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Is Passive Churn Crushing Your Profitability?

by | Jun 4, 2020

#retaincustomers

Can you retain customers despite this subscription business menace?   

There are only three ways a WISP or any business can grow — activate new subscribers, retain customers and get them to spend more each month. Sure, adding new subscribers builds your customer base, but the real financial magic happens when your customers stick around.

It’s about the recurring revenue, but there’s the opportunity to increase the amount they spend as you add higher-value packages and new services. A tiny increase in retention, just 5%, can pay off with 25% to 95% more profit[1]. 

Now, that’s incredible upside potential. It makes sense to establish a retention strategy. 

Track the Churn Rate

Start with your churn rate. Calculate your annual churn with these two numbers:

  • The number of active customers at the start of the year
  • The number of the original customers that remain at the close of the year

Let’s say you have 500 subscribers at the beginning of 2019. By the end of 2019, 460 of the original customers remain. Divide 460 by 500 and you have 92% — that’s your retention rate; your churn rate is 8%. 

The actual churn rate come as a surprise if you haven’t been tracking that metric.

If you noticed a sharp drop in subscribers, it’s good to pinpoint a cause. A key employee may have left your organization and caused service gaps, or maybe equipment failure caused a long service interruption in a sector.  

Failed and declined payments can also make it difficult to retain customers. A percentage of people who are suspended don’t come back.This type of churn is dangerous if there is no plan to stop it. But, you can’t allow subscribers to have free service, either. There is an easy way to manage passive churn. 

What is Passive Churn?

Passive, or involuntary churn[2] is when subscribers leave a subscription service without actively choosing to leave. 

Payment failures are a key reason subscribers passively leave. An expired card or a card that was reported lost or stolen will cause a service interruption. After the interruption, some subscribers won’t return. 

And, some choose to leave later, even after they’ve given a replacement card or made updates to their card data. The responsibility is on the customer to contact vendors about a card change. However, the interruption in service still impacts how the subscriber views your WISP.

Stop Passive Churn 

In today’s digital, “I want it now” age, subscribers expect perfect service. When they don’t receive it, even when they’re at fault, some customers blame you.  

It’s an awkward conversation to ask a subscriber for a new card number or expiration date. The tension results in residual damage that can surface later and cause the customer to bolt the next time a competitor offers a cheap rate. 

Plus, the return on investment from collection calls is small — it’s a high investment of your time with a low impact on your long-term profitability.

Instead of going through the anxiety of dealing with irritated subscribers, why not use a tool that corrects the expiration date or replacement cards?  

#AccountUpdater

IPpay’s Account Updater can halt passive churn.

Keep Subscribers & Revenue Uninterrupted with Account Updater

IPpay’s Account Updater updates customers’ credit cards in your database to keep recurring payments flowing. The system intercepts cards that will fail due to updates in expiration dates and card numbers and corrects them before the automation systems suspend subscribers.  

Account Updater gets the latest card information from the issuing bank and corrects the data so there is no revenue interruption or additional processing costs.

IPpay, a payment processor since 1995, has a laser-focus on the success of the WISP industry and understands specific challenges providers face. That’s why IPpay is a trusted partner of Visp.net

Why not make your life easier, reduce passive churn to retain customers with Account Updater? Learn more by calling IPpay at 561.469.0689. 

  1. Reichheldt, F., Shefter, P.; The Economics of e-Loyalty, Feb. 2000, Harvard Business Review, online: https://hbswk.hbs.edu/archive/the-economics-of-e-loyalty
  2. Forrester Research; The Art and Science of Reducing Involuntary Churn; 2017; online: https://www.digitalriver.com/wp-content/uploads/Forrester-Research-Report-The-Art-And-Science-of-Reducing-Involuntary-Subscriber-Churn.pdf

Thank you, John Schnobrich and Austin Distal for providing the images in this post. View more of their work at unsplash.com

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