How to Avoid the Most Common Subscription Business Struggles

April 10, 2019 · 6 min read

You run a subscription business for several reasons — not least is the advantage of having predictable, recurring revenue. And you’re not the only one. Other reasons why subscription businesses are booming include:

  • Subscription businesses can easily diversify their prices and products to match customer needs (by changing payment plans, using add-ons for specific memberships, etc.)
  • Regular payments can promote engaged users ( read more about that here )
  • Subscriptions can be an easier “yes” for customers, since they don’t feel like a major commitment — there’s no large up-front investment and customers can cancel anytime

It isn’t all rainbows and unicorns in the realm of subscriptions, however. Much like any business model, subscriptions have their challenges, too. Here are five of the most common subscription business struggles we see — and how to overcome them:

Consistently delivering value: Subscription fatigue is real

“The problem is that some brands have a relatively repetitive type of product,” says Kit Yarrow, a consumer psychologist. Additionally, a lot of businesses don’t make a big enough effort to stay up-to-date and relevant.

If you want your customers to stay subscribed, your offering needs to be useful and interesting from the jump — and remain that way over time. If it’s software, for example, it needs to be consistently updated with changes that add value. We all know someone who refuses to switch to a subscription service or update their software even if it means using an old, unsupported version, simply because the value of the updates don’t outweigh the subscription cost. Don’t let your customer be that person.

How to fix it:

  • Craft a customer onboarding sequence that showcases your product’s value from the get-go, and shows users how to get the most from it.
  • Stay fresh and relevant. Keep an eye on industry news and trends and a finger on the pulse of what customers want. And follow through by taking action on what you notice.
  • Repeatedly demonstrate and add to your product’s value. (Customer-specific content is a great way to do this, outside of improvements on the product itself.)

Security: PCI Compliance is just the beginning

A subscription business is based on an ongoing customer relationship, and that requires trust. Your customers need to know that their data is safe.

The Payment Card Industry Data Security Standard (or PCI DSS, for short) is a set of security protocols that are necessary if your subscription business accepts online payments. In other words, if you’re selling online, you have to be PCI compliant — but that’s just the bare minimum. You should perform regular security audits and other maintenance to make sure that your site is running as smoothly (and securely) as possible.

How to fix:

Fraud protection: Security goes both ways

Fraud — whether friendly or not — can put a serious dent in your business. Chargebacks are typically classified into two distinct types: friendly fraud and criminal fraud. Friendly fraud is usually just buyer’s remorse or forgetfulness. The key is that it’s not organized, and usually not intended maliciously. A customer simply wants their money back, and they’ve taken measures with their bank to get it.

Criminal fraud, of course, is the exact opposite. Someone wants to get something for free, and they’re pursuing it in very creative, underhanded ways. They might be an affiliate sending transactions to collect a referral fee, then reversing transactions. They could even be an underhanded competitor trying to drive up your chargebacks, decrease your margins, and cut into your cash flow. Either way, it’s not something you want to deal with.

How to fix:

Want to learn more about how to reduce your chargebacks? Click here to download our free guide.

Involuntary churn: Ignoring this can destroy your subscription business

Even the most loyal brand evangelists can forget to update their credit card information. That, in turn, leads to a lapsed subscription due to expired or incorrect card information. This is also known as involuntary churn, and since it happens about 20-40% of the time, it can have a significant impact on your business.

If credit card information isn’t updated, or some other network error occurs, the service/product stops working. The worst case scenario is that you’ll lose that revenue if the customer jumps ship after experiencing a credit card hiccup.

How to fix:

  • Use a subscription billing tool that has account updater features , so that customer payment information is automatically updated before their card expires.
  • Set up automatic reminders for customers to update their information when their card is expiring soon (there’s a quick tutorial at the end of this post ).
  • Have fail-safes in place for if/when steps one and two don’t work and the customer does churn. For example, a follow-up email sequence prompting them to update their payment information.

Payment methods: Don’t just accept your local currency

If your product or service is a global one, and you’re only accepting payments in one currency, you are losing potential customers. Not to mention, as blockchain and cryptocurrency like Bitcoin become more and more popular, you may encounter people who want to use Bitcoin to cover their subscription.

How to fix:

  • Work with subscription billing software that lets you charge in more than one currency .
  • Make sure that your marketing
  • Keep in mind that, as a subscription-based business, there are some disadvantages to accepting bitcoin as payment, including costly setup and notifications for any billing change that occurs.

Subscription businesses face the same challenges other businesses do — as well as these unique ones. But with the right strategies, you can stay ahead of any problems, keep customers happy, and see your revenue grow year after year.

Speaking of strategies to build a successful subscription business, our Retry Strategy guide walks you through another one. Download it today to get simple steps you can take to increase your LTV:

Retry Strategy

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