Reducing existing subscriber churn is as important as, if not more than, on-boarding new customers. Each new customer a business acquires comes at a cost, and generally it’s much cheaper for businesses to keep their existing customers than to onboard new ones. To acquire new customers, businesses need to pour time and financial resources into marketing, which can be both costly and time-consuming. On top of that, the success rate for marketing strategies such as paid digital ads, email blasts, and more varies and there is no assurance that marketing dollars will lead to customers. With that said, there should be greater focus put towards holding onto existing customers as the longer the customer stays on, the greater the business’s return on investment.

Voluntary vs. Involuntary Cancellations

There are two main types of customer churn: 1) voluntary cancellations, and 2) involuntary cancellations.

Voluntary cancellations occur when a customer actively decides to cancel their account for any number of reasons. These reasons may range from the customer being unhappy with the product/service offered, to not seeing the value in the product/service anymore, to realizing that they had stopped using the service altogether, and more. With voluntary cancellations, there are more ways to prevent customers from going through with their cancellations. For example, businesses could offer them an extended free trial, give them more time to test out the product/service, and so on.

Involuntary cancellations primarily take place when there are issues processing a customer’s payment method, either in the form of a hard or a soft decline. Hard declines occur when a customer cancels their credit card or closes their bank account and has no alternate payment method on file. Soft declines occur when the customer’s account is still open and available, but there is no room to buy on the account (e.g. customer has reached their credit limit or has insufficient funds). When involuntary cancellations happen, the only thing that businesses can do is reach out to the customer and ask for an alternate payment method. However, there is no guarantee that the customer will agree to provide a new payment method or respond to the message at all.

Mistakes Businesses Make That Contribute to Churn

Voluntary cancellations

With voluntary cancellations, the customer has initiated the request to cancel. One major mistake businesses make is not asking the customer why they’re unhappy with the product/service. To gather this information, businesses can take customers through a ‘save flow’, where the business identifies the reasons wanting to cancel in a quick and concise manner and attempts to retain the customer. ‘Save flows’ give businesses one last chance to retain the customer. If the customer still decides to cancel, the ‘save flow’ then serves as free user insights for the business. The business can then use this information to improve their product/service and avoid making the same mistakes in the future.

For example, a customer might cancel a subscription because they find the service too difficult to use. Taking the customer through a ‘save flow’ and gaining this information would help the business understand the area(s) where they’re lacking and then fix the issue(s) before more customers churn for the same reason. In this example, the business would want to re-examine the usability of their product and figure out the specific parts of the product that may have caused a negative user experience.

Another reason for why a customer might voluntarily churn is if they feel like they aren’t using the service enough. In this situation, implementing a ‘save flow’ would allow the business to work with the customer and figure out a course of action, such as offering them a lower tier, to potentially retain the customer in some capacity.

Businesses also need to be aware of how their charges are appearing on customers’ billing statements. When there is a disconnect between the business’s product/service and what is showing up on billing statements, customers may unintentionally dispute the charge due to not knowing where it came from. For that reason, it is important to give customers as much information as possible by including memorable billing descriptors that represent the product/service accurately. Additionally, there are new products in the market which provide enhanced payment details to consumers, thereby reducing the risk of a charge dispute.

Involuntary cancellations

One of the main mistakes businesses make that leads to involuntary cancellations is having no strategy in place to recover the customer after processing a hard decline. The strategy that businesses should have in place doesn’t have to be complex – in fact, it can be as simple as reaching out to the customer and asking them to update their payment method. However, neglecting to communicate with the customer at all means that the business closes the door to any potential for retaining the customer.

Another common mistake businesses make that leads to involuntary cancellations is treating soft declines in the same way that they treat hard declines. These days, credit card issuers are unlikely to include detailed reasons as to why a payment method was declined. This is the common “Do Not Honor” response code. In the past, they more frequently responded with more informative codes such as insufficient funds, credit floor reached, etc. This decrease in descriptive language has made it more difficult for businesses to distinguish between which transactions they should retry after an initial decline and which ones they should avoid retrying. Because of this, some businesses now have systems that are programmed to treat soft declines and hard declines in the same way. However, viewing soft declines and hard declines the same way means that the business may end up churning the customer unnecessarily if the customer was only unable to pay for the subscription due to an isolated event.

Tips for Reducing Subscriber Churn

Voluntary cancellations

Some of the mistakes mentioned earlier, including businesses not implementing a save flow during the cancellation process and using unclear billing statement descriptors, are things that could reduce subscriber churn if fixed.

On top of fixing those mistakes, businesses can reduce subscriber churn by having proactive communication, especially around how the customer is using the product. Proactive communication places customers at the center of the business and ensures that they are continuously engaged in the product/service. Proactive communication helps businesses tailor both the product and communication cadence to each individual customer.

