8 Secrets for Extending Customer LTVs and Reducing eCommerce Subscription Churn
Quarterly Learnings Report: Customer stories and lessons learned, delivered quarterly
If you’re running an eCommerce subscription business, then you probably already know that the real value isn’t in the initial sale. It’s in an extended relationship to a customer and the recurring payments that come along with that relationship.
Thing is, extending customers LTV’s isn’t something you do overnight. It’s a daily grind to convince your customers that your service is worth the money they put into it.
The bottom line here is delighting your customers so that each new delivery has the same sense of excitement as the first.
By taking on a customer-first focus, your subscription business can build a meaningful connection with your customers that flourishes over time.
So how can your subscription boxes make it feel like Christmas year ‘round? Let’s talk about it.
1. Understand the Customer Journey
First thing’s first: you need to put yourself in your customer’s shoes. You need to understand where they’re coming from, how they feel throughout their relationship to your company, and what they want and need from you.
What does a customer need to know when they first sign up, and how can you provide the most value to them from day one?
Your initial emails should work to build a connection from the very beginning, one that shows your investment in their enjoyment (or success) with the product.
By putting in the work from the very beginning, you can set yourself up for a much longer relationship.
Think of it this way: By about month three, a customer has become used to receiving your boxes. Your product is built into their routines.
Rather than an exciting novelty, the subscription is becoming integrated into their lives. If you can make it to this point, you stand a much better chance of staying together for the long-run.
Here’s a wicked example of a “welcome email” from the team at Kettle & Fire. After a customer opts in for the subscription, they are get this email:
Things to note:
- This email is highly personalized. By bringing in the exact location of the customer, this email feels created FOR the customer. That’s the feeling we want them to have.
- The copy is fun, quirky, and on brand. Brand is everything for your box company. Make sure you have a strong voice, tone, and imagery for your customers. Then keep it consistent. They’ll learn to trust your style.
- It’s inviting. This email makes the customer feel part of something bigger. They’re not just getting incredible products, but also a new community. It’s subtle here, but it goes a long way.
- Order details are easy to find, clean, and easy to digest. 5/5 stars.
- There’s bonus value. Take a look at the top of that email. See the little button that says “Get your free bone broth book bundle here.” That’s Kettle & Fire doing something really cool: going above and beyond for their customers. This bundle contains recipes, guides and information about the products and benefits. They don’t have to do this, but the extra step adds to the experiential piece of this subscription.
When I saw this email, I was floored. This is the gold standard for a welcome email.
Moving forward, there are a handful of key points to invest heavily in your customer base if you want to retain them over time. We’ve explored the different steps of the customer journey in a lot of detail in the past, so we’ll just touch on a couple of important points here.
A customer service complaint is a great time to reach out and prove that you’re willing to go above and beyond.
On the other side of the spectrum, when a customer recommends your service to someone else, you have a fantastic opportunity to celebrate them.
Finally, any time you make a new release or a change to the product, make sure you’re connecting with your customer base so they feel comfortable and up-to-date on the service they’re receiving.
This all boils down to understanding where your customers are in the journey and engaging with them throughout.
2. Turn Customer Support into Customer Success
Essentially, this is about going above and beyond- not just solving issues, but proactively doing more for your customers. In other words, it’s helping your customers to have the absolute best possible experience with the product. Practically speaking, there are a ton of ways for subscription box companies to build these closer connections with users.
Surveys are a great start, because they give your customers an active voice in shaping their experience. Rewarding loyalty with bonus prizes and additions to their usual items is another great way to increase your LTVs.
And when a customer does face an issue, how you respond will dictate the nature of your relationship moving forward.
Not surprisingly, BarkBox has this nailed down. This is a real customer story from a good friend of mine.
She began a BarkBox subscription, but found that the toys were simply too large for her little pup. So she reached out to cancel her account (and gave them feedback). She didn’t have a negative experience, it just wasn’t the right fit.
Wanna know what BarkBox did? They made the cancellation process easy, and then sent her a box of smaller toys for her doggo.
Guess who reactivated her subscription?
