The Ultimate Guide To Customer Retention For Subscription Products

The Ultimate Guide To Customer Retention For Subscription Products


The subscription economy has seen a 435% growth in the last nine years

But closely linked to this rise in subscription-based businesses is the competition for customer retention. Winning new customers cannot guarantee growth when you lose more subscribers simultaneously

Planning a roadmap for customer retention in subscription products is essential for scaling your profits

While B2B subscriptions were all the uproar until two years back, B2C and D2C businesses have now fuelled the uptick in India’s subscription economy. From Furlenco and Nykaa to Sleepy Owl and Flyrobe — Indian brands are increasingly tapping into the power of subscriptions today.

But closely linked to this rise in subscription-based businesses is the competition for customer retention. Winning new customers cannot guarantee growth when you lose more subscribers simultaneously. 

With the flexibility of short-term subscription plans and the option to cancel anytime, managing retention in subscription products is more challenging than ever.

So, what are your options to build a robust model for retention? Learn all about the best practices to create a customer retention strategy for your subscription product(s) in this extensive guide, and get ready to maximise your profits. 

Why Is Customer Retention Important In The Case Of Subscription Products?

Simply put, customer retention is about minimising churn — where you lose subscribers to a competitor and keeping your existing customers satisfied with your product. It’s about turning a one-time subscriber into a repeat customer. 

Your retention rate plays a key role in enhancing your ROI and multiplying your revenue. 

Here are the five key benefits of customer retention for subscription-based businesses:


It’s no surprise that acquiring a new customer is 5 to 25 times more expensive than retaining an existing one. Marketing your product is a resource-intensive process that can take a long time and a lot of money to materialise into new customers. 

So, if you focus on satisfying your current set of subscribers and aim to deliver seamless user experiences, you can save your expenses on customer acquisition. 

Not only will your retained customers save your acquisition costs, but they are also more likely to upgrade to more expensive versions or buy another subscription. That’s because you can sell something to an existing customer at a 60-70% success rate. 

Better ROI 

Winning your subscribers’ loyalty can remarkably increase your ROI. Just a 5% increase in your retention rate can skyrocket your revenue by 25-95%. These numbers just indicate the huge difference you can achieve even with the slightest improvement in your retention capabilities. 

Besides, retaining old customers increases your chances of selling add-on features or services, since retained customers tend to buy more than new ones. 

More Referrals And Word-Of-Mouth Marketing

Picture this: You’ve successfully onboarded a new user, clarified all their concerns promptly, and sent them tips and tricks to best use your product. The user could use the product to solve their problems and happily tweeted about this experience. 

This tweet creates social proof for your business. It will create buzz around your product and potentially bring new subscribers.  

So, while you work hard on enhancing your customer experience to retain them for the long term, you’re indirectly laying the base for referral marketing. Your happy customers will spread the word about you, and people are 4x more likely to buy when a friend recommends a brand. 

But perhaps the most significant benefit of acquiring subscribers through referrals is the domino effect it can create for customer retention. The users you gain via referrals will have a 37% higher retention rate than usual customers. 

Increased Customer Lifetime Value (CLV)

Customer lifetime value defines the expected amount that a customer would likely spend throughout their lifetime. The higher your LTV figures, the more profits you can make. 

Retaining your subscribers is one of the easiest ways to increase your CLV numbers. Your retention strategy will help enhance your customer satisfaction levels — which will subsequently increase your average customer lifespan and CLV figures. 

A loyal customer can be worth up to 10x of their initial purchase value.

More Sales From Existing Customers

It’s no surprise that customer retention can also drive more sales on top of improving your ROI, acquiring more referrals, and increasing CLV. If your users are happy with the overall experience, they’ll likely buy more from you — whether it’s more subscriptions or add-on features. 

An existing customer knows your business well. So, they would prefer purchasing more from you instead of spending extra time finding other products for additional needs. 

How To Keep Customers Engaged Throughout The Existing Subscription Cycle 

You’re marketing your product in full force and selling more subscriptions than ever. But your subscribers end up cancelling within a week or ten days. Does this sound familiar? 

There are many reasons to explain this high drop-off rate — complicated onboarding, tricky integration process, or subpar customer service. If your churn rate is running amok, a strong customer retention strategy is the only way to save your product. 

Here are five essential practices to engage with your users and boost your retention rate:

Informing Customers About Changes In Pricing

The biggest culprit behind high customer churn is your pricing. Most subscription-based companies spend less than 10 hours/year on their pricing—which naturally creates more problems than it solves. 

While your price points will be low when your product is new to the market, you have to increase your pricing as you gradually expand your user base. In fact, your subscription’s price is one of the most crucial determinants of your business performance. Even a 1% increase in your pricing can improve profits by 11%!

