Subscription-based businesses are some of today’s most profitable companies. Thanks to their model of choice, they’re able to secure longer and more profitable relationships with their patrons.
However, simply using the subscription-based business model and taking in new customers doesn’t automatically mean you’ll be set for success.
Success for a business like this comes with the ability to extend subscriptions as much as you possibly could.
If you analyze the stories of companies such as Netflix, GoDaddy, Dollar Shave Club and Spotify, you’ll discover that all of them excel at several areas of customer retention.
Customer retention is all about staying relevant, keeping customers happy and addressing issues when they inevitably arise.
While most of us don’t have millions of dollars to throw at this aspect of business, we can all follow a few simple principles that work well with businesses of every size.
Here are five of the most important ones that you can apply to any subscription-based business:
1. Meet or Surpass Expectations.
Satisfaction is mostly a matter of meeting the expectations that were set when the customer subscribed to your service.
The timeless wisdom of the adage “underpromise and overdeliver” applies here.
Be very accurate and sober in your marketing. Avoid unnecessary hype that may skew the perceptions of your target audience.
Above all, make sure that your product or service actually does what it’s supposed to do.
2. Address Problems Early.
After the customer signs up, make sure that he doesn’t feel like your level of engagement with him has diminished.
A day or two after the customer receives the product or starts with the service, ask them how they’re doing. Be very helpful and without being intrusive. Make them feel that you’re ready in case they need assistance with anything.
Having a pre-produced library of user guides and help topics is very helpful. Developing a community based on a support forum is even better.
If you don’t have the budget for a call center team, at least have one person who can answer customer support calls. If you’re a startup, chat and email support are fine.
Encourage customers to raise an issue as early as possible. This usually means that their frustration levels are still relatively low and you can deal with them while they’re still very calm. Having this policy also means that whatever issues they’re having with your product or service is still in the early stages and are much easier to resolve.
3. Reward Customer Loyalty.
As a subscription grows longer, the customer’s lifetime value also becomes greater. As the guaranteed profit grows, business owners find themselves with greater flexibility on pricing.
With this kind of leeway, it’s a good idea to give back to your customers a bit with discounts, freebies and rebates. Sure, this cuts down on overall margins, but on a grander scale it discourages opt-outs and allows you to extract even more revenue from the subscription.
When you put things into perspective, this is really a more cost-effective way to maintain your market share than trying to acquire replacement customers.
4. Be Proactive with Payment Issues.
There will be instances when customer payments will hit a snag. A credit card can expire or a PayPal account could be cancelled.
When this happens, don’t assume that the customer will immediately take notice and fix it. Call or email the customer about the situation and offer kind assistance to resolve the issue.
As much as possible, give the customer time to iron out the billing kinks before you freeze or cancel their account.
5. Use Analytics.
If your subscription-based business mostly works on a web-based platform, use an analytics solution to monitor customer behavior. This helps you gain valuable insights on where they get stuck and frustrated.
Analytics can also reveal the preferences of your best customers. If the Pareto principle holds true and 20% of your customers really drive 80% of your results, it’s worth paying attention to their interests and pain points.
Keep in mind that it’s doubly tough and expensive to acquire new customers than to keep existing ones. Make sure to align your company’s priorities towards satisfying the people who keep your subscription-based business running.