How Can Subscription Brands Reduce Churn as Consumers Tighten Budgets?

While the latest consumer sentiment numbers for May — derived from University of Michigan data outlined by TipRanks — show at least a temporary halt in what has been a steady decline, the index still shows a fall of 24.5% year-over-year.

In short, the U.S. consumer is increasingly concerned about their finances and employment status and is therefore scrutinizing expenses more thoroughly than they might have in days past. That means monthly subscriptions, whether to services or to products, are often first to be cut.

That presents a problem for subscription brands.

Subscription Brands Offer Discounts, Deploy Personalized Messaging, and Use AI Tools To Reduce Churn

In conversations with businesses attending SubSummit — a subscription-focused retail and e-commerce conference that began in Dallas on May 28 — Modern Retail noted that a consistent theme throughout these discussions was the importance of customer retention.

The outlet quoted Joe Rohrlich, CEO of subscription management company Recurly, as saying that "retention is the new growth metric" in the segment.

“In a lot of ways, this is the whole promise of a subscription business anyway — that it’s bringing you into a longer-term, predictable revenue stream,” Rohrlich added.

Rohrlich pointed to the importance of the value proposition in reducing voluntary churn — that is, when customers no longer deem that $10, $15, $20, or more monthly cost to be worth it to them.

One way of mitigating that churn? John Roman, CEO of outdoor and survival gear mystery box subscription brand BattlBox, indicated that his company did so by offering exclusive discounts to active subscribers. Members gain access to the BattlVault, where they receive exclusive pricing on approximately 1,500 SKUs.

Reinforcing the value proposition is also key to language app Babbel's retention strategy, according to Julie Hansen, chief revenue officer and U.S. CEO. Hansen stated that Babbel leaned heavily on motivational reminders, customized to match each subscriber's data profile, to reduce voluntary churn. These reminders could take the form of hints to subscribers related to what they could learn in an upcoming lesson.

“We have the basic tenet that engagement will yield retention, and I think that’s right, but we’ve never before thought about [retention] as proactively as we are,” Hansen said, also mentioning that Babble is in the early stages of using AI to analyze data to better "understand when people are losing interest or losing motivation, and help to motivate them more."

Meat and seafood delivery service ButcherBox also signaled a shift away from mass marketing, pivoting toward more personalized communication with subscribers.

“We’ve done a lot of work on transforming from what we used to call our ‘monolith behavior,’ which meant that we would send out every email to every single customer with the same exact offer at the same exact time,” the brand's chief commercial officer, Reba Hatcher, said.

Hatcher was keen to mention ButcherBox's commitment to deeper discounts and the creation of its loyalty program, Sizzle Society, as being instrumental in the fight against churn.

"For us, it’s about doubling down on the discounts we can give, the loyalty program we can build and the product offerings we have, and doing what we’ve always done but at hyper speed,” she said.