Subscription eCommerce relies heavily on communication, and experience. So take a close look at the ways that you are interacting with your customers at each stage in their relationship with you.
And especially, how you deal with issues. Are you reactive or proactive in helping the customer?
3. Build Hype for Upcoming Shipments
In the same way that a great film trailer can both convince new customers to see a movie and bring loyal audience members back, building added marketing into your existing communications can plant the seeds for a longer LTV.
After all, if a customer is already receiving and enjoying your products, they’ll be far more open (and interested) to see what’s coming next.
Adding product “trailers” to your subscription is simple. Tease some of the exciting highlights, explore new ways for customers to use your products, and generally give them a sense of the exciting stuff still to come.
This can be done through emails, social announcements, or even physical goods in the box. Here’s a great example from the folks at Winc:
Things to note:
- It provides value. Starting to sense a trend here? Winc goes beyond simply showing you what’s coming up, they give you a quick lesson on how to use it. Within a quick glance, I can start planning meals to cook with my wines and what flavors I can expect. (is anyone else’s mouth watering?)
- It brings the customer back. See how next to each wine you can click to “Learn More”? That takes you to the product page where there is a ton of information on each wine. It’s about bringing the customers back to you, getting your brand in front of them, and providing them with something useful (and often fun).
- Order details are clear. The shipment information is right there and you can customize your order further in one click (maybe you’re not a fan of Malbecs from Argentina or something).
- There’s more. Every time you email your customer, you’re gaining access to their virtual mailbox. If they open your email, make sure it’s worthwhile for them. Winc continues in their email to include an upsell to a relatable product AND a special offer from Of a Kind. Winc is more than wine, they’re a ticket to more.
Dollar Shave Club also does this well. Their Bathroom Minutes, for example, isn’t just a helpful resource- it’s fun, funny, and engaging, perfectly crafted for the few minutes a day that a subscriber has to spare while in the restroom.
Remember: The main reason people subscribe to a box is to have an experience.
If it’s simply products in a box, they will go to Amazon. Give your customers a story. Make it experiential so they feel the mission of your business. The secret to constantly honing in on this lies in storytelling and content.
4. Engage with Your Community (Regularly)
The longer we use any service, the less it feels like an exciting new toy. It becomes a well-worn part of our routine, which, for a subscription box eCommerce business, might seem ideal.
And, in a way, it is. After all, once you become integrated into your customer’s use patterns, you’re in a great place to stay for the long haul.
The danger here is your product being taken for granted. After all, any subscription box product has similar (if not equivalent) brands that are sold in regular stores.
Engaging with your community is the key way that you can remind your audience that you exist, that you consistently provide value in their lives, and that they benefit particularly from using your specific service.
On their page, they address major Q&A’s, share fun and relatable images/quotes, interact with their community, and even give customers a peek into the people behind the biz (Our Culture highlight).
And, they do a fantastic job of curating their feed with customer images.
This is a win-win-win-win. Yeah, you read that right:
- Win #1: They’re celebrating a customer (everyone loves to be shown off).
- Win #2: They’re deepening their relationship with that customer.
- Win #3: It’s great content Organifi didn’t have to create themselves.
- Win #4: Social proof. Need I say more?
Whether via an email newsletter, a pamphlet included in the packaging of your product, or social media, community building is key to keeping customers for the long-haul.
5. Build Downgrade and Skip Options
Here’s the thing: even your most devoted fans will likely need to either skip a box at some point, or switch to a cheaper subscription.
This can feel like a loss on your end, but it’s also a chance to show off your flexibility and hold onto those customers for months to come.
Make it easy to take a month off, and emphasize the ways that you are willing to work with a customer to find the plan that works best for them.
In the event of a downgrade, prepare an email sequence to help the customer get to know the ins and outs of their new plan.
But why—you may ask—why would I make it easier? After all, won’t I lose revenue?
The answer lies in the compounding nature of churn. I won’t get into the details here (the linked post explores it in detail), but suffice to say that over the course of a year, your losses (or gains from retaining a customer) are likely much bigger than you think.
Even if the monthly recurring revenue from a customer dips due to a cheaper plan or a skipped month, the revenue you save by retaining them can be astounding.
