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Active Churn and Passive Churn: Why You Should Focus on Both

For a subscription-based business, customer retention should be the top priority. Because of the nature of their services, subscription-based businesses can’t simply rely on new customer acquisitions to bring in revenue. In fact, there are cases where a company ends up spending more on acquiring new customers than actually earning a profit because many subscribers terminate their subscriptions after a short amount of time.As such, companies have to have a solid customer retention strategy as well.

If you want to know how well your subscription-based company is keeping customers, you need to have a good grasp of precisely measuring customer retention. If customers stay subscribed for prolonged periods of time, you shouldn’t have any problem. However, if you noticethat they are leaving too soon,, you have topay attention to what is causing customer churn.

The Two Types of Customer Churn

Customer churn, also known as customer attrition or turnover, refers to the loss of customers currently subscribed to your services. It can be divided into two types:

Active Churn – Also known as voluntary churn, this refers to when customers cancel their subscription because they no longer want or need your services.

Passive Churn – Also known as involuntary churn, this refers to the loss of customers who don’t really want to cancel their subscription but are unable to continue anyway because something else is stopping them.

Both types of customer churn are detrimental to a subscription-based business, so you need to find out what is causing either type of churn and how to deal with those problems.

Addressing Active Churn

Minimizing active churn is challenging because cancellations are made willingly by the customers.Nevertheless,it’s anything but impossible. By taking the right approach, there’s a chance that you can persuade your customers to have a change of heart and stay subscribed. Here’s how:

Make them see the value of your service – One of the most common reasons why people think they’re not getting a lot of value from the subscription is insufficient product awareness. For example, if you’re providing a health food delivery service, they may think visiting a grocer issomething they can simply do on their own in the long run.But if you can highlight the positive aspects of your service, for example, its convenience and the many recipes that one can create out of the produce you provide, the customers willbe more aware of how valuable the service really is.

Add more value – Maybe they’re already fully aware of how valuable your services are but they still think it’s not enough to keep their subscription. If this is the case, then you need to add more value to what you are offering to make them think twice about canceling. Improving the quality of your service is a good approach, but you should also consider adding perks or loyalty rewards that they may find useful.

Addressing Passive Churn

Passive churn is easier to address than active churn because of one important thing: your customers actually want to stay subscribed. This means minimizing passive churn is mostly about zeroing in on what’s keeping them from staying subscribed.

Most cases of passive churn is caused by problems related to payment methods. For example, failed payment transactions due to expired credit cards, wrong account information, credit limits, and failed overseas transactions can be a friction point that may discourage customers from continuing their subscriptions. Fortunately, recurring payment and automated billing solutions are readily available, making the payment process a lot easier for your customers. Such solutions employ tools that automatically resolve failed payment transactions for a frictionless subscription experience.

Paying attention to both active and passive churn can significantly increase the value of each customer subscription in terms of how much revenue they can provide. By using different customer retention strategies, customers will be more inclined to keep their subscription longer and worry less about problems that might cause them to cancel.

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