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At Philo, we’ve observed an intriguing trend: It’s not unusual for a quarter of our daily subscription activations to come from customers who have subscribed to our service before.
This phenomenon challenges the traditional notion of churn, as it’s not remotely a permanent loss of customers. While average churn rates may be higher in today’s competitive landscape, we’ve also noticed a higher “resurrection velocity” referring to the volume of customers coming back for various reasons. This presents an opportunity for businesses to understand and cater to different types of churn in order to improve customer retention and maximize value.
One key insight is that not all churn is created equal; different customers churn for different reasons and it’s crucial to identify these reasons and tailor mitigation strategies accordingly.
Financial churn
These are customers who may unsubscribe during leaner times due to financial constraints. However, many still have strong loyalty toward your product and return when their financial situation improves.
It is very easy to misdiagnose financial churners as lacking persistent value to the business. On the contrary, the fact that they keep coming back means your product is essential to them, given the scrutiny with which they prioritize their spending. Offering alternative billing choices, modified product tiers with lower pricing or temporary subscription pausing can help manage their expected behavior and retain them as customers.
Competitive churn
These customers may be lured away by promotional offers from your competitors or new entrants in the market. Rather than engaging in a race to the bottom with gimmicks, a well-timed and strategic approach to branding and marketing can help keep your service top of mind for these customers even after they leave.
The challenge with this cohort is that they are difficult to proactively identify. As such, leveraging broad-based marketing channels such as brand advertising or low-investment CRM tactics can be effective in priming this cohort to return. It is particularly important to focus messaging on new products or features that make your company the new shiny object.
Seasonal churn
These customers may subscribe for specific reasons or seasons, and their engagement tends to follow predictable trends and model consistent use over a limited period of time. Their value to your business may vary depending on temporal factors, such as new episodes of a beloved show or a literal season like the holidays or sports playoffs. This allows for a few weeks or months of subscription renewal with opportunities to build habits and get to know the product more deeply.
By analyzing engagement patterns during their “on” seasons, you can identify opportunities to capture more value with relevant ancillary products or features, or offer modified pricing for more sporadic use during the times they would typically lapse.
Event-driven churn
These customers may be short-term, single-use subscribers who show up for an acutely specific event or promotion. In other words, they’re here for a good time, not a long time.
The distinction of seasonal churn is important. Events are at a meaningfully higher risk of being underwater from a monetization standpoint relative to costs of acquiring users. It is critical to ensure the economics of their subscription are not upside down on a unit basis, as this group can significantly impair a sustainable business model in the long run if they show up in high volumes. On the upside, they can provide healthy surges in organic traffic, expand brand awareness and may make sense as candidates for hyper-efficient media buys.
Preventable churn
This cohort represents customers who could have been retained with better education during their onboarding, engagement and off-boarding processes. These customers may not be fully aware of the breadth of content offerings, features and devices that your product provides, which can result in them leaving unsatisfied despite having the potential for a long-term relationship with your product. Deploying context-aware information to these customers based on their implied needs can help improve their understanding of your product’s value and reduce preventable churn.
Many business leaders assume churn primarily fits in the preventable category. Assuming so often leads to an overestimation of the opportunity for change and underwhelming results in efforts to reverse it. It’s understandable that businesses default to this because it’s typically the most straightforward to address: If people are unaware, just send them some messages or create some onboarding to make them aware, right?
To be pithy, there’s no need to shame these polyamorous folks who love you but don’t rely on you. Instead, take a multifaceted approach and prioritize the types of churn that represent the largest customer segments and highest potential for behavior change. This will yield the greatest impact on your business value in the long run.
