Introduction
With the subscription market expected to reach a staggering $5,014.4 billion by 2023, subscription companies worldwide are focusing on keeping up with the competition. This includes developing customer retention strategies that can help keep the numbers up while collecting outstanding subscription payments.
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Regarding subscription collection, companies pay special attention to customer retention management in cases of first-party collection. Why? Because customers are considered the backbone of subscription companies. Unpaid invoices, if not taken care of while focusing on customer retention strategies, can lead to dire consequences such as revenue loss, constrained cash flows, and increased probability of customer churn. If you want to increase your subscription revenue without losing customers during subscription collections, join CollectCo at Sub Summit 2024, where we’ll showcase our result-driven collection strategies to help thousands of subscription companies like yours.
Why Do Companies Lose Subscribers During Collections?
Subscription services are becoming more common daily due to the ease of subscription in exchange for the services. Yet, the rise in popularity has also given rise to the need for customer retention strategies to ensure subscription companies don’t start leaking revenue. Significantly, companies may decline their user base during subscription collections if the customers have switched subscription service providers due to competitive offerings, unclear payment terms, complicated billing structures, and poor reception from the company itself.Competitive Offerings
Tens of thousands of subscription companies now offer their users the same, if not better, subscription services as part of their customer retention strategies. With such competition on the horizon, businesses are focusing on customer retention management. While most customers might not switch subscription companies just to get slightly better services, the ease of subscription can lead users to gravitate towards better value propositions if at the same prices or even lower.Poor Communication
A lack of transparent communication regarding subscription collections between subscribers and the company can severely impact customer loyalty and retention. Without a proper communication framework provided to users, even the best customer retention strategies may not be able to bring back the user base lost through poor communication.Complicated Billing Structures
Having long and complex subscription billing structures is a surefire way to scare away any new customers and make it difficult for the current customer base. Therefore, a tiered pricing structure as part of customer retention strategies can allow users to navigate easily through the billing method implemented by the subscription company.Lack of response From Customer Service
In case of any pricing queries or collection issues, customers require an immediate response from customer service to go through with their subscriptions. Without proper responses from the subscription company, subscribers may feel left in the dark and eventually be forced to switch to another company. In fact, 72% of customers can switch to another company after a bad experience, which shows just how vital customer experience is regarding customer retention strategies.Customer Retention Strategies for Subscription Businesses
With such a competitive market, it can be challenging for subscription companies to stand out and increase customer retention. Such subscription companies’ research and development departments focus heavily on customer retention strategies that can help improve subscription revenue and customer experience. Customer retention is significant for subscription companies in terms of growth and scalability, as even a 5% increase in customer retention leads to a 25-95% increase in revenue. Here are ways how subscription companies can improve customer retention:Good Customer Service To Improve Customer Retention
Competent customer service can significantly improve customer retention. The reason lies in the user experience, which can help customers have a positive perception of the subscription company.
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Customers may have specific queries during subscription collections they’ll need help with. Maybe they want some clarity regarding the pricing structure or need clarification about a payment deduction. To increase customer retention, subscription companies need responsive customer service that can provide proactive solutions, as 72% of customers want immediate service. Therefore, engaging customers with genuine interest through omnichannel communications must be a top priority of the subscription company’s customer retention strategies.How Flexible Payment Options Can Increase Customer Retention
The ease of automated subscription fee deductibles made a compelling case for subscription services all those years back. In the modern era, however, subscription companies have since provided flexible payment options for the same subscription services as part of their customer retention strategies. Flexible payment options can be implemented in several ways to improve customer retention. For instance, customers may feel a sense of risk when initially paying for the relevant subscription service. Therefore, having the flexibility to defer the initial payments and multiple subscription payment options can instill trust and confidence in the customers. This is done to improve customer retention and attract a new user base.Maintaining a Value Proposition Improves Customer Loyalty and Retention
Each subscription company has a value proposition and a company perception, both of which are integral parts of the company’s customer retention strategies. When customers subscribe to the services offered by the relevant company, the value the company provides is compared to the market and the value of the product itself. Customers are more likely to pay for their subscription services if they receive a high-value proposition. That means the service they are paying for is worth the price tag. Therefore, having a unique value proposition that blends quality and consistency can improve customer retention and lead to recurring revenue. How is Recurring Revenue related to Customer Retention? One reason subscription companies focus on customer retention strategies is to ensure recurring revenue, which is, at its core, the constant income stream such companies receive from subscription payments. However, if customer retention is lower, subscription churn tends to increase, which can lead to a fall in recurring revenue and lower cash flows. Therefore, customer retention management is vital for subscription companies across all industries to ensure optimal recurring revenue.Collection Feedback and Customer Retention Management
Implementing feedback surveys as part of your customer retention strategies can help customers better express themselves in case of any obstacles or areas of improvement in the subscription collection process, Companies can gather user-centric insights and data through subscription collection feedback to highlight user pain points and provide tailored solutions. This enhances customer support and increases customer loyalty and retention in the long run. Making collection feedback a part of the customer retention strategies reinforces positive user experience and prevents subscription churn from increasing.Streamlined Payment Process for Customer Loyalty and Retention
A streamlined payment process can make the subscription collections stand out and improve customer retention.
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Customers might not be paying for the subscription services because the collection process is not user-friendly or has several steps that make it all the more drawn out. Therefore, a more simplified and responsive payment process with multiple payment options should be included in the company’s customer retention strategies to enhance the customer experience and reduce failed payments.