, send ASAP, change coffee and add-on features. However, because the subscriber has to manage it all through their account the knowledge of this can get lost in translation.
It’s a necessity for brands to offer subscription flexibility to adapt to the changing needs of their customer. However, Lowri Rhys, Head of CRM at Pact Coffee says one of the brands biggest challenges in preventing subscription churn is communicating the flexibility.
Pact offers a huge level of flexibility to subscribers including skip, pause, delay, send ASAP, change coffee and add-on features. However, because the subscriber has to manage it all through their account the knowledge of this can get lost in translation.
Pact is doing its best to drive awareness of flexibility through on-boarding emails, welcome booklets (posted with first orders), programmatic DMs and managing subscriptions directly from email. Using customer service to drive awareness of account flexibility is also a tactic the brand leans on. Lowri says, “When people call customer service, they are encouraged to manage and interact with the subscriptions themselves.”
Communicating flexibility is just one part of the puzzle, customers still need to remember their log-in details to action these benefits. Offering customers a smooth way to manage subscriptions can put you ahead of your competitors, drive subscriber lifetime value and reduce churn. Until now, there simply hasn’t been a tool available to solve the problem of admin nightmares.
Relo's Subscription Manager takes the headache out of subscription admin and reduces churn.
Our 1-click Subscription Manager enables customers to manage their subscription, without ever needing to log in. Customers can change, swap or add items to their next order, reducing churn and increasing reorder rates.
Our Subscription Manager can be added to SMS and email CTAs and is expertly personalized to the individual.
It’s not enough to just make great products, customers need to feel they’re getting value for money by choosing you. It’s essential to communicate the value - brands that don’t are likely to lose out to louder competitors as price-conscious consumers tighten their purse strings. Without money saving or added value, it’s just a subscription.
Beauty Pie also communicates the value for money saved in email communication. By holding onto a Beauty Pie membership, the subscriber feels they are making a huge saving.
Subscribers are constantly reminded both onsite and in their email communications that they are receiving extra value for money by being a subscriber.
Pact uses the account area to give added value to the subscriber by providing tailored content to help the customer get more out of their brew, join the community and soft sell new products.
They also have a unique ratings feature designed to match coffee subscribers with their perfect brew. If customers don’t enjoy a coffee, their ‘Pact Promise’ stipulates they will replace it with another, free of charge.
Oddbox drives home value by letting subscribers know how much of a positive impact they’ve made on the planet by buying their fruit and veg which would otherwise be thrown away. In this case, the money value isn’t on the customer but rather the cost of the planet if they churn.
While some subscription customers become subscribers because they dig your brand, the reality is that most joined because of the shiny sign-up offer you dangled in front of them. As the weeks go on and the VIP treatment dries up, boredom can set in, and eyes wander.
Without treating your customer like a VIP, suddenly competitor #1 is looking very attractive to your current subscriber, and all the lovely discounts and deals they offer. Here are some common ways brands make their subscribers feel like VIPs.
Healthy meal brand, Hello Fresh use surprise and delight to make their subscription customers feel valued with free gifts.
Pact does the same thing, teaming up with ethical chocolate company, Tony’s to offer a gift that aligns with their customer’s values.
Butternut Box offers loyal subscribers free gifts as a token of appreciation, and also to encourage customers to try new products with the aim that they’ll increase their lifetime value.
Aside from free gifts and surprise and delight tactics, brands also offer special events and expert insights to drive loyalty.
Rebekah Brown, Founder of natural menopause brand, Mpowder uses community engagement to make subscribers feel like VIPs. She says...
Subscribers are also invited to measure their symptoms and receive a tailored SMS every week.
If you don’t have a strategy in place to encourage loyalty, it’s time to get one. 17% of customers say they’ll try a subscription that offers member-only perks and a further 14% want fun items and experiences [3]. It might sound costly to do this, but it will be much more costly to acquire a new customer than to spend a couple of pounds retaining your current base with a nice surprise.
Subscription cancellation is voluntary, and DTC brands need to look at the holistic customer experience when calculating churn rate. Did the churned subscriber receive faulty packages? Was their delivery ever delayed? Did they leave negative or passive feedback? Were they nurtured? 28% of subscribers listed a personalized experience as the most important reason they chose to stay subscribed [4]. Customers want to feel they are being spoken to as humans, by humans, so anything you can do to spread that message is key.
Butternut Box is a fantastic example of a brand that provides rockstar (and personalized!) customer experience. The healthy pet food DTC has designed an impeccable customer journey from your first foray onto the website through to subscription perks and support.
Despite this, Rosie lists one of her biggest challenges as “making the feedback data we receive useful” as lots of it comes from places such as Typeform which are complex when it comes to transferring it to an email service provider as there’s no easy way. Her dream is to “accurately anticipate someone churning.”
Today’s consumers expect honesty, integrity and transparency from the brands they purchase from. More and more, they are choosing to spend their money on products that align with their personal values. In 2020 alone, 1 in 3 consumers stopped purchasing from brands because they had ethical or sustainable concerns about them. DTC brands that can show they are giving back to the environment, making a difference globally or doing good have a much stronger value proposition than brands who make similar products, but have no higher purpose beyond profit. In many ways, having a brand purpose makes you much more memorable and likely to stick in the mind of the consumer as it’s an emotional purchase.
Let’s take a look at how top DTC brands communicate their purpose to subscribers.
Tony’s Chocolonely find powerful ways to communicate their mission to wipe out chocolate child slavery. They recently got into hot water with this campaign attacking corporate chocolate brands for their unethical supply chain.
The brand uses the chocolate wrapper and makes the chocolate uneven squares to show the inequality in the chocolate industry. Even though Tony’s is a higher price point than the standard chocolate bar, the subscriber is left feeling that if they don’t support Tony’s they are supporting child slavery.
Lucky Saint uses bold messaging to convey their brand purpose - making the world’s best alcohol-free beer for a healthier life.
The brand regularly teams up with mental health champions, wellness experts and encourages its active base to take part in running campaigns all centered around personal happiness and development.
Who Gives a Crap donates 50% of its profits to help build toilets for people who need them. They are known for their brightly patterned packaging and tongue-in-cheek tone of voice.
Instead of writing a generic reminder email, the brand plays on the human touch and sarcasm to drive home their value proposition.
The major players in this industry are already nailing customer experience, flexibility, rewards and purpose, but even the cream of the crop are missing the vital tools and data needed to improve subscription churn rates and grow stronger and faster. Ask yourself as a brand, is your tech stack and data as aligned to customer needs as it should be? The age of the resilient DTC brand is here and only the strongest will outlive the increasingly volatile environment.
We believe scaling DTC brands need smarter ways to target customers and drive repeat revenue, so we created a fast and effective solution. Our repeat revenue platform is the easiest way to get customers to reorder, try a subscription and stay subscribed. Stuck in a loop of rising acquisition costs, falling customer retention and subscription churn?
