When you look around, it’s not hard to notice the rapid surge of membership businesses. Even giants like Apple and Amazon are going all in with the recurring model.
The biggest reason why is this: getting a customer to buy from you again is a whole lot easier than getting someone to buy from you for the first time.
That’s true for any business, but the membership model, in particular, is designed to flourish in that reality.
When you are able to offer something that provides people ongoing value, growing a community of loyal members is one of the most rewarding and most profitable business models out there.
However, the ongoing customer relationship in a membership business can demand a lot from you. It requires constant attention, nurturing, and always making sure that the customer is happy and thriving.
Otherwise, “breakups” happen, and for some businesses they happen far too often.
The burden is that it’s difficult to predict or understand why customers are canceling, and (just like in a relationship) once they break things off, it’s too late to turn things around.
From here on out, I’m going to walk you through a process that will help you stay attentive to your members’ needs. We’ll also look at how to automate that process in order to keep your time freed up to work on your business.
Sometimes measuring churn rate is not enough
I’m not going to spend much time on the merits of measuring churn rate in a membership, or recurring revenue, business. There are literally thousands of articles that already do a great job covering that. In fact, here is one of my favorite references on the subject.
Churn is indeed one of the most important metrics a membership business can measure. No matter how spectacular your marketing is or how many people you convert over to customers, a high churn rate will prevent you from being able to grow past a certain point.
The problem with churn is that it’s a lagging indicator.
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Take a past client of ours as an example. This membership site launched and within the first three months had settled in at a churn rate of around 8%.
At first, this wasn’t too painful for them. They had around 500 members at this point and were losing 40 people per month at that rate. They were averaging about 250 new members per month, so they were still growing just fine.
By their first anniversary, they had grown to 2500 members and despite their best efforts, were still hovering around a 7–8% churn rate.
That is where they hit a plateau.
At 500 members, 8% wasn’t a huge deal. At 2500 members, they were now bleeding 200 people per month! For a company their size, that is a lot of people to have to replace every single month.
They were now pouring in gobs of money and resources into marketing just to keep their head above water.
Can you see why this is such an important problem to solve?
Here’s my biggest issue with churn, as Jonah Lopin, former VP of services for HubSpot (SaaS company), puts it:
“The problem with churn is, it’s a lagging indicator. By the time you see an increase in your churn rate, it is six or eight months after the point in time when you actually failed the customer. If churn is your only measure of customer happiness, then you’re always playing catch-up.”
Just like in a dating relationship, what if you were better at recognizing those signs that pointed to trouble? If you were more attuned to what your customers are experiencing, you would have a much better chance at not only keeping them around longer, but also turning them into a promoter of your product.
That’s what I’ve set out to teach you with this article. By the end, you will have a simple, DIY system for measuring customer happiness and automating how you reach out to your members.
How, exactly, does one measure customer happiness?
Stripped down, customer happiness is simply how satisfied a member is with using your product.
But it has to be better defined than that, because people still cancel even though a product is enjoyable or helpful for them. Here are some additional ways to define customer happiness:
- Are they experiencing the most important features of your site that will make it more valuable to them? In particular, are they using the sticky features that will make your product more a part of their routine?
- Are they active and engaged on a regular basis?
- If your product has a teaching component to it, are they steadily improving and making progress?
- Are they participating in the community? How enthusiastic are they to be a part of that group?
One of the clearest indicators of an unsatisfied customer is a lack of activity. Apathy creates churn.
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The service team at HubSpot were the ones who championed the concept of a Customer Happiness Index or “CHI”. They knew that if they could score a customer based on how often they are using certain features of their platform, they could predict who was at risk to cancel.
CHI also helped them spotlight happy customers who were candidates to promote it to their colleagues. It even provided insight on whether new features they were testing were being adopted well or not.
So how can you – a small business with limited resources – use the concept of a Customer Happiness Index to reduce churn?
Start by determining what actions a customer can take that will make them more likely to be successful and active on your site.
Here are some examples to consider:
- Completes a video course
- Posts a question in the discussion forums
- Logs in at least once every 15 days
- Attends monthly members-only webinar/hangout
Once you have come up with those indicators, you now have a list of areas to focus your efforts and decision making. If participation in your site’s community results in a member staying around longer, then you know exactly where to focus your resources when you need to reign in your churn rate.
Intercom: The secret weapon for creating happy customers (and three strategies to start using it today)
One of the best tools that we’ve used for tracking (and reacting to) member behavior is Intercom. (Plus, the Fizzle team uses Intercom to engage with Fizzlers as well.
By pulling your member data into their software, they make it simple for you to track important events such as when a member last logged in, when they first signed up for their account, and even when they’ve used a particular feature on your site. Not only that, but you can then trigger automated communication (either emails or on-site messages) based on those events.
