Demystifying churn and what to do about it

This article originally appeared as a guest post on the Restrict Content Pro blog.

According to Harvard Business Review it costs between 5 and 25 times more to acquire a new customer than to keep an existing one.

Wow! Are you putting exponentially more effort, care, and attention into nurturing existing member relationships relative to acquiring new members? That exponential effort can be reduced over time if you put the proper infrastructure in place now. Laying a solid foundation for churn optimization poises you for scaling later.

But that’s not the only staggering statistic you need to know: HBR also tells us that your profitability will increase by 25-95% if you reduce your churn by just 5%.

The first step in reducing your churn is understanding what your happiest, most successful members – I call them power users – do on your site to achieve success. This is Mission Critical for your membership business.

If you can understand the journey your members take from sign up to power user status and the problem these real human people seek to solve through joining your membership, you are halfway to success. Don’t miss this. Again: first, understand the real problem real people seek out your membership in order to solve. Second, track the real actions they take behind your paywall in order to solve their problem.

Every piece of marketing you create and every bit of your onboarding and retention strategy should be inspired and informed by those two pieces of critical information.

Once armed with what your power users love the most about your membership and the problem you solve for them, attract those types of people to your membership in the first place to set yourself up for profitability and scalability. Don’t cast a wide net to get as many sales as possible: focus on the ones that are a great fit. As you bring those new members on, use your onboarding to nudge them along the path that your powers users take to achieve success within your membership.

Let’s talk churn

Churn, or member cancellation, is the growth killer of all membership businesses, and in many cases, leads to their demise. When as many members leave each month as you’re able to bring on, your business has flatlined and is no longer growing, but hanging on for dear life.

Step one in avoiding flatlining is marketing to people that are primed to become power users on your site – your members will be happier, more successful, and rave about you online. Not to mention lower churn rates, support tickets, and complaints to deal with.

There are four types of churn on a membership site you need to know about.

1. Credit card or involuntary churn

Involuntary churn happens when something regarding a member’s credit card changes and your payment processor is unable to auto charge their card when their regular payment is due. Change of address, credit card expiration, or if the card gets cancelled for any reason are all culprits of involuntary churn.

Churnbuster and Profitwell’s Retain product are the top ready-made solutions to prevent the majority of involuntary churn. On the surface, they are expensive, but do the math before you decide it’s not worth it!

To understand the value that tools like this provide, first, you need to know your customer lifetime value, or cLTV. If a member is “saved” by one of these tools, how much in real dollars does that mean to your membership? I’ve not ever seen a case in which a membership site actually lost money using one of these tools.

The least you can do here is have your email provider kick off an automated email sequence that notifies your member of their failed payment and offers the easiest path possible to re-enter their credit card info for continued access. Having multiple emails that get more serious over the course of 14 days or so is a smart move – although the failed payment email sequence needs to stop as soon as the correct payment information has been entered and the card has been charged. Make sure you have a confirmation email sent to your member once they have entered proper CC info as well. As a last ditch effort, pick up the phone and call the member to determine if they want to continue having access to your membership.

You can eliminate a significant portion of your churn by implementing automated systems for recovering failed payments. This is a no-brainer for anyone running a membership site as a business, not just a hobby.

2. Success churn

Success churn = good churn. When someone has completed your content, accomplished their goal, or achieved a desired result, it’s okay to let these folks go and be happy for them!

But don’t let them leave without asking them to provide a stellar testimonial and/or case study to encourage other members and nurture qualified leads. It’s also nice to offer a downgrade option to these members if you have a community they’re interested in continuing to participate in and contribute to, but don’t want to pay the full price that includes your content. It’s likely wise to only offer this option if they cite success as the reason for their churn on their exit survey. You have an automated exit survey in place, right?

If not, here’s a template you can use, which is a tweaked version of one published by Groove:

Subject: Sorry to see you go

Hey {NAME},

Thanks so much for being a member of {YOUR SITE NAME}. I’m sorry to see you go. I have one quick question that I hope you’ll answer to help me make {YOUR SITE NAME} better: what made you cancel? Just reply to this email and let me know. And be honest – I promise I can take it! I’d really appreciate it.

Thanks,

{YOUR NAME}

If members are graduating from your current membership because they have achieved success, is there something else you can sell them? More content? A course? Private coaching? Access to a small mastermind group of former members in a similar situation? A book? Another membership entirely? Could you refer your graduated members to other resources or memberships with whom you have an affiliate arrangements so you continue to recognize revenue from that group of people while simultaneously offering them value?

Bottom line for success churn: it’s good, it’s natural, but don’t let those people slip away without a testimonial, case study, and/or an upsell or cross-sell.