The Art of Sport really leans into this flexibility, and it is clearly worth the dedication.
They don’t hide the ability to control shipments. It’s part of their marketing. Right there on #3 “Control what you get, when you get it- change products, dates, or cancel anytime.”
This makes the barrier to entry much lower for a customer. They know right off the bat that they are not trapped in this subscription.
The Art of Sport even addresses it again, clear as day, right in their FAQs.
“You tell us when and that’s when we’ll ship it- this is your gameplan, player.”
My customer-centric heart swoons.
6. Recover Failed Payments
Failed payments are likely the bane of your existence as a subscription box business. After all, these aren’t necessarily customers that are choosing to leave.
An overdrawn account, a new card, or any of a number of momentary situations can endanger your subscription base.
There’s a good chance that 40-50% of your churn is passive- i.e. due to unresolved billing issues.
Luckily, this is one of the easiest problems in the business to solve.
Dunning/recovery campaigns can be hard to visualize, so let’s look at a real example and dig into the issues.
Note: This example is from Winc (formally known as Club W), therefore this process is *hopefully* old. Fingers crossed Winc’s team has improved since this, but it’s a great exercise nonetheless.
In this campaign, my card declined and they began to email me. Within it, there are a few layers of mistakes.
Right off the bat, I was receiving these emails about an expired card. If Club W had simply retried my card once or twice more, automatic updater would have solved this issue. And they never would have needed to email me about it.
Then, I got the exact same email every day for 4 days straight. If it didn’t work the first time (or third time for that matter), why wouldn’t they try something else?
*Note: These emails are old and were sent before automatic updater was a thing. So, Club W, there wasn’t much you could have done here. But today, I hope you don’t do this. Something about “Your Payment Has Been Declined” showing up 4x in a row on my inbox made me feel… uneasy. It almost seems a little spammy, no?
Make your dunning campaigns personalized, human, and not spammy. Add in different messaging, send emails from different people, and do not send the same one 4 days in a row.
(p.s. I churned after this)
Now let’s talk about the email itself. Club W (Winc) got a few points back, then lost me again.
- This email is branded, it looks nice, it’s clearly coming from Club W, there are no spammy send-from addresses (like "club W via dunning provider" which is very common. Give yours a check).
- The email is straightforward and the customer knows exactly what is needed and what to expect.
- That’s a lot of copy. You want to get your customers to that button before you lose them. Now, maybe this email would actually do great with your customers. But maybe they need something shorter. The only way to know is to test different emails within campaigns. Which brings me to my second point…
- It’s the exact same email 4 times in a row. It wasn’t just the subject line, they sent this identical email content to me again and again and again (and again, if you're still counting). This bland, robotic staccato of emails goes against everything we are working towards: personalization, experience, and engagement.
- Too many CTA’s. So yes, the customer does know exactly what is needed, but do I [click here] or [update your info]? Or do I need to go to the [support center] or maybe [contact us]. Don’t gamble at the point of recovery. You need one CTA, clear and concise. Include a note about replies for questions, instead of linking out to another page. And then, make sure those replies are routed to someone on your team who can handle any issues.
- It took me to an account preferences page. And since I wasn’t logged in at this computer (and couldn’t remember my password-who does?) I had to run a “forgot password” queue, reset it, and then navigate through to the billing tab to update the information. Nope, nope, aaaaaand nope. Again, it’s a gamble at this high-risk moment. That one CTA should go to a card update page that doesn’t require a log-in, verifies the payment on the spot, and is branded, safe, and secure.
Let’s look at an award-winning dunning email to compare. ButcherBox has one of my all-time favorites.
Things to note:
- It’s simple.
- It’s straightforward.
- It’s personalized.
- There’s one clear link to click.
- Branding is on point and trustworthy.
- Products are featured right there to reinforce value.
- That link goes to a wonderful, mobile-optimized page that doesn’t require a login.
Failed payments are one heck of a headache, but they don’t have to be. This is your lowest hanging fruit for churn.
Take on passive churn with a 21st century tool-set designed to maintain your subscriptions without ever bothering the customer.
