Customer churn is the single most important factor in predicting a subscription box service’s future success, according to David Packman, a well-known industry investor. But alarmingly, McKinsey & Company found that more than one-third of subscription box consumers cancel within three months. So what can be done to increase the retention of subscription box customers?

Well-designed customer retention programs can help to reduce customer churn as well as identify critical service issues that may be creating customer dissatisfaction. In our experience, it's best to customize your subscription customer retention strategies to one of the following two approaches:

Cancellation Reason

There are typically only two reasons a customer will cancel their subscription - it's too expensive or they are dissatisfied with the product/service. In order to retain those customers, we typically offer the following responses:

1. If money is the problem – Understand the detailed concern regarding price. Is it too high of a monthly fee? Perhaps offer deliveries every other month. Do they not see the value of the subscription? Perhaps offer discounted service for a limited time so they can see the true value.

2. If the product is the problem – Gather their feedback. Do you have another plan that better suits their needs? Is there another product you can offer them?

By working with your customer to solve their problem, even if temporarily, you'll have built a deeper relationship with them and in turn increased their customer lifetime value. 

Customer Type

It's also important to distinguish between high-value and low-value customers:

1. High-value customer – Better offer

2. Low-value customer – Just cancel

How do you determine a high-value versus low-value customer? There are several factors to consider. Has this customer been a long time subscriber? Are they brand evangelists even if they can't afford the price? Are they providing your company value through social media awareness? Ask yourself these questions before determining your offer.

Bonus - Speak To Your Customers

Notice that both of these retention strategies start with a conversation? This is a very intentional part of the subscription box retention strategy. Regardless of the cancellation reason or customer type, you'll want to make sure you speak to your customer about why they are canceling. By simply taking the cancellation button off of your website and requiring your customer to give you a call before canceling their subscription, you could significantly increase your customer retention rate. 

Churn has a direct impact on customer lifetime value and the ability to grow a business, so focusing on reducing it can have a monumental impact.  A 5% increase in customer retention rate has the potential to yield profit increases from 25% to 95%. 

While Packman has seen the positive effect of optimizing churn, he warns that if there is a bigger problem with the subscription business (a monthly churn rate above 5%), the only way to meaningfully reduce churn is to essentially redesign the service and the value proposition. 

How are you approaching customer retention at your subscription box company? 

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