Target Your Churned Subs for Additional Growth
One of the most commonly uttered phrases in business is that, “retaining a customer is cheaper than acquiring a new one.” And if I sit with that statement, it makes a lot of sense because a retained customer has already gotten off zero. Once someone has committed to paying for something, the seller has overcome a massive psychological burden.
And if we dig in more, current customers are often better for a business than new ones. According to BIA Advisory Services:
Recently, a new trend is developing as 61 percent of small business owners surveyed report over half of their annual revenue comes from repeat customers rather than new customers and that a repeat customer spends 67 percent more than a new customer. In line with this, small business owners are spending less time and money on customer acquisition; only 14 percent are spending the majority of their annual marketing budget to acquire new customers, and only 20 percent are investing most of their time and effort to acquire new customers. This is a significant shift in behavior as small business owners have realized that existing customers play a more influential role in business success than new customers.
While this survey references small businesses (and is 10+ years old), I suspect the message is the same for media companies. Longevity can result in deeper loyalty, which opens up opportunities to increase revenue per user. The New York Times reported Q1 earnings last week. I published my top-level commentary here. But one part is worth exploring:
About 550,000 subscribers saw their price increased in Q1 2023, with 500,000 being news-only. The company anticipates an additional 700,000 people in multi-product seeing their price increase in Q2 with a total of 1.5 million subscribers by end of year. This will contribute to ARPU continuing to rise and I anticipate ARPU will return to the pre-Athletic acquisition highs.
By increasing the price on those 550,000 subscribers, The New York Times was able to push digital-only ARPU from $8.93 to $9.04 quarter-over-quarter. That’s impactful. And with the ability to increase prices on these subscribers, retaining them is paramount, especially since a new subscriber will likely earn much less at the start.
But there’s another category of reader that has the potential to be lucrative for publishers: churned subscribers.
In subscription businesses, there are two types of churned subscribers: passive and active. The latter is straight forward. They chose to unsubscribe for any number of reasons. But passive is interesting because these people are no longer receiving your content despite not making a decision. According to a 2021 report from subscription-management software provider, Piano, “34.2% of churn is passive.”
Passive churn occurs when the payment processing fails. It could be a debit card and there are insufficient funds. The credit card could have expired. They could have lost their wallet, replaced it with a new card, but the number is new. None of these are the publisher’s fault. And yet, we’re still losing the revenue.
I find when it comes to passive churn, the best thing you can do is prevent it before it occurs. There’s a process called dunning, which is effectively automated communication to subscribers to ensures the subscription is retained. And so, that would be broken down into two parts (with basic messaging):
Pre-renewal
Dear Reader,
Your subscription is renewing in two weeks. Is your credit card information up to date?
Click here if you need to make any changes.
Thanks,
Publisher
Post-churn
Dear Reader,
Your subscription has canceled due to your payment method failing. If you want to retain your subscription, you’ll need to update it.
Click here to update your information.
Thanks,
Publisher
Here’s another statistic from Piano. “Passive churners make up half of all winback” subscriptions. In other words, if you’re fighting to get those people to resubscribe, more than half of them will. So, there is zero reason to not set up your dunning so that you don’t lose passive churners.
But what about the active churners? These are the ones who have made a decision that they no longer want the subscription.
I believe these active churners are a group that we should be trying to reengage with. What we have to understand is that people’s priorities change. The information that they needed when they first subscribed might not be the same as when they churned.
AMO is a good example. Maybe a reader is very focused on first-party data, which I obviously write about a lot, so they pay to subscribe. But then they pivot and focus on programmatic. I barely write about programmatic advertising, so they churn to go read some other publication. Their business objectives changed and so they redeploy their resources accordingly.
Or what if you’re a food site? Someone subscribes because they are really interested in BBQ food. But six months later, they’ve had enough and now really care about food from Southeast Asia, so they go find content about that.
People’s needs evolve. And most of the time, if you’re focusing on your niche, you’ll have to accept that you can’t always serve them. But sometimes you get a second chance. That either happens because you have evolved your coverage—AMO starts writing about programmatic advertising—or their needs revert back to their original objective.
This is why it’s important that when someone churns from your content, you don’t delete them entirely from your database (except where privacy laws require). From time to time, it’s worth sending them a message letting them know that things are either still the same or that you’ve launched new offerings. It also makes sense to deploy some of your paid marketing budget to trying to re-acquire these readers. However you market, reminding your churned subscribers you still exist is powerful.
It’s something I’m planning for AMO. I’ve had paid subscribers for over three years and people have churned. So, the simplest thing I can do is send them a note letting them know that there is now a Slack, financial analysis on a growing number of companies, podcast transcripts, and an upcoming event on October 26th.
We all know that the best thing we can do is not lose subscribers. It’s better to keep someone retained than try and get someone new. But we’re going to lose subscribers over time. It’s a fact of life. But it’s not an entirely lost cause. In some cases, you can win them back simply by getting them to change their credit card number. In other cases, winning them back is letting them know the value of what you provide. A churned sub got off zero once; we can get them off a second time.
Thanks for reading today’s AMO. If you have thoughts, hit reply or join the AMO Slack. And I’ll be announcing ticket sales and the first speakers for the AMO Summit soon, so mark your calendars: October 26th here in NYC.
