Strategies for boosting retention and fighting customer churn, with Piano’s Michael Silberman
If publishers are bathing in the light of the ongoing subscriptions boom, then they will also know its shadow: customer churn. One person who knows a lot about the problem is Michael Silberman, SVP Strategy at all-round subscription and e-commerce optimisation platform Piano.
Piano works with clients whose reach is immense, touching the lives of billions of readers. In its rich dataset Piano Benchmarks, Piano gathers and stacks the websites in its database, ranking them from lowest to highest. Using this, it advises businesses on their subscription strategies, using metrics from retention rate to price points and special offers.
At June’s FIPP D2C Summit, Silberman drew on this dataset to give his insights about the most important factors impacting retention and churn – and how publishers can avoid making easy mistakes.
Watch the full conversation with John Schlaefli, FIPP’s Chief Revenue Officer, here:
Annual subscribers deliver higher lifetime value
One important difference Piano has investigated is that between monthly and annual subscribers. As Silberman explained, monthlies have 12 chances to cancel across the year, while annual subscribers only have a single chance at the end of the year.
This matters because “Even though monthly subscriptions tend to cost more per month compared to annual ones, therefore, this is offset by the higher churn rate,” said Silberman. “Even at the end of year two, we’re seeing that annual subscribers are slightly less likely to cancel than monthly subscribers.”
He also explained that the cancellation risk is highest in the early months of a subscription – usually because it’s a trial period – but then it sharply declines. Also, the longer you are a subscriber, the less likely you are to cancel. “The annual retention rate is much higher than monthly in almost all cases,” added Silberman. “The bottom line is, monthly subs have much lower retention rate, and therefore lower lifetime value.”
Trials (free or not) have a huge impact
Moving on to trials and their relative value for publishers, Silberman explained that the first month’s retention rate for monthly offers without a trial produces a median retention rate of 86.1 per cent – “so around 15 per cent churning out,” he said. Readers taking advantage of a paid trial results in a retention rate of 81.2 per cent, or about 19 per cent churning out after the month’s trial is over.
Yet the real difference is when it comes to free trials. “From our data, we’re seeing that there’s just a 61.7 per cent retention rate after a free trial,” explained Silberman. That’s equivalent to around 38 per cent churn.
“That’s because the strategy that works for a business like Netflix doesn’t necessarily work for a publisher. And even Netflix has shown some movement towards introductory offers instead and away from free trials.
“At this point, we definitely do not recommend a free trial, but a paid trial – and then we see a huge boost to conversion rates. Most publishers have learned now that a free trial doesn’t work, and they’re shifting strategies to reflect that.”
Passive vs active churn
Most churn (67.5 per cent) is “active” rather than “passive”, said Silberman: “The more active churn is where people turn off auto-renew or deliberately cancel. Passive churn is something like a billing failure or a credit card expiring.”
Passive churn can be mitigated by having smooth systems and by using tactics such as automatic retry on a rejected credit card.
Those who actively choose to cancel do so because they’re not getting value from a product, or perhaps it’s priced too highly versus the value people get from it. “So then you need to be looking at your value proposition,” said Silberman.
Catch ’em early
Silberman recommends implementing onboarding strategies that try to catch people very early in the process, before they churn. “Auto-renew disablement tends to occur quickly – within the first day of subscribing – and that tells you that there isn’t much time to get people on board.
“It’s so important to have a plan for getting people engaged. Tactics like a newsletter from the editor, signing them up for a subscriber-only email right after they sign up, encouraging people to download the mobile app, and surveying them after a few weeks to get their feedback – that’ll let you know what’s working and what’s not. That’s a pretty common tactic from the direct-to-consumer (D2C) product companies.
“Then, if you can keep people for the first month, then you have a much higher chance of staying. Long-term subscriptions are one of the best predictors of whether people will stick around.”
Piano’s data also shows that those subscribers who visit the website regularly are the least likely to unsubscribe, because they are getting value from the product. “You have to think about those behaviours that are driving repeat behaviour, bringing people back to the website.”
Waking up the sleepers
Sleepers are another consideration. These are those readers who are paying for a subscription, yet haven’t visited the site or app in the last 30 days.
“We found that during the pandemic, the sleepers suddenly woke up,” said Silberman. “Ordinarily, it’s a risk to ‘wake up’ the sleepers and try to bring them back in, since there’s a risk that they’ll cancel. But during the early days of Covid, they were more likely to wake up and use their existing subscription than to churn.
“Our takeaway from this was that during moments of high value and high news demand, that’s when it might be OK to wake people up.”
Small improvements = big impact
To end, Silberman emphasised that while the numbers are relatively small, you get a lot back when considering ways to minimise churn. From Piano’s data, he can say that for every one per cent reduction in churn achieved, there’s a 13 per cent increase in three-year revenue for the median subscription business.
“So much about reducing churn comes back to successful onboarding,” Silberman emphasised. “That’s really the thing to focus on.”