So, while optimising your pricing plans is necessary, increasing it too much can backfire. Before changing your prices, ask yourself these questions:

  • What price point gives away your subscription at a bargain?
  • What price point is the limit to categorising it as expensive?
  • What price point would be expensive but worth the offer?

You can also survey your users to get their input on the matter. Research and strategise in-depth before finalising a price change. 

Once you have changed your pricing, avoid keeping your users in the dark about it. They’d be forced to switch to alternatives and undergo a lot of inconveniences if you change your prices without prior notice. This is a recipe to fuel your churn rate. 

So, promptly inform your customers about a potential or fixed increase in pricing beforehand to help them decide without waiting till the 11th hour. Take a page out of Spotify’s book to communicate pricing increases.

The Ultimate Guide to Customer Retention For Subscription Products

Keeping Track Of Competition Pricing 

Fact: 30% of businesses switch their existing SaaS stack to competitors for fulfilling the exact needs. 

While multiple factors can cause this churn, product pricing is important. If your competitors offer the same features and utility at a lower price, your users will likely pick their subscription over yours. 

So, consistently analysing your competition is a necessary aspect of your retention game plan. 

More importantly, your pricing has to address any disruptive market changes. Like the freemium pricing model spread across the SaaS industry. Keep an eye on your competitors to understand their pricing strategies and iterate yours based on careful consideration. 

Personalisation + Building Different Touchpoints 

Personalisation is the most critical piece of your customer retention puzzle. Designing a personalised user experience means you’re interacting with a single individual, solving their queries, and fulfilling their expectations. 

It can help build trust among your users and win over their loyalty for a long time. 

Knowing your users’ needs is a great starting point for your personalisation efforts. Identify their pain points and business needs i.e. “why are they using your product?” Once you understand exactly what they’re looking for, you can pitch features and solutions specific to their needs. 

So, create more touchpoints for personalising your interactions and enhancing engagement with your users. While chatbots or Facebook messenger are one way to materialise your efforts, you can also send them personalised emails and feature recommendations.

Grammarly’s weekly report is the perfect example of a personalised subscription product. It helps its users understand their tool usage better and moderate their preferences. 

The Ultimate Guide to Customer Retention For Subscription Products

Offering Rewards To Build A Loyalty Program

A loyalty program is another amazing strategy to master customer retention for subscriptions. Most users consider the convenience and value they derive from a product to continue paying for a subscription. 

With a loyalty program, you can double down on these factors and incentivise your existing users to continue their subscriptions. 

Here are some best practices to launch a loyalty program for your subscribers:

  • Offer exclusive benefits: The Amazon Prime subscription offers users the benefit of faster deliveries. So, people who repeatedly shop from Amazon will opt for a Prime subscription for its convenience. Your loyalty program should provide unique perks that are not available to standard users. Identify what gives the maximum comfort to your users and convert it into a benefit.
  • Create a community: The more invested subscribers feel in your brand, the more likely they will subscribe to your product. With an active community of users, you can initiate meaningful discussions and increase the value you offer to your loyalty program members. 
  • Set exciting rewards: Your loyalty program should entice users with coveted rewards that will benefit them in the long run. You can ask them to perform small activities on social media and share referrals to bag their rewards. 

Emirates’ subscription product, Skywards+, allows users to boost the miles they earn through a flight along with discounted tickets—making it convenient and cost-effective to buy from Emirates.

  • Personalise your loyalty program: Create a personalised experience for your subscribers to produce the best results for your loyalty program. This will help deepen your customer relationships, ultimately retaining them for a more extended period.

A loyalty program offers more value and greater convenience to your subscribers, enhancing their motivation to continue with your product. If you don’t, someone else will. 

Include A Downgrade Option

Pricing is perhaps the most crucial reason your users are cancelling their subscriptions. No matter how great your product is, if users can’t afford it — they’ll leave. 

The easiest solution to minimise such cancellations is to offer an option to downgrade. Create different pricing plans based on your customer personas. Choose a cheaper price point for the starter plan to cater to the needs of users who can’t afford the premium version. 

Create a significantly different downgraded option costing a lot less than the standard plans. You can include all the basic features to ensure the product’s utility remains intact. 

This pricing plan, for instance, has three starkly different versions for varied audiences.

The Ultimate Guide to Customer Retention For Subscription Products

Wrapping up

Planning a roadmap for customer retention in subscription products is essential for scaling your profits. Retaining users is a masterstroke to save your costs on acquiring new clients and drive more sales simultaneously. 

So, use this exhaustive guide to create a bulletproof customer retention strategy for your business and soar your customer satisfaction levels. Convert every subscriber into a brand advocate, and you’re all set to conquer your industry. 

Want to learn about building a customer acquisition strategy for your product? Sign up for The Maker’s Summit and learn from the top 1% of product experts worldwide.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

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