For better or worse, churn rates have a way of throwing a wrench into UA efforts. While it certainly stings any DTC brand, subscription brands often get hit the hardest by customer churn. When a subscription company loses its subscribers because of subscription cancellations or elapses, it naturally leads to loss of revenue. Churn rates really matter for subscription businesses because they are an important indicator of long-term success. Reducing churn not only increases LTV, but ultimately leads to greater return on CAC.
Why customers churn
In early stages, it is possible that UA teams aren’t attracting the most ideal customers. These are what we call “early birds,” or customers who are great for the short-term, but not necessarily in the long run. There is also the possibility of prospects thinking a brand's competitors are doing a better job, which puts the brands in the position to really step up their game to differentiate themselves.
There are different perspectives of churn that UA teams of subscription brands are all too aware of. Customer churn, for instance, refers to how many of your customers cancel their subscriptions in a certain time period. It's a useful metric, because you can use it to calculate the average lifetime value of a subscriber. That ties in with revenue churn, which looks at the percentage of revenue you have lost from existing customers in a given time period.
There is also voluntary and involuntary churn. The former is obviously when a customer actively makes the decision to cancel subscriptions. Involuntary churn happens when customers unintentionally lose access to services, and, according to ProfitWell, can make up 20-40 percent of overall churn.
Regardless of the context of the churn at play, it is in a subscription brands best interest to reduce churn and lift their ROI stat. We can speak from our own experience on how to get there.
One of our own use cases
We worked with a subscription goods brand that wanted to target high value customers in order to lift their ROI and reduce churn. Up until the point we collaborated, they had been optimizing their UA on subscriptions within the standard 7-day conversion window. That approach only worked to an extent, considering that while it yielded high conversion-to-subscription rates, a significantly high percentage of customers would churn within a few months. The losses added up, considering their 7-digit ad spend per month, which was mainly on Facebook.
Quick fixes weren’t sufficient in the long haul. What they needed to do was target their long-term LTV audience to reduce churn and increase LTV and profitability at scale. Using Voyantis, we set the prediction modeling goal, built the prediction model, and enabled the company to run the campaign optimizing on that signal. The results after the test run were fantastic.
With Voyantis, the subscription goods brand was able to acquire high value customers that yielded a higher ROI. These customers showed high loyalty and engagement, reducing churn rate by 32 percent compared to the benchmark campaign. The brand's additional revenue from top -ups also increased by 30 percent, compared to the benchmark campaign, which resulted in 16 percent lift in ROI starting from day seven. Basically, Facebook is optimized for audiences that are likely to subscribe quickly. However, with Voyantis— subscription brands can optimize for customers with the highest retention and ROI.
Here’s a closer look at how the Voyantis campaign measured up against the benchmark campaign, which used the same creatives and targeting. The only difference between the two was the optimization, AKA Voyantis’ superpowers.
As you can see, when compared to the benchmark campaign, Voyantis’ eCPA for loyalty was 30 percent lower than the brand’s best performing campaign, while engagement metrics were also far more superior. Similar results can easily be attained by other subscription goods brands that are ready to integrate an optimized signal for LTV to their UA campaigns on Facebook.
Now is the time to start churn mitigation
There is no time like the present to map out a churn mitigation strategy, especially when there are tools and services available that can help lift ROI exponentially by optimizing LTV predictions with the backing of AI technology. Sure, a degree of churn is inevitable, but subscription brands can easily double their ROI by focusing on LTV.