Voluntary vs Involuntary Churn for Subscription eCommerce Brands
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In the subscription market, churn rates can kill your profits.
While the market is growing fast (the eCommerce subscriptions market is expected to reach $478 billion by 2025), most businesses struggle with low profit margins and high acquisition costs.
You're wasting money and resources by letting those hard-earned customers go without a fight.
Some churn can't be helped — a customer might need to cut spending, for example.
Other types of churn, like those caused by expired credit cards and spending limits, can be reduced with the right strategies.
The first step to protecting your profits is understanding the different types of churn. Then, it's time to build a fool-proof strategy to bring those subscription customers back into the fold.
Churn Buster offers frictionless churn recovery with custom dunning emails, support escalations, SMS messaging, and more. Try it for free.
Voluntary vs involuntary churn: what's the difference?
Voluntary churn occurs when customers make a conscious decision to end their subscription. There can be any number of reasons for voluntary churn, such as:
- Poor customer service
- Perceived lack of value
- Found a service they like better
- Looking to cut costs
- Like a competitor better
- Found a lower-cost solution
Most businesses reduce voluntary churn by improving their offerings or providing better customer service. While that's a step in the right direction, it won't solve all your issues.
That's because there's also involuntary churn — and it accounts for up to 40% of all churn.
Involuntary churn occurs when customers end their subscription due to factors outside of their control. Unlike voluntary churn, they didn't decide to end their subscription because of poor service or lack of value, which means they can be recovered.
The top reasons for involuntary churn include:
- Insufficient funds
- Fraud flag
- Credit card is over the spending limit
- The billing address is out of date
- System or bank errors
- General declines for unknown reasons
Involuntary churn is a silent profit killer, and it's easy to miss if you aren't paying attention.
At Churn Buster, we've found 10% of subscription eCommerce payments fail, though this can be as low as 3% or as high as 25%, depending on the market and customer segments.
How to reduce involuntary churn
Subscription eCommerce is a fast-growing market, which means there is plenty of room for growth. However, to make the most of the growing market, you need to reduce churn as much as possible.
How do you do that? Start by taking steps to reduce involuntary churn.
Don’t warn customers about expiring cards
Most credit cards expire after three years. If customers forget to update their information, their payment might not process, resulting in involuntary churn.
Sending a reminder email to customers sounds like an obvious solution, right?
Actually, it's best NOT to send a reminder. Here's why–pre-dunning, or sending emails to customers before their card expires, is more likely to frustrate customers than solve the issue.
That's because the majority of upcoming expiration dates are fixed behind the scenes. Payment processors like Stripe and Braintree work directly with banks to update expiration dates and other card details automatically.
So those "URGENT: Credit card expires soon!" emails just annoy your customers; they don't reduce involuntary churn.
Nail the customer experience
Sometimes, the behind-the-scenes updating of card details doesn't work, or there might be a different issue that needs to be addressed. If that's the case, it's time to reach out to your customer to resolve the issue with a dunning email.
To be effective, however, you have to provide a smooth customer experience.
Imagine this — you're scrolling your favorite social media app when it asks you to sign in again. You just want to watch lip-synching videos, not deal with administrative tasks. It's distracting, and you can't remember your password, so you close the app.
Your subscribers feel the same way. They opted into your service, they like your products, but if your efforts to fix an expired card annoy them, they might decide to walk away.
Which is why you have to nail the customer experience.
That means using gentle reminders that are on brand, easy to understand, and clearly explain the problem.
Dropps gets it right by sending a series of emails that gently push users to fix card issues:
You'll also want to ensure your landing pages work well on mobile devices, which is how more than half the world accesses the internet.
Don't treat all failed payments the same
Not all involuntary churn happens for the same reason. Some problems, like having an outdated card number on file, require customer action to fix. Others, like a customer having insufficient funds in their account, can be fixed without asking for a new payment method. Don't bother customers if the issue is something they can't (or don't need to) fix.
Among companies using Churn Buster, 21% of all payment issues are resolved by simply retrying the card on file a few times before emailing customers. If your emails are sent to customers automatically after each failed payment, this strategy can be impossible to replicate, leading to excessive email volume, customer confusion, and more billing-related support load.
Once customer involvement seems necessary, send a custom message that tells them what is wrong and how to fix it, like this one from Estrid:
After determining that the billing issue may need a new card-on-file, Estrid makes it easy for the customer to keep their subscription going. These emails link directly to a page where the customer can update their card, without having to remember a password.
To streamline your process, retry a customer’s card-on-file several times before reaching out to them — you'll keep customers and your bottom line happier.
Monitor for issues and opportunities with your dunning sequences
It's not enough to create a dunning email campaign. To reduce involuntary churn, you need to make sure your campaigns are effective.
Are the emails threading into the spam folder? Is one message outperforming the others? Is there an opportunity to reach customers via SMS or other channels? Should you be notifying your team of high-value scenarios?
Monitor your involuntary churn measures to ensure they're reaching customers and having the desired impact. Track metrics like email delivery rate, open rate, and the number of past-due payments to ensure your strategies are effective.
How to reduce voluntary churn
Now that we've covered how to reduce involuntary churn, let's discuss reducing voluntary churn, or when customers actively choose to end their subscription.
The top reason for voluntary churn is the customer experience. Which means the most effective strategy to reduce voluntary churn is by creating a seamless customer experience.
Here are a few strategies to do just that:
Let subscribers skip or pause their subscription
Customers appreciate flexibility. If they can't afford their subscription this month or just haven't had a chance to enjoy last month's offerings, they might cancel. Allowing them to skip or pause the subscription encourages them to use that option, rather than canceling.
Chewy uses this strategy to prevent cancellations. They also allow customers to send the shipment earlier if they need their pet supplies before the next shipment goes out.
Make customer service easy
Nearly 40% of customers stop doing business with a company due to poor customer service. In the digital age, customers expect easy, fast access to customer service. A chatbot, live chat support, and a detailed FAQ page ensure customers can access support whenever and wherever they need help.
If you offer email support, make sure it is well monitored and notify customers when they can expect to get a message back so they know you're listening.
Use customers surveys to understand why customers leave
Sometimes you don't know why churn is high, which makes it impossible to solve the issue. Ask customers why they are canceling rather than testing multiple strategies (which may or may not work!).
An automated survey exit survey can provide insights you can use to keep customers coming back.
Celebrate customer loyalty with rewards or perks
Customers like to feel appreciated. Rewarding loyalty with perks, like a discount or an extra option, helps customers feel valued and can keep them coming back.
For example, Book of the Month offers a free add-on book and swag when subscribers reach 12 months.
Final thoughts on voluntary vs involuntary churn
Preventing churn is the single most effective step your eCommerce subscription service can take to improve revenue. Preventing churn lowers acquisition costs, improves customer lifetime value, and keeps your customers happy.
Churn Buster helps digital subscription services recover failed payments and end passive churn. Get started for free.