No Brainer Automations to Increase Revenue & Lower Churn
I used to think that driving big impact came from shipping really big projects. I was wrong.
The big projects are certainly what everyone talks about. These are what get added to your resume and mentioned in company all hands decks.
If you look at the following projects, you’ll probably reach the same conclusion.
- Big project - takes 3 months to build and produces 5 “points” of value
- Small project - takes 1 month to build and produces 1 “point” of value
Five is greater than one, so the big project produces more value right?
Thinking like this leaves out the most important factor. Time.
The First Factor: Time
Which project drives more impact depends heavily on how long its live on the product and producing value.
Pushed to its logical extreme, if you ship the small project in January and the big project in December, you can see that the "small project" produced 12 points of value and the "big project" only produced 5.
Now there are a lot of caveats here such as, the value of each project, when the big project work starts compared to the small project, etc.
However, I think this example illustrates a valuable point.
The faster that you get your “wins” out on the board, the faster you grow.
The Second Factor: Certainty
Any experienced product person will tell you, its very hard to actually predict what a project will do before its launched.
Good due diligence helps, however you can’t truly know until its live. Typically, the bigger the project, the more uncertainty.
In our example above, the “Big Project” might actually produce value that is somewhere between a 0 and a 7 when its first launched.
Getting it to produce a value of 5 might actually take 3 attempts and many months longer than you thought.
Therefore, projects with a higher certainly of working should get shipped even faster.
My Favorite Small Automations
If I have a “favorite” type of project to launch at subscription companies, its small, fast changes that implements a well know best practice.
These are great for a few reasons:
- Very quick to implement, meaning you start producing value quickly.
- Very low risk that this won’t work because its so commonly used across the industry
- Low cost, so even if you’re wrong then you didn’t waste that much time here.
These are typically the first five things that I am looking to set up for any company that I work with.
1. Contacting People When They Fail Payments
For everyone who fails a payment, about 60-70% of the time after someone fails a payment the retry process will be the thing that gets them back.
That however still leaves 30-40% of your failed payments that will be won back by reaching out to people to update their payment methods.
The keys do doing this well are:
- Frequency - Notify them multiple times. Ideally heavily right after the fail and then also right before they’ll lose access.
- Personalization - The less generic this feels, the better. Have it come from a person, talk specifically to the value of the product, etc
- No Friction - Make it as easy as possible for them to update their info. Ideally they don’t have to log back in or go back through a checkout experience.
The most common tactic here is via email, but text and phone call can also work depending.
How much effort should you put in? Well depends on what that person is worth to you in the the future.
AAA (which is a roadside assistance insurance in the US) once left me multiple voicemails by a real person when I forgot to give them my new card information.
I think I was paying them $65 a year, which doesn’t sound like much, but they likely retaine users for decades, so they can easily afford to do this if each user is worth hundreds of dollars.
2. Retrying Failed Payments
If you’re new to this blog, setting up correct payment processing is one of the most important things you can do as a subscription product. I have probably written about this more than anything else.
The longer your product is around, the more important this is.
Assuming you’re collecting payments off the app stores, then the number one suggestion here is to make sure you’re using an ML driven retry process.
Stripe comes pre configured with what I’ll call “dumb” retirees. It will be auto set to retry ever 3, 5 and then 7 days.
In my experience, switching to their “scale” tier, or using a different vendor like Churnkey’s "Precision Retry" process, which takes optimizes retires for soft decline and customer reach out for the hard declines.
If you’re using a subscription manager, like Recurly or Chargebee, the also have this feature set and you just have to make sure its enabled and set to be aggressive.
3. Win Back Tactics in Your Cancellation Flow
This tactic was covered extensively in this post, so I’ll just recap it here.
While the best pace to fight cancelation is early in the experience, specifically making sure users set up the product correctly and form a good habit, you can still get some small wins here.
The 3 core tactics that I have seen work are:
- Allowing user to pause their account
- Offering users a small discount
- Allowing users to switch tiers
As mentioned in the post, these are most effective when they are actually helping address the core problem that is causing the user to leave.
If they got busy, then giving them a break will help. If they are canceling because they don’t need your product anymore, then pausing wont’ do anything.
Check out the full post for a breakdown and examples.
4. Turning off Monthly Email Receipts
If there is any common link between Spotify, Netflix, Amazon Prime, or any of the other big membership products, its that they don’t send monthly email receipts.
They don’t for a reason, each email receipt is a small reminder that you’re still paying for a product.
If I were a betting man and you had perfect data tracking, I’d gamble that you are seeing most of your normal cancellations with 48 hours of users receiving an email receipt.
5. Re Activation Campaigns
These are campaigns that attempt to pull back customers that were previously active on your product.
This really depends on the vertical that you’re in and whether you solve a problem that recurs for users. Have automated campaigns that attempt to re engage users after they have dropped away, typically with a small offer.
Uber and Lyft push this tactic constantly, this tactic also makes sense for dating services, as you’re likely to have users enter relationships and then become single again.
So What Do You Do With This Information?
When it comes to picking & sequencing projects, I think most companies make two core mistakes.
- They undervalue the impact of lowering churn
- They choose “build” in the old “buy vs build” dilemma and then are way too slow to build.
On churn, let's say that all of the ideas in this post will lower your churn from 15% to 13%.
So you’re saving 2% right? 2% isn’t that much right?
Its much more than you think.
When you lower churn, you have to factor in the future payments of those people who are currently leaving, but won’t in the future.
A good rule of thumb is that 1 divided by you average month/month churn number = your average length of retention.
- 1 / 0.15 = 6.6 months of retention
- 1 / 0.13 = 7.7 months of retention
When you do this math here (6.6 months vs 7.7 months), you’re actually adding 16% to your LTV.
Because time is such a factor in subscription products, you should do this as early in the company's history as you can.
This brings me to the second point, buy vs build.
90% of companies that I have seen, when faced with the option of using a vendor who does these things decided to built it themselves.
This is a fine approach if you actually build it soon. However for most companies, after they decide to build it, they realize its more complex than they thought and decide to do it later.
Very quickly this idea can get stuck in the backlog and a full year goes by without doing anything about it.
That’s a full year going by that they could have had lower churn and didn't. This adds up to be a lot of money as your company grows.
If I wanted to be fully "rational" about this approach, I would get these automations up and running as fast as possible, then adapt them for time.
If you're a super talented founder who is also an engineer, then probably just build all of these.
If not, find a vendor or set of vendors to get installed quickly, then determine in time if you want to replace them with internal features in time.
Good luck out there.
Note: This post is sponsored by Churnkey. They are exactly the type of tool I look to install quickly when I am working with a client to make an impact quickly in these areas while we work on larger projects.
If you don't have automations set up, I think they are a great way of doing this. You can either click this link or I can intro you to the team.
Sponsored by Churnkey: Churnkey helps subscription companies like Jasper, Veed.io, and Copy.ai, to drastically reduce voluntary and involuntary churn. On average, Churnkey saves companies 20%-40% of subscription revenue that would otherwise be lost to churn.
