What Is Churn and Why Is It Important?
Churn is the number of users you lose each month divided by the number of users you have. It's a simple calculation: if you have 100 subscribers and you lose 5, so your churn is 5%. For reasons we won't get into here, churn never includes the users you have gained in a month.
Now, why is it so important? Well, it's less money in your pocket from the lost subscriber alone, but it also costs 5x more to acquire new users than it does to keep the current ones.
According to Insightsquared, reducing your churn by just 5% can increase profit by 25-125%, depending on your industry, company age, and business model. When we talk about the cost of acquiring new users, we're also talking about your time and effort.
So one of the best ways to increase your revenue and grow your business is to retain the users you already have acquired.
Retaining users is a highly effective marketing tactic called Churn Reduction—think of it as customer retention—and it is especially effective for SVOD businesses. Every customer you successfully retain will bring in months of revenue until they cancel. And if they never cancel, the revenue never stops!
In Uscreen, reducing churn is automated, which means you set it up once, and it works automatically for all cancelations. We have this and other amazing features under our Marketing tab.
NOTE: To prevent promotional exploitation, the Reduce Churn automation will not be triggered if a user was on trial or used a coupon to purchase a subscription plan.
There are three main sections to our Reduce Churn tool, so let's break it down.
First, right before the cancelation is confirmed on your site, your users will be asked why they want to cancel their subscription:
The reason they provide is key to understanding how you can improve your business to prevent users in similar circumstances from canceling in the future.
If the vast majority of your users are canceling because it's too expensive, then you've got a decision to make. You can ask yourself: if you lower the subscription cost, will you retain and attract more users to offset that reduction in revenue?
You can use their selected reasons to determine if you need to make other changes in your business to decrease churn.
Immediately after completing the cancelation process, a win-back email will go out offering a one-time discount on their next payment to continue with their subscription. Remember that the cancelation isn't finalized until the last day of their subscription, but as far as your user is concerned, they have completed the cancelation process.
The email is your first chance to win them back. We give you a template to work off and you choose the discount. For monthly subscriptions, we recommend a discount of 75% off for the next month, and for a yearly subscription, 15% is best.
On the last step, your users will receive the second email on the final day that their subscription is active. Making it the "last chance" email.
The discount still stands from the first email, so if they choose to accept it, then great! You've just reduced your churn rate.