The D2C subscription industry is experiencing significant growth and evolution. As more companies adopt direct-to-consumer models, competition is intensifying, leading to both opportunities and challenges for businesses in this space.
Managing and mitigating churn in D2C subscriptions is crucial for businesses. Churn directly impacts revenue and counteracts the efforts and expenses invested in customer acquisition, onboarding, and support. While exact figures may vary, it's generally accepted that retaining existing customers is more cost-effective than acquiring new ones
You can ascertain where you are at with D2C subscription churn by calculating the percentage of streaming customers who cancel their subscriptions or stop using the video service during a given period.
Formula to calculate churn rate
Next, is going into the root cause of churn.
Churn in D2C subscriptions can be both involuntary and voluntary:
Involuntary churn: Often results from payment failures, such as expired credit cards.
Voluntary churn: May occur due to various reasons, including:
Product or service dissatisfaction
Pricing concerns
Poor user experience
Subscription fatigue
How do you know what’s causing churn for your D2C subscriptions?
Data science and machine learning present a robust and objective way for D2C businesses to go into the root causes of churn on their platform. Machine learning is an AI application that can analyze and learn from enormous amounts of information in a fraction of the time it would take a human brain to complete the same task.
The use case for machine learning is the same for D2C companies: AI will digest data and turn it into relevant churn metrics for D2C players.
By simplifying the analysis of vast amounts of subscriber data, modern machine learning tools empower broadcasters to identify:
Combining these insights puts broadcasters in an advantageous position to take meaningful steps to reduce D2C subscription churn. Let’s explore how.
First and foremost - as you start with churn management, note that it seldom occurs without warning.
Signs like a fall in customer engagement or a rise in inactivity always precede voluntary churn. You may also find sudden overconsumption of your content, usually followed by unsubscribes (commonly called "burn before churn.”) Machine learning and artificial intelligence step in here. They help identify these patterns from data and position you to act on them timely.
Using the right data analytics tools or churn prevention software, you can identify the warning signs highlighting at-risk customer segments. With this foresight, you can quickly re-engage the customer with specific churn management strategies before they churn.
For instance, if you find your customers turning price-sensitive, you can offer coupon discounts to entice them to stay. If a growing amount of customers are upset with the service and provide negative customer feedback, make sure you have the capacity to 1. hear the complaints and 2. deal with the root cause.
Churn prevention tools like ChurnIQ provide dashboards with metrics highlighting your D2C subscription churn rates and the reasons for the associated subscriber cancellation.
An example of ChurnIQ’s retain dashboard
It presents a clear picture of what’s happening at your baseline level. You also get a synopsis of upcoming renewals and an analysis of renewal performance.
The analytics tool uses a machine learning algorithm to track accurate D2C subscription churn probability scores with a breakdown of the number of at-risk subscribers and their reasons for leaving your platform.
Here are five ways you can use ChurnIQ’s data intelligence capabilities to address churn:
The foremost step to counter D2C churn rates is knowing your exact risk status. The Subscription Churn Risk dashboard uses the graph above to illustrate the immediacy of your churn problem among the existing subscriber base. This information makes it an excellent starting point for assessing how severe your churn risk is.
For example, the graph above shows that 85% of the at-risk subscribers display “Very High” risk patterns. From this, you can deduce how quickly you need to start addressing your at-risk subscribers and with what intensity. Intuitively, high risk demands immediate action with greater force. On the other hand, lesser-risk situations can afford fewer resources to be allocated immediately.
Once you know the "what," the next important thing to know is the "why " to step in with a solution.
ChurnIQ’s algorithm analyzes subscriber data and detects churn causes, ranging from past behavioral patterns to current ones. It also notices streaming and pricing plan issues that cause dissatisfaction and churn. This understanding puts you in a position to intervene and address the exact cause.
In the graph above, we see that the primary churn causes for this broadcaster are:
This is a precious insight as it can point you to do the following:
Once you know the severity of your churn problem and its primary causes, it's time to get specific.
It's nice to know the general churn status of your entire customer base, but it's only useful if you can precisely locate the at-risk customers. An excellent way to do that is by creating segments based on churn risk levels and causes. You can use ChurnIQ to segment Very High/High Risk of Churning this month. Then, coupling this with the detected churn cause, you can narrow down your audience and develop a campaign to compel that particular segment to stay.
Suppose you notice that high-risk subscribers are often linked to price complaints. On the other hand, low-risk subscribers are frequently related to a poor customer experience. This should make it clear that prioritizing the price-sensitive group is a priority. Next, you can develop engaging pricing strategies or coupon campaigns that offer attractive discounts.
In the image below, you can see several examples of crucial segments recommended by the ChurnIQ dashboard.
Using data from over a decade in the video subscription industry, Cleeng has built a selection of subscriber segment suggestions available in the Dashboard. This guides you toward the most logical ways to segment your customer base to best address the different D2C subscription churn problems.
Once you've located your at-risk customers, the next step is creating a plan to re-engage them and secure them as loyal subscribers. This is an essential step because a perfectly shaped message will differentiate between retained and lost subscribers for your platform.
To simplify this, we at Cleeng, have used historical subscriber data and industry best practices to create a catalog of recommended retention actions specifically for D2C subscription churn. These actions are broken down per stage of the subscriber journey (Register vs. Experience vs. Winback, etc.). The goal outcomes, recommended segments, and actions are defined within each stage.
For example, see below the recommendations for the Retain stage:
If your Prediction dashboard shows "High Risk" associated with "Poor experience," the Segments catalog recommends an apology with a discount to show the customer that the error has been addressed and that their loyalty is valued.
If your Prediction dashboard shows "High Risk" associated with "Frequent churner," you may find the customer burning through your content quickly and then canceling.
In this instance, we recommend focusing on any upcoming content. The content attracted the customer first, so remind them that there is more to come.
No matter your churn concerns or your customer's stage, you can select relevant recommended actions to give you the best chance of retaining them to reduce D2C subscription churn. Finally, you also need to implement plans, considering the time element.
If your execution of retention campaigns takes too long, you can lose customers from your net.
For example, consider a user who signed up for a hockey season pass with an end date in 2 weeks. If you wait for the season to be over before you convince them to spend longer on your platform, you could lose them for good once the season ends.
Therefore, acting quickly is essential. To that end, ChurnIQ Segments offers easy, automated campaign creation—no more hours of tiresome planning and list management. Using the integration with Looker, you can connect with any marketing tool. Simply set up a segment once, define the campaign frequency, and have it run automatically in the background.
As the D2C landscape competition is at an all-time high, pulling up your churn management performance is necessary to stay in the game and grow steadily. To that end, the best way to go is to be objective about your approach.
Machine learning presents a powerful data-backed way to identify at-risk subscribers, understand their behavior patterns, and take proactive measures to reduce D2C subscription churn.