3. Engagement related/voluntary churn

This is antithesis of success churn and feels like a punch to the gut. It happens after you bring on a qualified member, ripe for achieving power user status, but they become unengaged over time, and eventually cancel.

It’s best to nip this in the bud before it happens by tracking engagement and intervening to bring that member who is slipping away back to active engagement and receiving value on your site before it’s too late. Remember, your profitability will increase by 25-95% if you reduce your churn by 5%. Engagement tracking should not be abandoned under any circumstances.

Monitoring member engagement can be a tedious process involving lots of late nights and spreadsheets. And if you haven’t been doing that, you’ve left untold amounts of money on the table as those who have become unengaged over time have churned, and you don’t have any further recourse.

If you have under around 150 members, spreadsheet your heart out. But anything more than that, and you’ve got an overwhelming task on your hands that you’ll likely abandon after a few tries. For this reason, we recommend looking into an automatic engagement tracking tool like MemberScore.io. It’s purpose-built by Member Up for tracking member engagement on membership sites, helping you intervene before disengaged members cancel.

The one problem we often come across is voluntary, or engagement related, churn. You could think of MemberScore as a strong counterpart to services like Churnbuster to give your engagement/voluntary and credit card/involuntary churn the ‘ol one-two punch. A bit more on that in a moment.

Once you’ve armed yourself with accurate engagement information you can provide some TLC through an automated email nurture sequence to those who have become unengaged, and conversely, offer upsells and ask for testimonials from your most engaged members.

MemberScore or not, do something. Otherwise, you’re missing out on the benefits akin to compound interest and you’ll stay on the hamster wheel of churn as long as your membership is around.

4. Simply unavoidable

Sometimes churn is unavoidable and you just can’t prevent it. However, this should always be the exception rather than the rule. Here are a few reasons that happens:

  1. Priorities changed: Maybe a new member was hot for your solution at first, but their priorities simply changed and they are no longer interested.
  2. They weren’t a good fit in the first place. If you’re seeing this reason for churn repeatedly, you need to audit your marketing. If you are marketing to people who have the potential to become power users, this should be happening once in a blue moon, that’s it.
  3. A competitor is scoping you out. This is rare, but from time to time someone will join your site, scope out the goods, then bail. It’s not fun to think about, but it does happen, and unless they goofed and used their work email address, they’re likely to fly under the radar and not be “caught.” Don’t let it get you down if you think this is happening. Do your thing, nurture your community, and shake it off.
  4. Financial reasons. Sometimes people lose their jobs, have emergencies, and have to make budget cuts. If you’re privy to this happening before someone cancels see if you can work with them. Automate this process by offering a downgrade option to a lower membership tier and/or a membership pause option that’s offered during the cancellation process. You can also have a form that says, “Is there anything we can do in the next 24 hours to keep you as a valued member of our community?” If you’re lucky enough that someone fills out the form, you need a system in place to reply promptly.

Churn is a natural part of running a membership or subscription based business, but most churn is avoidable and unnecessary. If your churn rate is sitting at 3-5%, well done! There’s room for improvement, but you’re likely on track for success! If you’re at 6-9%, implementing my recommendations should be at the top of your to-do list this quarter. If you’re at 10% or more, you’re in the danger zone and you need to fully assess your marketing, onboarding, and retention strategies without delay.

Regardless of your current churn stats, putting systems in place to tackle both voluntary and involuntary churn on your membership is Mission Critical. If you don’t, at some point, your churn will exceed your ability to acquire new members profitably, and you may start losing money hand over fist.

Turn down the churn

According to Patrick Campbell, CEO of Profitwell, leading up to 2019, the cost to acquire customers in subscription businesses has risen 70 (yes! s-e-v-e-n-t-y) percent since 2011. That makes it near impossible for small to medium sized business owners to acquire new customers while remaining in the black.

You have to increase your customer lifetime value to be profitable. In your case, that means keeping members around longer by ensuring they recognize the value they signed up to receive in the first place. If you leave that job up to chance, you’re in for a rough ride running your membership site. I’m not in any way, shape, or form advocating “tricking” anyone into staying on your site longer than they should. Rather, if you know the path to a power user and are marketing to those who are most likely to achieve power user status and become evangelists for your membership, then you owe it to them to give them the help they need to get there.

For more on how to find and most effectively market to your target audience, grab my free eBook that covers the ins and outs of the top marketing channels for membership sites in 2019.

I hope you’re now better equipped than ever to tackle your churn problem head on. If you want to dig deeper into managing your members, Member Up can assist with guidance and coaching at any stage of your membership site journey. Also, be sure to check out MemberScore.io, the purpose-built member engagement tracking tool.