To say that the subscription-based business model is picking up steam is a massive understatement. While not too long ago it seemed to be mainly the purview of telecommunications, software and media companies, today businesses of all sizes are selling groceries, organic produce, meal kits, cosmetics, personal grooming products, health supplements and much more as weekly, monthly or annual subscriptions.
Consumers have enthusiastically embraced the model because of the convenience it offers, while businesses welcome the promise of steady recurring revenues. And just as the pandemic (with its stay-at-home orders) has accelerated the shift to ecommerce, it has also hastened the adoption of retail subscriber models.
If you operate a subscription-based business, you should be concerned about cancelled subscriptions, often referred to as customer churn.
Why should you care about customer churn?
As the owner-operator or manager of a startup or growing businesses, you’re likely focused on customer acquisition. It’s in an entrepreneur’s DNA to strive to grow the business.
You should be just as fixated on customer retention. Why? Because it’s much more costly to acquire new customers than it is to keep current ones — five times more expensive, according to some studies. If you’re continually spending to win new customers, you could be digging a big financial hole to fall into. Reducing by even a small percentage the number of customers who leave you each month can result in a big revenue lift over time.
So, staying on top of customer churn is important for business growth. But with so many other things to take care of, including fulfilling and shipping orders, restocking supplies, managing company finances, updating your digital storefront and more, you may not even know what your churn rate is.