Optimizing subscription renewals is integral to any organization with a subscription offering. Encouraging your customers to stick around and maintain their subscriptions can keep your company in business and on the fast track to tremendous growth.
However, canceled subscriptions can quickly achieve the opposite. To make the most of a recurring revenue model, it’s essential that you keep subscription renewals coming in from your captured customers. Read on to learn how you can—and more about why you should.
What is subscription renewal?
Subscription renewals are recurring payments made by customers of a given company to maintain access to that company’s products or services. Businesses can leverage a subscription model to market anything from information to support and even physical consumables. Customers renew their subscriptions on a regular schedule through timed payments.
Although the general customer “renewal rate” can be improved for businesses with or without subscription offerings, those with such offerings may have an easier time doing so.
Why does subscription renewal matter?
Subscription renewals translate to consistent profitability. When your business acquires and maintains paying subscribers, it essentially guarantees profits over a given period of time. Unlike netting a single sale with a new customer, convincing them to sign up for a subscription can prove profitable over both the short term and the long term.
When customer subscriptions are abandoned or canceled, your business can bleed projected revenue. This makes improving your subscription renewal rate extremely important for the overall health of your organization.
Types of subscription renewals
Automatic subscription renewal
With an automatically renewed subscription, customers can count on access to your product or service staying consistent. Their regular payment is automatically deducted from their bank account or charged directly to their payment card of choice to simplify the process.
The main advantage of this type of subscription renewal approach is that it reduces friction for your customers during each payment cycle, improving overall customer retention in the process. The added convenience of subscription purchases being deducted automatically makes it easier for customers to enjoy your offerings. Some companies offer special incentives to encourage long-term subscriptions with automatic renewal and decrease subscription abandonment rates.
Manual subscription renewal
A manual subscription renewal process is inherently more involved for your customers. Instead of automatically charging their account or card, you allow them to make their payments directly.
This can prove to be less convenient than an automatic renewal option in many cases. However, there are ways that both you and your customers can benefit from this arrangement. For your customers, the ability to turn certain types of subscriptions off by not paying and back on with a single payment as needed could be reassuringly flexible. For your company, it could also offer you a chance to upsell customers at the start of each payment cycle.
Fixing subscription renewal issues
Poor subscription renewal rates often stem from problems in how a company treats its relationships with customers. For a subscription model to work, your choices cannot be tailored to the transactional nature of other business models—understanding your customers and adapting to their evolving needs should be your main focus.
Customers abandon their subscriptions for all sorts of reasons, but these often carry the common thread of feeling misunderstood or otherwise underserved. Here are a few notable causes of customer subscription renewal abandonment:
Reasons customers abandon their subscriptions
1. They stopped using the product or service. When the benefits that your customers derive from your product or service are too low, they may find it makes no sense to continue paying for access.
2. The fees and features are mismatched. Customers may subscribe for a while and then drop your offering if its cost or features no longer match their budget, lifestyle, or needs.
Ways to improve your subscription renewal rate
1. Emphasize engagement with your customers. This is among the most effective things you can do to keep your subscription renewal rate safe from sudden churn spikes. Routinely engaging with your customers to keep them interested in your brand and demonstrate how attentive you are to their needs goes a long way in keeping them happy with their subscriptions.
2. Ensure the level of service and quality of the product you are delivering is sufficiently high. Balancing subscription prices with service and deliverable quality can be challenging, but well worth the effort it takes to get it right. A sudden lapse in quality can quickly send your customers running to a competitor for a more consistent alternative.
Succeeding with subscriptions
VeryCreatives can help you to plan out and execute these critical parts of your digital product’s development and launch. Our team partners with yours to put together a proven plan for success with a subscription-based business model. Reach out today to book a call and get started!
