No one loves a quitter. I don’t (just) mean that in the sense of a high school coach shaming anyone who walks away from the team. I’m referring to the moment a consumer quits a subscription-based business or service — one of the hottest business models of the moment, from giants like Spotify to box-merchant startups like Stitch Fix, to yes, us (as in, Medium).
Such enterprises, particularly newer ones, naturally focus on signups, easy onboarding, and racking up impressive numbers of new customers on a monthly or quarterly basis.
To the extent such companies think about offboarding, the strategy often boils down to intentionally orchestrated friction. If you’ve ever gone through, for example, the maddening process of dumping your cable provider — “Yes, you’ve mentioned the bundles” — you know exactly what I mean. But really, if you’ve ever broken up with any such business, you know that quitters get little respect. When it’s not an annoying process, it’s usually an indifferent one. And after all, why should a company bother to design for ex-customers?
But more and more, it’s becoming apparent that it’s time to give quitters more respect. After all, it’s widely recognized that, as KPMG put it in a 2017 report on software-as-service businesses, “churn” is a “must track metric” for subscription-based businesses. If such services put as much thought into designing the quit process as they do to the process of customer courtship, they might just be able to only measure churn — but actually understand it.
But many companies (especially startups) still seem to think that if it’s too easy to cancel, more people will cancel — period. At least that’s the experience of Guy Marion, chief executive and co-founder of a startup called Brightback, which specializes in customer-retention software systems — with a specific emphasis on creating more thoughtful quit processes.
So Marion has a bias here — but he also has a point. He notes instances where companies (note: not his clients) have creatively designed for quitters. He likes, for instance, that Audible figured out that a subset of its customers were college students who didn’t want to pay for the service over the summer, so they began to offer a “Pause Your Membership” option. Netflix, wanting to give viewers an alternative beyond the binary staying or going, now offers potential quitters the option to downgrade to a cheaper plan, rather than lose them altogether. These options are offered in a clear, no-nonsense manner — not a tangle of verbiage about “bundles” — that might actually tempt a quitter to stay.
“The beauty of subscription-based businesses is that the barrier to entry [for customers] is low,” says Almitra Karnik, head of marketing at CleverTap, a venture-backed customer management and retention software firm with offices in Mountain View and Mumbai. “But the barrier to exit should also be low.” Using “all these shenanigans” that make it hard to quit simply doesn’t work, she says: “You are just postponing the inevitable.” And pissing people off in the process.
Investors seem to have lost patience with “vanity metrics” — flashy acquisition numbers that aim to shock and awe as evidence of rocketing growth, but gloss over how many of those new customers stick around.
“It’s about creating a user-friendly experience for canceling,” Brightback’s Marion argues. A customer with years of history should get a different experience than one who signed up three weeks ago. But either way, the process should involve a limited set of questions seeking basic insights not that dissimilar to an exit interview: where the quitter is going instead, why are they leaving, the likelihood they might return in the future. The goal: Figure out what you could do differently.
Marion likes to invoke the cliche that “retention is the new acquisition,” and obviously he’s not the only one who thinks so. Retention always mattered, but it’s getting more emphasis now that investors seem to have lost patience with “vanity metrics” — flashy acquisition numbers that aim to shock and awe as evidence of rocketing growth, but gloss over how many of those new customers stick around. In the wake of mightily hyped but profit-challenged services from Blue Apron to Uber, there’s a fresh emphasis on “positive unit economics,” a fancy way of saying: Let’s see if that interest and attention is translating into a sustainable business, by measuring the actual profitability of each transaction or customer. In this scenario, making fewer quitters quit could make all the difference.
Every e-commerce startup knows that customer acquisition costs are steep, and getting steeper: According to a study by marketing-analytics company AdStage, over a six month period in 2017, the cost per click to attract customers on Facebook snowballed by 136%.
So it makes sense to devote more thought and effort toward keeping (rather than replacing) the customers you’ve attracted. And Karnik, the CleverTap marketing chief, says she has seen a decided shift in the priorities of clients and their investors. “Digital-first companies, they have shifted their budgets substantially, focusing more on retention even more than acquisition,” she says. “The cost of churn is super high. It’s not only that you have spent on acquiring the customer, you are also potentially losing a customer’s lifetime value.”
For her firm’s client, MobiKwik, a mobile payment service in India, CleverTap’s software figured out that 30% of new users were uninstalling the app in the first week. The company devised promotions in the first three or four days after download that cut this quit rate by 10%. But it also designed deal-oriented campaigns specifically targeting quitters, and “won back 23%–25% of their uninstalled base,” according to CleverTap.
Consider the “box economy.” There are currently upward of 3,500 companies pushing X-in-a-box (clothes, beauty products, etc.) monthly services. Most offer some kind of introductory hook — discounts, free trials, limited offers — that ideally convert into lasting relationships. “I’ve spoken to many of these companies,” Marion says, “and often they’ll be churning 50% to 60% of new signups in the first three months.”
Imagine the value in an offboarding process that reveals which offers are leading to loyal customers .
One reason is an extreme focus on top-line growth juiced by these seductive discounts. Such businesses “spend a tremendous amount of time on lead-generation,” writes Moira Vetter, CEO of Atlanta-based marketing firm Modo Modo Agency. “Sometimes it seems that’s all they focus on — the top of the funnel and the velocity at which you can drive prospects into it.”
But imagine the value in an offboarding process that reveals which offers are leading to loyal customers — or even learning that a trial offer is too generous, giving some users everything they need and no reason to stick around.
Marion cites a case study involving one of his firm’s early clients, web analytics company Crazy Egg. (So far Brightback’s customers are mostly B2B outfits, but it is currently in trials with two consumer-facing startups.) Using Brightback’s software to revise their cancel process, Crazy Egg learned that significant numbers of quitters weren’t necessarily dissatisfied with the service, they just hadn’t had time to implement it or fully figure it out. Those customers could be targeted, and often saved.
Brightback’s specific business aside, there’s value in the underlying message that quitters can matter, particularly for a company that’s more interested in bottom-line profitability than top-line growth. The goal should be “understanding why customers leave and making appropriate, targeted or high-performing offers to retain those customers,” as Marion puts it. “Without generating resentment.”