Why do consumers cancel their subscriptions?

In our latest whitepaper, we conducted an investigation to discover what encourages consumers to sign-up for subscriptions, and pinpoint what exactly could cause them to cancel a subscription.

Consumer attitudes towards Subscription Offers

Subscription commerce allows retailers to build brand loyalty through repeated purchases. However, shoppers could choose to cancel their subscriptions with minimal notice. Identifying their expectations allows retailers to implement solutions likely to keep shoppers satisfied and more likely to retain their subscriptions.

Surprisingly, our research has highlighted that shoppers are less influenced by initial introductory discounts than retailers may expect. Instead, they would prefer a consistently low price, offering value for money. While time-limited offers will entice shoppers, they also lead to significant customer churn.

We discovered that 20% of subscribers who plan to cancel their subscription soon will do so because they “only signed up to benefit from an introductory discount.”

Retailers have been using discounts, free trials, and other incentives to get new subscribers to try out new subscriptions. But this is a risky strategy that may make it easier to get new customers, but it will naturally increase the number of customers who cancel their subscriptions once they start paying full price.

If you're using your number of subscribers to make long-term purchasing decisions, you need to be careful about how you plan to maintain that level of customers.

Too much emphasis on your current subscription numbers could backfire if you suddenly discover that many customers choose to cancel their subscriptions.

Customer frustrations with Subscription Commerce

To understand what encourages a customer to remain subscribed to a subscription service, it’s essential to understand the common frustrations that may cause them to cancel.

We’ve found that flexibility is the key to a successful subscription commerce strategy. But the biggest bugbear for consumers is when they feel they are not receiving value for money.

The cost-of-living crisis may be causing worries for consumers, and non-essential consumer items may be the first to be cancelled to save money.

Our own research has reiterated Barclaycard Payments’ findings. We discovered that 34% of current subscribers plan to cancel at least one subscription.

The most common reasons why include budget (36%), not using the products enough (23%), only signing up to use an initial introductory discount (20%) and a perceived lack of value for money (19%).

It should also be noted that changing interests and a lack of options to pause or edit a subscription are also reasons that could lead to a cancellation.

We encourage retailers to think carefully about the different reasons that could cause a consumer to cancel a subscription.

Awareness of common complaints could allow you to make small changes that could prevent a customer from dropping out, and potentially disappearing forever.

Cancelling customer churn

In their 2022 State of Subscription Commerce report, Recharge Payments noted that “passive churn” can be a huge issue for retailers, where customers leave without realising, perhaps due to outdated card payments.

They state: “On average, merchants lose 10% of their revenue to failed payments, which can occur for reasons as simple as forgetting to update credit card details.

What’s more, failed payments are one of the main contributors to passive churn, meaning customers leave without actively cancelling their service.”

Simply integrating technology that combines customer service and digital marketing techniques could be enough to win the customer back.

For example, installing a two-step cancellation process would not only prevent any accidental cancellations but could also alert a customer to a potential payment issue before it arises.

From a customer service perspective, this could prevent any problems or reputational issues when a customer does not receive their subscription in the post.

Growing legal concerns around auto-renewals

Retailers welcome introductory discounts and free trials because they encourage new customers to subscribe. Retailers hope that the initial trial may be enough to keep a paying customer. However, many customers fail to cancel their initial trials and are subjected to auto-renewals.

Citizens Advice is so worried about the rise of complicated cancellations and unnecessary barriers that they are pushing for a ban on subscriptions that automatically renew before free trials turn into paid subscriptions.

Retailers must pay close attention to the technology supporting their subscription commerce strategies. They must make sure that customers are able to cancel their subscriptions quickly and easily. Failure to do so could lead to serious consequences.

Generic plugins may have conflicts with other aspects of your infrastructure, so it's essential to periodically check how easy it is for your consumers to cancel their subscriptions.

What can retailers do to safeguard themselves and their customers against the perils of Subscription Commerce?

• Use digital marketing techniques to remind customers when a free trial or introductory discount period is due to end.

• Enable customers to set up time-specific cancellations during the initial application, therefore, choosing their cancellation date from the outset.

• Implement single-click cancellations, followed by a confirmation email, to prevent accidental cancellations.

• Use push notifications to alert customers to upcoming deadlines (such as edit/cancellation periods).

• Integrate subscription commerce platforms with customer service contact centres. If a customer has a complaint or an issue with their subscription, the information is readily available to the customer service agent at the touch of a button.

Shoutout to your Exes with Remarketing

A final point of consideration is to look at what communication you have with previous subscribers.

We've identified that a customer could choose to cancel their subscription at any time for several reasons. But just because a customer is no longer an active subscriber does not mean they should drop out of your sales funnel altogether.

There are numerous ways you can use technology to reach out to previous customers, encouraging them to sign up again.

From emails to push notifications, your approach to former subscribers should focus on why they chose to drop out. For example, if it were for budgetary reasons, could you highlight your value for money?

Automation is making this easy to manage. The challenge for your digital marketing teams is finding the right message that entices former customers to come back to you.

Wrap

Customers have certain expectations. If those expectations are not met, customers will happily cancel their subscriptions, and when this happens, it can be difficult to entice them back.

To overcome this, creating a flexible self-service solution that puts the customer in control over their subscription is key to longevity and increasing the lifetime value of each consumer.

While discounted introductory offers are a good way of enticing new customers to sign up, we believe they also directly contribute to customer churn. For your retail strategy to thrive, you need to focus heavily on rewarding your existing customer base and ensuring they have no reason to cancel their subscription.

Simple techniques such as aligning your subscription packaging to your content marketing activities or installing customer service options into your subscription platforms can be the difference between keeping your customer engaged or not.