Customer acquisition costs have surged in recent years, with a staggering 222% increase since 2014.
This heightened battle to engage new customers makes it critical for companies to invest in retaining the ones they already have. Retaining a satisfied customer who already has a routine with your product is both cost-effective and vital for your business's growth.
Peak seasons are prime time for brands to concentrate on customer retention, with subscribers exposed to numerous product choices, increasing the temptation to explore alternatives.
That's why you've got to hang on to customers by preventing churn from reasons you can control, like failed payments. If a payment failure is not promptly addressed, it provides an easy exit for subscribers to explore competing offers.
But to address this issue, you need to know the factors driving customers away and how to define the impact of long-term retention.
Typical reasons why customers churn
There are two primary ways companies lose subscribers: voluntary churn and involuntary churn.
Voluntary churn occurs when a subscriber simply no longer wants the product. They might be:
- Cutting expenses
- Changing habits
- Seeking a different solution
There’s not much your company can do in these cases, aside from offering discounts for customers who can’t afford your product or considering product changes to address the reasons customers have churned.
Involuntary churn typically affects loyal customers who experience payment-related issues, such as:
- Insufficient funds
- Payment incorrectly flagged as fraud due to transaction timing
- Outdated payment information
Not addressing these issues ensures that payments for recurring product shipments or subscriptions will fail. By the time a customer discovers the issue, they may choose to allow their subscription to lapse. But customers are often unaware that they’re experiencing an interruption in the first place. So they churn without realizing it. The revenue impacts from passive churn are immediate.
How retention drives downstream growth for your business
When loyal customers churn due to payment failures, it becomes a multi-faceted financial loss with two core issues:
- Selling to an existing customer is up to 14x easier than selling to a new customer.
- It costs more to replace an existing customer with a new one.
Each customer has sunk costs, including the effort invested in them:
- Cost to acquire (CAC)
- Maintaining customer satisfaction
- Product and customer support
Given the lost investment when customers churn, it’s even more critical to hold on to those who are already loyal to your brand. That’s what makes Butter such a valuable tool for recovering failed payments. Our customers lower accidental churn by about 10%+ on average.
Why Butter is your data-driven solution to involuntary churn
Customer retention is not just a financial concern; it's a strategic imperative. Our innovative solution for tackling involuntary churn solves payment failures and retains valued subscribers, without any disruption to their user experience.
Prioritizing customer retention is the gift that keeps on giving, ensuring a loyal and satisfied customer base for the long term. On average, our customers see approximately:
- ~10% lower accidental churn (flowing through to higher monthly retention rates)
- ~25% higher contribution margin (flowing through to increased LTV:CAC ratios)
- ~5% higher ARR (flowing through to increased cash flow and top line revenue)
Butter’s algorithm learns with each transaction
Butter is dedicated to helping subscription companies decrease involuntary churn with our proprietary machine learning models. Our models are trained on your transaction data and the data of other merchants in your industry as well as Butter’s full customer base. We target subscribers who are genuinely content with the product but may face disruption due to payment failures.
We examine each failed transaction's unique variables to determine the best course of action, such as:
- Retrying at a specific time
- Retrying with additional data context
- Avoiding retries altogether
This focused payment recovery strategy ensures a seamless experience for your subscribers, making them unaware of the payment failure and thus preserving their loyalty to the brand.
See exactly what Butter can do for your business with a free payment health assessment. Contact us today to get started!
