Subscription-based business models are more popular than ever. Once reserved for newspapers and magazines, this business model is now used for everything from membership websites to razor blades.
But if there’s one aspect that causes friction for entrepreneurs, it’s membership renewal. Without a healthy renewal rate, the business model collapses.
Importance of Membership Renewals
Customer acquisition is important — particularly for young businesses that are still trying to build up a customer base and clientele. However, customer retention is arguably more important.
Despite the fact that, according to OutboundEngine, acquiring a customer can cost as much as five times more than retaining an existing member, just 18 percent of companies say they focus on retention. This results in wasted spending, lower profitability, and increased overhead.
The data shows that increasing your customer retention rate by just 5 percent can increase profits from 25 percent to 95 percent. And when you consider that the success rate of selling to a customer you already have is 60 percent to 70 percent — compared to just 5 percent to 20 percent of non-customers — it’s clear where the focus should be.
By emphasizing membership renewal over customer acquisition, you can transform your business and turn it into a predictable cash cow.
5 Reasons Members Don’t Renew
In order to increase renewal rates, you first must consider what’s holding you back. Here’s a look at some of the top reasons customers don’t renew — and what you can do to ensure these problems don’t plague your own membership numbers.
1. You Don’t Ask
Can you believe that one of the major reasons people don’t renew subscriptions is that they’re never asked?
If you aren’t regularly broaching the topic of renewal, you’re doing your business a disservice. There are a variety of ways to accomplish this, but effective membership renewal letters could wonders for you.
According to MembershipWorks, crafting high-converting membership renewal letters requires some careful planning and execution. Best practices include:
- Using subject lines with 6 to 10 words.
- Sticking to just 50-125 words in the body of the email.
- Quickly highlighting some of benefits of membership.
- Communicating a sense of urgency.
- Including a simple and direct call-to-action.
If you don’t feel equipped to write a membership renewal letter, it may be worth hiring a talented sales writer to handle it for you. This is one investment that’s almost guaranteed to generate a high ROI.
2. They Don’t Feel Engaged
The product or service you’re providing your members is just one aspect of their membership. It’s important to pay attention to the big picture — i.e. the experience you’re creating.
Many customers don’t renew because they don’t feel engaged. If you feel like there’s a disconnect between you and your customers, it’s probably suppressing renewal rates. Take the time to enhance customer engagement through more compelling content and personalized communication.
3. They Don’t See the ROI
While some members are emotional and experiential, others are far more pragmatic. The folks in this latter group will only renew if they see significant ROI and value.
Never take the fact that your service provides value to members for granted. If your membership rates are dropping, it may be partially due to the fact that you’re failing to communicate these key benefits. Even if it seems obvious, something needs to be said.
4. They Aren’t Aware
Sometimes customers just aren’t aware of what’s going on. They either forget about renewing, or they aren’t aware that they’re no longer active members. Either way, the onus for keeping these members in the fold falls on you.
The best way to prevent unaware members from dropping off is to allow for auto-renewal. This keeps people on board without requiring a bunch of additional administrative effort on your part.
5. They Don’t Need You Any Longer
Sometimes members simply grow out of your service. If, for example, you have a service that delivers baby diapers to parents, they’ll no longer need your service when their children become potty-trained.
While there will always be some drop-off, look for ways to continue adding value to your customers so that they don’t phase out. Using the previous example, you could expand your services to include children’s underwear or potty-training resources.
Implementing a Proactive Renewal Strategy
You can’t be passive about membership renewals. Remember that it’s much easier to convince an existing member to renew than it is to go out and find another one to replace them. By eliminating friction points in the renewal process, you can keep revenues high and simultaneously improve profitability.
