According to recent research, customer acquisition costs increased by 222% over the last decade. In 2022, this trend was further accelerated via increased data restrictions which, for many, cascaded into increased advertising costs. It is no surprise that we are witnessing the ecommerce industry shifting towards customer retention with a renewed focus.
Merchants offering subscription products are already better equipped to weather these rising costs. As seen in our 2023 State of Subscription Commerce report, the lifetime value of a subscriber is 46% higher than an average customer. That said, subscription businesses are still facing similar industry challenges, especially given the introduction of auto-renewal laws that went into effect in July 2022.
With this in mind, we approached our merchants to understand how we could help them strengthen their relationships with existing subscribers. One of our merchants’ top requested features was implementing the ability that allows existing subscribers to ‘pause’ their subscription. Despite the simplicity of the concept, we chose to explore the idea in-depth with our merchants to better understand the problem and offer a more complete solution.
Getting to the root of the problem
After speaking to our merchants, it was clear that they believed they could reduce churn by offering customers an alternative to canceling their subscriptions—allowing them to pause instead.
To further ground this hypothesis in data, we analyzed why customers choose to cancel their subscriptions. One of the most common reasons is that they ‘have too much’ of the subscribed product. To alleviate this, customers would either ‘skip’ their next charge or cancel altogether.
However, skipping a charge only skips a single order, and customers who needed to pause their subscription for longer would have to skip several orders. This was not a transparent option, and far from an ideal customer experience. As a result, a significant subset of those customers may choose to cancel their subscriptions.
In other words, the analysis not only validated the hypothesis but also uncovered gaps in the subscriber experience.
Building the right solution
Empowered by merchant feedback and research, we rapidly developed a holistic solution with features such as:
- The ability to offer multiple configurable pause durations to subscribers
- Support within our native customer portals
- Ability to automatically resume a paused subscription
Research and analysis guided our UI/UX decisions, and we ultimately chose to present the ‘pause subscription’ option only after a customer clicks the ‘cancel’ button in their customer portal. Here, the customer is presented with the option to ‘pause’ their subscription for a certain period. Implemented this way, our research suggested that the ‘pause’ feature could:
- Minimize customer churn by up to 10%, since fewer customers end up canceling
- Boost customer lifetime value, since customers who remain subscribed will spend more
Finally, to maintain the merchant’s compliance with the existing regulations, customers can still choose to cancel their subscriptions.
Since launching the feature four months ago, we have carefully monitored its impact on our merchants. With more than 1,700 merchants already using the feature actively, we’ve been able to collect meaningful data on the overall impact. Most significantly, we’ve observed that merchants who have implemented the feature experience an average subscription save rate of 9.6%. This means that customers who would have previously canceled their subscriptions are now opting to pause them, allowing merchants to retain these customers and avoid revenue loss.
Merchants who have implemented the pause subscriptions feature experience an average subscription save rate of 9.6%.
We’re not done yet! We knew that customers who elect to pause their subscriptions are still at risk of churn, so in follow-up conversations with our merchants, we discussed how we could help them identify their paused customers to aid in their effort to retain them as subscribers.
This led to our most recent enhancement, where we added a Klaviyo metric that tracks these paused subscriptions. Klaviyo, one of our top integrations, is an excellent email and customer engagement platform that allows merchants to optimize their customer messaging. Using the new pause metric, alongside the multiple other metrics and properties we send to Klaviyo, merchants can now build powerful email campaigns and flows based on their customers’ engagement with their brand.
The success of the pause feature, coupled with merchant feedback and analytics, will continue to dictate how we will continuously improve and iterate on it. At the moment, we are actively working on allowing merchants to download an export that lists customers who have opted to pause their subscriptions.
We are also building in-app analytics that explains the feature’s performance on their store. By understanding which of their customers are pausing, how long they are pausing for, and which products are more likely to be paused, merchants will be empowered to make data-driven decisions on improving their offerings and forecasting sales to help with inventory planning.
From all of us at Recharge, we are grateful for the feedback from our merchants which has enabled us to develop a scalable solution to address their unique challenges, while delivering measurable business results. We recognize that customer retention is not a one-size-fits-all solution, and are committed to working closely with our merchants and developing innovative strategies to help them retain their customers.