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.
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 →
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.
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.
Track your active subscriptions, MRR, churn, and more in one dashboard
Here are the most common reasons subscribers churn, and what you can do to prevent that from happening:
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:
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.
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.
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.
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:
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.
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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