Churn Buster offers extended campaigns that recapture revenue long after other services would have given up, not to mention card retries decoupled from email so you don’t have to reach out again and again to figure out payment issues.
With advanced analytics to give you tons of visibility and easy card capture forms, Churn Buster really is the industry standard for quality dunning.
Maybe I'm a bit biased, but companies like ButcherBox, LOLA, and Kettle & Fire are recovering more than ever ¯\_(ツ)_/¯ Take a peek at how they did it.
7. Build Exclusivity
We love to feel special and valued by the companies we use to meet our needs. Exclusivity is a hot commodity, and your subscription box business can cash in by focusing on the specific benefits that your customers gain.
Consider offering special items, deals, and discounts to customers that opt into a membership program.
You can also bring customers into your program based on loyalty. Customers that have received four of your boxes, for example, could be upgraded to a platinum membership with extra benefits to keep them around in the long run.
Four Sigmatic does a fantastic job of this with their Mushroom Membership program:
When customers become a member, they gain access to extra perks, one-time-add-ons, and other “shroomtastic savings.”
I talked to Katilin Holliday who runs the Retention efforts at Four Sigmatic. Here’s what she had to say about their new membership model:
“We decided to create the Mushroom Membership instead of a Subscribe + Save program because we wanted to convey that it was about more than just a discount and free shipping. We give our members awesome perks like early access to new products, gifts and are launching new perks frequently. Ultimately, the Mushroom Membership’s purpose is to create a long term relationship with our customers and provide them with value, consistently. This makes for loyal customers and low churn.”
This membership model stacked on the subscription really gives your business an extra layer of trust and experience.
Remember: with the physical aspect of many eCommerce subscriptions, there's such a huge emphasis on customer trust. The physical subscription is what gives a company permission into the home (aka a shipping address and regular deliveries).
It’s a HUGE privilege to have, and opens up to the one-time purchase model, add-on products, and so much more.
*BUT (and this is one big but), that trust has to be built first. Which is why adding in exclusivity through a membership-type model is a great churn reducer.
It also allows you to hone in on the customer experience and evoke some customer behavior.
Dan King, who spearheaded the membership model at MeUndies (and is now over at Ritual) told me "The membership model adds more value to the subscription with perks and exclusivity. The membership promotes the behavior we want to see from our best customers, which is, increased purchase frequency and adoption of new products."
Kaitlin echoed this when she said “The commitment that “membership” evokes is also a subtle nudge for the customer that consistent use over time is the best way to get the full benefits of our products.”
8. Learn from Your Churn
How long does the average customer stick with your subscription service? What are their main reasons for leaving? What kinds of customers tend to stay with you the longest?
Understanding your churn is the key to understanding the relationship between your subscription box business and your customers.
Churn cohorts are a great place to start because they help you to visualize your churn based on the starting dates of different customers.
Exit surveys are the real heroes here, because (done right) they can tell you the story of your churn direct from the horse’s mouth. Keep these quick, concise, and simple to complete.
Remember: the customer is on their way out the door. Some will take a moment to chat, but don’t push your luck. This is not the time for a sales pitch.
Extending LTV’s in the Long Run
Over time, maintaining your customer’s sense of excitement and wonder is the best way to extend LTV’s for your subscription box business.
While their first experience is critical, the second box that they receive establishes the pattern (and the connection) moving forward.
The highest level of churn occurs at this point, and the best way to hold onto these customers is to help them to fall in love with your product.
For the most part, subscription boxes tend to be luxury items rather than day-to-day necessities, so your goal has to be to intertwine them into your customer’s lives to the point that they begin to feel like necessities at the same time as making them exciting enough to delight your base again and again.
If there’s one tactic here you should really pay attention to is your failed payment handling. Every subscription business deals with this headache, but most companies are degrading the customer experience with processes like we saw from Club W (Winc).
Involuntary churn is the lowest-hanging fruit for subscription box companies. With the right toolset and approach, it can be almost entirely eliminated, making a vital impact on your overall revenue.
As we mentioned above, we’ve seen companies with 40-50% of their churn coming from failed payments. With the right approach you could cut your churn in half and get more boxes out the door every month.