7 Customer Retention Predictions for 2020

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We’ve seen our fair share of shocking headlines recently: tenuous IPOs, the “retailpocalypse” and a fickle market have all combined to reset the way we size up subscription businesses. Recurring revenue models have their pitfalls and 2019 has certainly taught the industry a few lessons.

Next year, retention is set to be a top priority for companies looking to keep customers engaged and driving growth. From niche products to personalization, how companies deliver on and measure the success of their customer experience will separate successful subscription businesses from the next unflattering news story. These seven trends will emerge to shape the way companies delight and retain customers in 2020.

More mainstream brands will embrace the subscription model

We’ve all seen the articles detailing the financial fall of many brick-and-mortar stores. The “retailpocalypse” predicted years ago is coming to fruition as household names like Sears, Toys R Us and Barney’s slowly consider bankruptcy or go up for sale. The shifting retail industry presents an opportunity for traditional companies to fully embrace recurring revenue models. We’ll see big brands like Nike and Ikea continue to experiment and expand innovative subscription offerings. For struggling brick-and-mortar businesses, subscription services could very well be a lifeline. 

Niche products will give way to subscription fatigue

Because the proliferation of subscription offerings are so vast, specialized products and services will need to prove their worth. We’ve reached a point of maximum fragmentation in our subscriptions, so offerings must be far better than they’ve been in the past. Take media and entertainment. Exclusivity is the name of the game for streaming services from Apple and Disney as they go head to head with Netflix and Amazon. Deloitte found that the typical U.S. consumer subscribes to 3 streaming video services. With growing “subscription fatigue,” there isn’t room for more. Rising customer expectations and increased competition means we’ll see consolidation, partnerships and mergers in B2C (clothing, streaming, meal delivery) and B2B companies (project management, martech, ecommerce) alike in 2020.

Customer retention will become the new frontier for marketers 

It’s impossible to ignore the IPO press around WeWork, Blue Apron, Uber, Peloton and others. If 2020’s tech and consumer unicorns have poor unit economics and aren’t turning a profit, they need to prepare to be the next ugly headline. The days of spouting fast, easy growth backed up by vanity metrics are over. Retention will take its place as a top growth strategy for companies with subscription models. Should that have been the case much sooner? Sure. But organizations like Zoom, Datadog and PagerDuty are the new standard for success. These companies each had successful IPOs in 2019 thanks in part to their killer retention metrics. More will follow suit.

Metrics will shift to reflect a retention-first mindset

To deliver on sustainable growth, changes must take place at an organizational level. The teams responsible for acquisition efforts will also be held to those acquired customers’ LTV more so than in years past. Of course, the acquisition-at-all-costs mentality isn’t a problem that originates solely from marketing, but changing the focus of marketing teams to be retention-minded will be a common theme next year. This shift will usher in a new partnership between marketers and product teams as they work together to onboard, activate and collect feedback from customers. A public and shared churn goal will help keep these teams aligned on their retention efforts.

Personalization will mean more than creepy ads and <first name> in an email

Personalization has been a big buzzword this past decade. But it’s time to go well beyond personalized variables delivered en masse. We need to look at interaction with our customers as a 1:1 event. That means taking more of the known factors of customers, segmenting them into groups and personalizing their web and product experiences to the point where it’s an entirely custom journey. This approach is going to be essential for success in the very near future. Salesforce Research found that customers are 2.1x more likely to view personalized offers as important vs. unimportant. And 84% say being treated like a person, not a number, is very important to winning their business. These numbers are only set to rise.

Customers will have even more control and companies must pay attention

Some companies are going to rise to the occasion of changing customer expectations. They’ll personalize more experiences and offer better support. But are they willing to make it easier to cancel? They may not have a choice. California recently enacted legislation on July 1, 2018 that stipulated subscriptions that were entered into online must able be available to cancel online. That means no customer support call queues. It’s a big win for consumers and we may see more legislation like it in other states. So, if you don’t have an easy online cancellation process, 2020 is your year to invest.

Multi-channel retention strategies will wow the customers; predictive engagement will not

Our 2019 State of Customer Retention Survey Report shows that both subscription business leaders are interested in developing predictive models to forecast customer churn. It’s understandable: predictive capabilities are a popular topic of discussion thanks to the increasing desire to leverage AI and machine learning. Let’s say you have a predictive model that shows you what accounts will churn. Not many leaders could confidently explain what happens then. When it comes to retention, most companies don’t have the systems in place to perform outreach at scale based on predictive data. In 2020, predictive models will remain a growth experiment that’s not quite ready for mainstream adoption.

Guy Marion

CEO at Brightback
Guy Marion is Founder and CEO of Brightback, the first automated customer retention software for subscription businesses.

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