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On average, before the pandemic, one out of every four consumers canceled at least one subscription within a six-month period. This number of cancellations is set to increase as the financial consequences from the crisis start to filter through.
A contracting global economy and worries about jobs are set to see consumers focus on their outgoings. Those with subscriptions will be studying their bank statements and reviewing what they can and can’t live without – at least in the short to medium term.
The obvious money worries that consumers have means marketers need to register new customer signals and adapt their engagement and retention strategy to keep subscribers happy, churn down, and drive incremental value.
Understand consumer psychology in a crisis
As the first step before making any changes to reduce customer churn marketers need to understand the different types of consumer psychology and emotions consumers are going through right now.
There are four categories of consumers in a crisis, devised by Professor John Quelch of the University of Miami:
1) The ‘step on the brakes’ audience, which may stop, delay, or cut back on discretionary spending. While usually lower-income buyers, these high-anxiety shoppers can be found across all wealth levels.
2) The ‘pained-but-aware’ group – usually the largest segment – often tighten belts in all areas at the start of a crisis but have a positive long-term outlook. Increasing uncertainty can push them into the ‘step on the brakes’ category.
3) The ‘cosily well-offs’ will continue to buy at almost the same level, with additional selectivity about the timing of purchases. These are mostly wealthy consumers.
4) The ‘live for todays’ are predominantly young and urban. They focus on experiences over material goods. While they are less concerned about saving, they may delay significant purchases.
Customer research is vital
It’s only via research on their customer base that marketers can better realize their anxieties and motivations.
After implementing research on the customer base brands can source those messages which deliver the best results. They also, importantly, have the opportunity to experiment with them to optimize customer engagement.
However, this requires marketers to change their mindset around experimentation. Too often it’s limited to the customer acquisition phase when it should also be used to increase customer retention to improve the customer experience and drive revenue.
Good-better-best pricing is a great model to experiment with during the pandemic. This sees marketers adding or removing product features to create variably priced bundles, targeted at customers of varying economic means and those who value features differently. This model has three benefits, firstly in terms of offensively generating new growth and revenue, secondly in defensively countering moves by competitors, and lastly in drawing on consumers’ psychological drivers.
Research and experimentation at point of cancellation
Today, it’s possible for customers to easily cancel a subscription with a simple swipe on a mobile device. Whereas in the past if they wanted to stop a subscription they often had to contact a call centre where they would speak to a highly trained agent who would attempt to persuade them to remain.
Therefore, an important question for marketers in this digital age is how can they encourage a customer to not leave at the point of cancellation?
The best place to start is to carry out research to understand the motivations and anxieties of customers in wanting to end the relationship. This includes finding out what each customer’s understanding was of their membership features and benefits, and what save tactics could prevent churn. Then use this insight to inform and experiment with powerful personalised value statements and save tactics online, such as special offers. We’ve seen clients reduce customer churn by up to 24%, increasing customer lifetime value, by implementing such research and experimenting based on the findings.
Time spent with the brand is important
During a period of crisis and high anxiety, customers remember more positive memories when asked to recall time spent with a product or service, rather than the money saved.
We have a strong personal relationship with time – more than we do with money – because time is a scarce resource and increasingly meaningful in a time of great uncertainty. Experience with a product or service over time helps nurture feelings of a personal connection with customers.
Marketers must understand the meaning that their brand brings to the lives of their customers in any strategy.
In the time of crisis manage anxiety
These are uncertain times, so it’s no wonder consumers are anxious about their financial outgoings and brands are nervous about the potential of increased customer churn.
The marketplace and consumer behaviour have changed dramatically in just a few short months meaning marketers need to be up to speed on consumer psychology in a crisis. Research has become absolutely critical to truly understand customer anxieties and motivations, along with using the feedback to experiment with customer communications to optimise the customer experience across all touchpoints.
By taking these steps it’s possible for brands to reduce subscription anxiety, and therefore customer churn, as well as maximise customer lifetime value. It will help them to remain profitable and grow during this crisis and once it’s over.