Case Study: 3 Behavioral Hacks That Helped a Subscription Service Decrease Its Churn Rate by 50%

A step-by-step guide on how to use behavioral incentives to decrease customer churn.

How do you retain your customers even after they’ve already decided that your product or service is something they could live without?

In this article, you’ll discover:

  • How social media planner Kontentino cut customer churn in half in the spring of 2020,
  • How not to talk about reasons for leaving, but remind the customers all the benefits they’ll lose,
  • Why listening first and persuading second helps change people’s minds,
  • How to shift the selection from a “yes or no” option to one where customers have two options to compare.
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In uncertain times, we tend to count our losses and think about what is and isn’t disposable, which is why the most logical thing for us to do is to cut our monthly expenses. But before we even look into downsizing to a smaller apartment or opting for a cheaper wine (or no wine at all), we initially try to find a way to optimize without having to make such painful sacrifices. 

When going through your expenses, what's the one thing you’d be least likely to miss? Something that stands out on your monthly bill but that you could totally do without? A subscription service, perhaps?

Let’s look at the CEO of a small business, which had been using a handy tool for optimizing its team’s work output. It saved them time, resources, and everybody was happy with it.

But then the COVID-19 crisis struck and a major chunk of their projects got postponed. In response to a situation like this, the CEO experiences a great deal of uncertainty and feels like she has no control over what might happen. 

That’s when she’s more prone to making emotionally charged, impulsive, or even irrational decisions. Research shows that fear narrows our vision, thereby making us more likely to miss the bigger picture. 

So at this point, the CEO may feel that the only way to regain a sense of control (over the company’s expenditures) is to get rid of all unnecessary costs, including their subscription to that very useful tool they had been using... 

Research shows that fear narrows our vision, thereby making us more likely to miss the bigger picture.

Now imagine that you’re a business owner who runs that kind of subscription service. Your service has suddenly fallen into that “disposable” category and people are unsubscribing in droves. After you’ve dodged the natural tendency to panic, you should look for remedies to help counter this. 

When you stop and think about it, dropping all those premium features would come at a price: they’d no longer be able to plan their projects as effortlessly as before nor would they save as much time.

So what would cancelling their subscription really save them? A measly 40 dollars a month, which in the grand scheme of things is next to nothing? It certainly won't make any difference between being in the red and having a surplus. 

And the CEO might have realized this, had she taken the time to deliberate before making such a rash decision, which you might call a knee-jerk response to a sudden change.

The process behind Kontentino´s offer
Source: Kontentino

So how can you make your customers stop and think for a moment? 
Luckily, behavioral economics is just the ticket for when things go south. Between adding friction, redirecting attention, active listening, and even getting customers to convince themselves, none of these strategies relies on the obvious while some might even seem counterintuitive, but they have been proven to work.


A sharp increase in churn

One business that had found itself in a similar situation and approached the behavioral consultancy MINDWORX was Kontentino — a handy SaaS tool that allows agencies and brands to manage their social media more efficiently and facilitate collaboration. But once the global COVID-19 pandemic hit in the spring of 2020, Kontentino really took a beating. The first thing many of its customers did was ask to cancel their subscription.

6 behavioral economic tips to increase customer retention (part 1)
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Make Your Customers Stay: 6 Behavioral Tips to Increase Customer Retention (part 1)
The monthly average churn rate, which used to fluctuate around 2%, shot up to 15% during the first few months of the coronavirus crisis.

Clients both big and small did that for a number of reasons: they either lost the majority of their cash flow, in which case they wanted to cancel their subscription altogether, or they lost some of their projects and therefore wanted to downgrade their plan. 

As a result, the monthly average churn rate, which used to fluctuate around 2%, shot up to 15% during the first few months of the coronavirus crisis. 

The first thing Kontentino did intuitively, even before they approached behavioral practitioners, was to add friction.

What’s friction, you ask? You can think of it as everything along the customer’s journey that requires a bit of effort (reading instructions, filling out a form, clicking a button, etc). As a rule of thumb, you should try to remove as much friction as possible. 

In this article, you can read more about how Netflix handles friction in a surprising and elegant way.

Friction

Everything along the customer’s journey, which requires effort from the customer. As a rule, it should be removed, to elicit a desired behavior or response.

But sometimes friction can also be deliberately increased in order to discourage customers from doing something businesses don’t want them to do. If you ever tried to leave Amazon, for example, you’d know that the cancel my account option is buried so deep into their website that you’d either need to take half a day off from work, have an MIT degree, or have Hercules Poirot at your disposal to be able to find it without getting increasingly frustrated. 

A word of caution, though —  adding unnecessary friction might be what’s known as a dark pattern, which you should steer clear of. But when used with caution and in moderation (we can’t stress that enough), it can be a great tool to make customers pause and rethink their impulsive decision to leave you. You can read about how adding friction at a crucial place in a sales funnel for a newspaper subscription made a huge difference here.

A strategy to fix the problem

In Kontentino’s case, adding friction meant that in order to cancel or change their subscription, customers had to talk to a customer service representative. 

And you may have guessed it — that conversation would end up being crucial

Kontentino suggested a combination of possible incentives while MINDWORX’s job was to suggest a persuasive framing. 

The good news is that the psychological principles these solutions were based on are universal, so regardless of the situation you’re in or the incentives you’re offering, you can use them too. 

So let’s now look at the 3-step strategy Kontentino could use to convince a CEO of a small start-up not to downgrade their monthly plan despite the fact that their business has lost a significant number of clients.

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