What's Subscription Churn and What You Can Do to Reduce It
In this guide:
- What's Subscription Churn?
- Calculating Your Churn Rate
- What's a "Good" Churn Rate?
- Why Churn is Your Enemy
- How to Reduce Churn
- Email is (Still) King
- Monitoring Your Subscriptions Business
What's Subscription Churn?
Subscriptions are a great way to grow a consistent revenue stream, and as long as you get more subscribers you'll make more money. When analyzing your subscription business, you're most likely keeping a close watch on active subscriptions.
Your active subscriptions go up when new users subscribe and down when they cancel their subscriptions. In this guide, we're going to take a closer look at the second group and see that reducing the number of subscribers who leave is as crucial as getting new subscribers.
In the world of subscriptions, the metric for how many subscribers leave is called churn, and it's a standard KPI used to measure how fast your business is "leaking" subscribers.
Calculating Your Churn Rate
At first glance, tracking subscribers who leave is as simple as counting the number of canceled subscriptions, but that's not very useful because how canceled subscriptions affect your bottom line is relative to how many active subscribers you already have.
Monthly churn is calculated by dividing the number of canceled subscriptions during the month by the number of active subscriptions at the beginning of the month.
For example, if you started the month with 1,000 active subscriptions, added 250 new subscriptions and lost 100, your churn rate would be 100 / 1000 = 10%.
This means that every month 10% of your paying users are leaving, and the 250 new subscriptions aren't even considered which means your promotion, app store optimization, and ads won't help much. That's why it's crucial you actively work on reducing your churn rate.
Monitoring your churn rate is a must for developers who rely on subscription. While Apple and Google don't calculate churn rate for you, Appfigures does it automatically for each of your subscription tiers over time and by country. Sign up for free →
What's a "Good" Churn Rate?
In an ideal world paying customers would never leave. In the real world, however, no matter how great your app is, some customers will leave.
While different types will see different churn rates, most developers should aim for a churn rate that's in the low single digits.
Why Churn is Your Enemy
Churn is a threat to subscription apps because it eats at the bottom line quietly and unless you're paying attention can eliminate it while you're busy promoting the app.
Going back to our app with 1,000 subscriptions, if we don't actively reduce the 10% churn it's experiencing, we'll need to get 100 new subscriptions every month just to keep the same revenue. If we reduce our efforts for a single month, we could run the risk of losing more subscribers than getting new ones, which would certainly reduce the bottom line.
But if we can reduce that 10% churn to just 7%, we'd be retaining 30 subscribers every month, leading to a much smaller decrease in revenue.
Monitor Your Subscriptions
Track your active subscriptions, MRR, churn, and more in one dashboard
How to Reduce Churn
Here are the most common reasons subscribers churn, and what you can do to prevent that from happening:
1. The App Doesn't Have All the Features or Content They Need
Users subscribe to your app to solve a problem through features and content, with the expectation that more features and content will be available in the future. That's why they agree to pay monthly.
This means that when they don't see the updates they expect or can't find all the content they need they are more likely to churn. Some users need specific features you don't have yet while others simply can't find them.
Luckily there are several ways to combat this type of churn:
- Read reviews and add features users are asking for. Some users turn to reviews to offer suggestions and make feature requests. By actively reading reviews and keeping a list of suggestions you'll know what they want and also prioritize requests by their frequency.
- Read competitor's reviews and add features their users are asking for to stay ahead. Go a step further and tap your competitors' audience for feature suggestions by reading their reviews. Check out this guide for how to do that.
- Improve your onboarding. Unless your app has exactly one feature it's possible that new users will miss some of the benefits the app offers when they use it for the first time and eventually forget to look. Helpful onboarding will ensure they know about everything the app has to offer.
- Make a big deal of new things. People's needs evolve over time, as does your app. That's why it's important to make sure that when you release new updates you also let your users know what's new in and outside of the app.
- Make it easy to get in touch. Your users will let you know when they can't find a feature or when they have a suggestion if you let them. Make sure your "contact" button is within reach in the app, or go for a more professional option using a 3rd party service. These are the most popular communications SDKs right now.
2. They Can't Use the App to Do What They Need
Users need your app to work. It's important for all apps, but even more so for apps that charge a subscription. That's why it's important that you actively work to prevent bugs and also proactively find and eliminate existing ones.
- Read your reviews and fix what users are complaining about. App reviews are great for feature suggestions but also bug reports. Although it's annoying that they do, some users find it easier to report bugs through reviews. If you haven't already, make sure you set up a review alert for bugs so you'll know about them right away.
- Use a performance monitoring service. Be proactive and monitor bugs and crashes as they happen and before they turn into negative reviews. These are the most popular performance monitoring SDKs right now.
- Make it easy to get in touch. Just like the tip above, giving your users a way to let you know about bugs and crashes gives you a much better chance of keeping them from churning.
3. They Forgot About It
Some users subscribe for a specific task, use the app once, and forget about it. Then, a few billing cycles later realize they're still subscribed and unsubscribe. Keeping these users from churning requires showing them the ongoing value of the app.
Remind users to take actions in the app. Get users to actively engage with the app by sending them a push notification or via Siri shortcuts for actions that would help them get more value out of the app.
ReCaf, a caffeine tracker, learns when a user tracks caffeine and then uses Siri shortcuts to make it easier to track at just the right time. A great convenience, but also a good way to keep the user engaged.
Here are the most popular engagement SDKs right now.
Make a big deal of new things. As you continue to improve the app and add new content make sure to let your users know what's new with in-app messaging, push notifications, or by email. They may need more from the app but just don't know that it can do what they want.
4. The Price is No Longer Right
Price plays an important role in a user's decision to continue paying for a subscription. Just like the tip above, you as the developer of a subscription app need to constantly remind users of the value of the app.
- Get them to use more of the app so they recognize its value. The more users engage with your app the higher their perceived value of it will be and the lower the chances they'll churn. Help them use more of the app by offering tips, tutorials, and guides in the app and also by proactively sharing those with them via email.
- Make a big deal of new things. Keep sharing product improvements with users to reinforce its value. Ultimately, users set a price in their heads based on what they perceive the value of the app is.
- Experiment with different feature bundles and prices. One price rarely fits all, and your first set of price tiers may not be the most ideal. Take the time to experiment with different options, changing both the actual price and how you bundle features.
5. They Just Don't Need It Anymore
Sometimes users churn because they no longer need what the app offers. That's something you should expect. But just because they no longer need it now doesn't mean they won't in the future.
That's why a canceled subscription shouldn't be a goodbye. Here are a few ways to do that:
- Make it possible to follow up in the future. Make sure you have a way to communicate with your users after they churn, and not just via in-app messaging in case they delete the app. Collecting emails is a great way to do that.
- Email them about new things. Let churned users know when you release new features. You never know which new features will get them excited enough to upgrade again.
Email is (Still) King
You probably noticed we talk a lot about email in this guide. That's because email is a great channel to reach your users in a way that isn't too intrusive. Getting email right isn't easy, but as long as you use common sense (don't send too many emails and make sure what you send is relevant) and best practices we guarantee you'll see positive results.
Monitoring Your Subscriptions Business
Fighting churn may feel daunting at first, but so did getting your first app to compile, right? Monitoring how your subscriptions perform is the first step towards improving your churn and also your bottom line.
Whether you have a dedicated team that optimizes your subscriptions or you're a solo dev with an hour to dedicate to optimizing every month, the key to seeing improvements is to do as much as you can.
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