According to Ofcom’s latest report, in the last three years alone e-commerce has grown at 10 times the rate of other retail sales. This makes sense as the priority of almost all marketers working in digital media has been and will continue to be customer acquisition. But the digital media market is maturing, becoming increasingly subscription based, buyers are becoming more savvy, a degree of saturation is happening and the amount of choice expanding rapidly. Attention, therefore, needs to turn away from just acquisition and towards customer retention.
For businesses that operate online or in the cloud, one good place to start is in the wealth of customer data these businesses hold — and can mine for information. Marketers are using that data to work out how to differentiate between customers, understand which bring greatest value to the business over the long term, and to deal with and stem the tide of customer churn.
Is every customer worth keeping? It’s worth knowing before you fight hard to do so. Most businesses understand the 80-20 revenue rule: 80% of their revenue is driven by 20% of their overall customer base. However, too few companies provide their sales and marketing teams with the insights they need to appropriately prioritise their efforts towards the people who matter.
Determining ‘subscriber worthiness’ can help companies overcome these issues. Your own customer data provides you with the essential information to form the basis of a subscriber worthiness ‘score’: Who are these customers? What is their average lifetime value? What is the support or chargeback burden for that customer?
Once you have this data and have scored each customer, your marketers can apply this understanding to their outbound efforts, based on your strategic priorities. Knowing whether it is worth keeping a customer, you can turn attention to ensuring that you do so.
Preventing the voluntary churn, which all companies suffer from, requires an adept CRM system and a similar set of marketing skills to the ones used to acquire customers. But what about the issue of involuntary churn where a customer is lost not because they wanted to leave but because, due to changes in their financial details or circumstances, the company is unable to collect payment?
One increasingly popular trend within e-commerce is the subscription model of purchasing – now used for many media types and services. It is becoming more commonplace to join Netflix or Spotify, for example, and to pay for the service of receiving content over the internet, rather than individual products delivered by post. This presents a whole new set of challenges for the companies, as they have to ensure that the customer not just joins, but stays.
While most marketers are familiar with a more traditional method of taking payment – a one-off transaction processed in real time, before goods are dispatched. A subscription-based model is different – it requires that payment is taken each and every month, or on some other regular basis. At first this doesn’t tend to be problematic. However, the longer a customer is with a company the more likely it is that problems occur.
The average debit and credit card in the UK is valid only for around two to three years, after which it expires; a customer’s details can quickly become out of date. Customers will also lose and replace their cards – or have had them stolen. Then there is the issue of the money a person actually has in their bank account or how close to their credit limit they are. A change of job and a different salary date or just a difficult time financially and a maxed out credit card, could lead to an automated request for payment being declined and the customer unknowingly losing a digital service.
It is estimated that companies are losing as much as 10-15% of their customer base, just because they don’t have the right payment details for them. It is obvious then that finding ways to address this can add millions in additional revenue for digital businesses – on average, our customers achieve a 3-5% annual revenue uplift from overcoming this involuntary customer churn.
Many companies who deal with subscribing customers are choosing to outsource their payments to a new breed of cloud-based billing platforms. The good news here is that if the chosen solution is comprehensive enough, then the provider should be able to help capture this lost revenue. When choosing a billing provider, the ability to integrate and automate marketing data should definitely be something on the checklist.
The infrastructure provided to reduce involuntary churn can be tailored to customers and built into the platform. Valuable customer data can be collected and, more importantly, used to create a lift in revenue. This can include a raft of ways to ensure customers don’t go anywhere.
Credit card updater services, such as the one from Vindicia, make sure that a company is charging the right card, not one that has been lost or stolen, or is out of date. Problems can also occur when customers cancel a payment because, in the year since they set it up, they have forgotten what it was for. Reminding people that their annual payment is due and how this payment will show on their statement makes it far more likely that the company will be able to collect on the charge. It’s also a nice touch for the customer.
Retry algorithms, determining when and how often to try customers cards, are also highly useful to ensure money isn’t wasted trying cards before they are ready. For example, we know that retrying a card lots of times immediately after the first attempt to collect, you are more likely to continue getting declines, than you would if you left it a week or so.
This may sound complicated but it needn’t be. By researching and outsourcing to a provider that not only delivers a billing platform but also offers services to help you manage your customers from beginning to end, you can reap more the rewards of this new age of cloud commerce, and make your marketing efforts go further.