So if someone hasn’t logged in for over 30 days, you can automatically send them a “checking-in” email.
Once you create an account, Intercom will walk you through how to get your members imported properly.
Rather than get into the weeds on every possible thing you can do with Intercom, we are going to focus solely on the basic event automation you can do around raising customer happiness.
Don’t wait until the customer is already dissatisfied or disengaged before you reach out
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If you aren’t able to get set up yet, don’t worry. Read on. These same principles can also be applied using autoresponders with your email marketing software (e.g MailChimp, Aweber, Convertkit, etc.), and I’ll still be covering some strategies that are important for you to become familiar with.
Strategy #1: A simple welcome message
A customer’s satisfaction with your product starts with actually knowing how to use it. If they struggle to even get started and aren’t confident about how to participate, their chances of sticking around are low.
Let’s begin by creating a simple message that welcomes a new user and points them to an important feature. We’ll schedule it to send 24 hours after someone signs up.
Here’s an example of what the welcome message could say:
Hi {First name},
Thank you so much for becoming a premium member.
It still blows my mind when someone new signs up to be a part of this community. To be able to help you and so many other people get better at what you are passionate about is a thrill that is tough to put into words.
I just wanted to very quickly tell you about the most important feature of your subscription: our discussion community. We’ve noticed a trend: people who participate in our forums have a much higher success rate in mastering the material that we teach. I want to make sure you have every opportunity to excel with your membership here.
So take 2 minutes to head over to the forums and get familiar with how to use them. Go ahead and introduce yourself. Our members love welcoming new people to the site!
Take care,
Michael
Strategy #2: A Follow up message
As I said before, you don’t want to wait until the customer is already dissatisfied or disengaged before you reach out to them. Make sure to check in with your members after they have had a chance to sit with the product for a few weeks and see how things are going.
For this message, we’ll use the same format as our first scenario, only this time we will set the post-sign up time to ‘30 days’.
Hi {First name},
You’ve been around {site} for a month now, so I wanted to ask you: what’s one thing you’d change about {site}? I know it’s not perfect, but I don’t have the same perspective as you, so I’d love to hear what you’d do differently. Any thoughts are welcomed!
Thank you for your time and help with this.
Michael
Any time you’re asking for a response in an email, be concise and to the point – no long paragraphs, no rambling. Ask them only for one thing. Do not give them multiple questions to answer or ask them to do several things for you. That will severely decrease your chance of a response.
Strategy #3: A “rescue the customer” message
One of the clearest indicators of customer dissatisfaction is inactivity. If a subscriber is going weeks or months without returning to the site, they are certainly not experiencing enough ongoing value to justify the membership.
However, not all cases like this are as hopeless as you might assume. The customer is not always dissatisfied with your product. Life happens. They get busy, and as the old saying goes – “out of sight, out of mind.”
Event-tracking software like Intercom comes in handy for this. Let’s set up a new automation rule for anyone that was ‘last seen more than 30 days ago.’
Here is an example of what that message should look like:
Hi {First name},
I hope everything is well with you. A lot has been going on since the last time you came by {site}. I would love a chance to talk with you one-on-one about how things are progressing for you and to see how I can help make your subscription with {site} work better for you.
If you’re up for that, just reply here with a yes and I’ll get something set up with you.
Take care,
Michael
Again, be concise and to the point. You should also feel total freedom to be creative with this exchange. Consider other ways to get them excited about using their subscription again – whether that be new content, scheduled community events like live webinars or hangouts, or simply reminding them why they became a member.
Six Things to Remember to Keep Your Customers Happy and Raise the Lifetime Value of a Customer
Given that we went over some mildly technical and procedural steps for how to engage your customers with specific messages, I don’t want you to lose sight of the broader strategies here.
Here are six quick takeaways for you on keeping your customers happy:
- Churn is one of the most important metrics that a membership business can measure. It sets the bar for how much your company can grow.
- Churn is a lagging indicator. The day someone cancels on you is sometimes as long as 6–8 months past when you let them down.
- A system to measure and respond to customer happiness helps you to catch customer issues before it’s too late.
- Know the parts of your site (and the actions customers take) that make customers more successful and more connected.
- Onboarding your customers is a vital piece of the puzzle to lower your churn rate. Don’t assume that new members will figure out how to use their subscription like you intended.
- Check in and ask for feedback once customers have had a couple of weeks to experience the product. This gives you an opportunity to resolve issues with the customer before they decide to check out.
What about your business?
If you run a membership business, I’d love to know one thing from you: what challenges do you face in your own business to manage customer happiness? Post your answer in the comments!
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