One example of a business that uses proactive communication is Netflix. Netflix proactively turns off all user accounts that haven’t been used in the last 9+ months. This gives customers the impression that Netflix is more concerned with the value members get out of using the service, rather than with how much money they can make off of the customer. This proactiveness helps Netflix build more trusting business-to-consumer relationships and ultimately reduce subscriber churn.

On top of monitoring customer usage, businesses can act proactively with customers by pointing them to different features of the product that they haven’t used yet, giving them the flexibility to adjust their shipping cadences or pause their subscriptions, and understanding their communication preferences.

Businesses can gain a great deal of insight into how they should communicate with customers by figuring out the demographics of their customers. This can sometimes be done by simply looking at card type indicators gleaned from their payment methods. Understanding customer demographics is important because factors such as age can be very telling in regards to communication styles. For example, younger generations tend to prefer less communication while older generations tend to prefer more frequent and detailed communication. To understand how other areas of customer demographics affect communication styles, businesses can A/B test different cadences of communication. A/B testing allows businesses to pay special attention to different segments of customers that respond more positively or negatively to communication and tailor future communication around those findings.

One caveat of proactive communication is that businesses should always exercise proactiveness in the context of the product/service that they offer. Certain types of products, such as insurance, are not things that customers regularly use. Proactively reaching out to customers and reminding them that they’re paying for it may drive increased amounts of churn, so it’s important that businesses conduct tests on communication cadences and copy to figure out the best way to approach their customers.

Overall, businesses need to put the time and resources into understanding why customers decided to subscribe to their product/service in the first place. After they figure out the ‘why’, businesses have to begin executing on the ‘what’ and the ‘how’ to ensure that their customers continue having a reason to remain subscribed.

Involuntary cancellations

Businesses can adjust things on both the front-end and the back-end to help reduce involuntary subscriber churn. On the front-end, businesses can alter their subscription flow and ask customers for alternate payment methods during the enrollment process. However, businesses need to be cautious about doing this because it could add another layer of friction to the subscription sign-up flow. To offset this potential friction, businesses could either make the secondary payment method optional or accept payment from an online payment system such as PayPal. Businesses should also be cognizant of timing and reach out to the customer immediately after the payment method fails.

On the back-end, businesses can build out a process for when and how to recycle transactions. If they can understand the type of card on file (e.g. credit, debit, pre-paid, etc.) and the types of codes being recycled, they can determine whether they should keep trying the customer’s card after they initially receive a decline. With credit cards, customers are typically not even aware if businesses repeatedly retry their card. With debit cards and ACH accounts, there may be overdraft fees that apply, so retrying these types of payment methods and triggering an overdraft fee could result in very frustrated customers. If businesses want to take this risk, they should try debit cards on the 1st and 15th of each month as people typically get paid on these days.

How Rebar Helps Clients Reduce Churn


Chargebacks are a common problem for subscription businesses. They occur when a customer disputes a charge and has the money returned to their card, which may happen for a variety of reasons.

Operationally, the transaction could be presented to the network incorrectly which would cause the transaction to post and later be returned to the customer due to issues such as being found fraudulent. There could also be an issue in the upstream process (e.g. the billing statement doesn’t match the product/service sold), where customers either dispute the charge due to lack of clarity, or contact the business to figure out the source of the charge. Either way, the disputes, chargebacks, and increased customer service load cause unnecessary strain on the business’ time and resources.

Rebar helps clients get to the root cause of these chargebacks by ensuring alignment between products and billing processes, paying attention to authorization rates, chargeback rates, and more.

Decline codes

Receiving the occasional decline code in customer payment is normal and should be expected with subscription billing. However, an abnormally big spike in any type of code could be an indicator of some sort of operational problem in the business. For example, Costco switched their rewards membership card from an American Express card to a Visa card program. During this process, many cards were switched out, which meant that any recurring biller with a large number of Costco cards in their portfolio started seeing a particularly high number of declines.

When these spikes in activity happen, businesses need to recognize that something is happening in the market that they have to get in front of. Rebar stays up-to-date on these trends by participating in trade organizations and by being plugged into the subscription community. We help clients find these trends in their decline codes, figure out how to prevent them from being big issues, and solve for them when they do occur.

Customer communication regarding program changes

Subscription programs are often bundles of multiple benefits. For example, a subscription could give the customer access to both discount benefits and insurance benefits offered by different carriers. Occasionally, the carrier for specific benefits may change, or the benefit may be swapped out altogether. In these situations, businesses need to be sensitive about when and how they communicate these changes to their customers in order to avoid increased voluntary cancellations.

Rebar helps clients communicate these changes in a way that re-engages their customers by tailoring communication in a way that reminds customers of what the product can do for them, how to use the product, and why it’s beneficial to have the product.

Ultimately, businesses save on customer acquisition costs by putting time and resources into keeping existing customers. Following these tips for decreasing churn and being cognizant of common mistakes that lead to both voluntary and involuntary cancellations will help businesses reduce unnecessary churn and expenses.

For more information on subscription billing platforms and how Rebar can help you reduce churn, contact us at [email protected]