As the economic fallout and uncertainty over jobs continues due to the pandemic, consumers are turning their attention to their outgoings.
Prior to the current crisis, on average one out of every four consumers cancelled at least one subscription within a six-month period. However, this number of cancellations is predicted to increase as the financial consequences from the pandemic start to filter through.
Many of those with subscriptions will be poring over their bank statements and reviewing what they can and can’t live without – at least in the short to medium term.
But it’s not just about monetary worries. Consumer behaviour changes in a time of crisis, for a number of reasons. This means performance marketers need to register changing customer signals, and as a result, adapt their engagement and retention strategy to keep subscribers happy, churn down and drive incremental value.
The good news is that subscription-based companies, operating mainly online, are generally able to quickly alter their messaging to retain customers, and also help drive customer lifetime value.
Consumer psychology during a crisis
To effectively make changes to reduce customer churn performance marketers firstly need to understand the different types of consumer psychology and emotions during this time of uncertainty. This is important when logic and rational decision making by consumers are not in abundance during these periods.
There are four categories of consumers in a crisis, by basic psychological segmentation, which Professor John Quelch of the University of Miami has devised, and marketers should bear in mind:
- The ‘step on the brakes’ audience, which may eliminate, delay or reduce discretionary spending. While usually lower-income buyers, these high-anxiety shoppers can be found across all wealth levels.
- The ‘pained-but-aware’ group have short-term anxiety, so often economise in all areas at the start of a crisis, but have a positive long-term outlook. This is often the largest segment. However, increasing uncertainty can push them into the ‘step on the brakes’ segment.
- The ‘cosily well-offs’ will continue to buy at almost the same level, with additional selectivity about the timing of purchases. These are mostly wealthy consumers.
- The ‘live for todays’ are usually young and urban, with a focus on experiences over material goods. They are less concerned about saving, though they may delay major purchases.
Customer research to understand anxieties
While these psychological segmentations are useful to help understand changing customer behaviour, performance marketers should undertake research on their customer base to better understand their anxieties and motivations during this time of uncertainty. This will enable the delivery of marketing activity that will help manage subscription anxiety, optimise the relationship with their customers and maximise customer lifetime value.
It’s only once research of the customer base has been carried out that businesses can find those messages that deliver the best results, and have the opportunity to experiment with them to optimise engagement. This approach enables brands to deliver a standout customer experience via every touchpoint, on and offline, to really differentiate themselves from the competition.
However, it requires marketers to change their mindset around experimentation. It shouldn’t be limited to the customer acquisition phase, as it often is, but to increase customer retention, by improving the customer experience.
A focus on experimentation purely at the onboarding stage is a recipe for losing more customers than you sign up because the customer experience won’t be optimised.
One such area of experimentation that’s worth considering during the current pandemic is good-better-best pricing. This sees marketers adding or removing product features to create variably priced bundles, targeted at customers of varying economic means, or those who value features differently. It’s an approach that has three benefits, firstly in terms of offensively generating new growth and revenue, secondly in defensively countering moves by competitors, and lastly in drawing on consumers’ psychological drivers.
Research and experimentation at point of cancellation
Historically customers would need to contact a call centre to cancel a subscription, where they would speak to a highly trained call agent who would attempt to persuade them to remain a customer. In the online world, this has changed, with cancellation possible with a simple swipe on a mobile device.
This poses a new and large retention issue. If you don’t have a call handler speaking to the customer at the point of cancellation how can you try and save them?
The solution is to carry out research to understand the anxieties and motivations for customers in wanting to end the relationship. This includes finding out what each customer’s understanding was of their membership features and benefits, and what save tactics could prevent churn. The insight can be used to inform and experiment with powerful personalised value statements and save tactics, such as special offers. We’ve seen clients reduce customer churn by up to 24%, increasing customer lifetime value, by implementing such research and experimenting based on the findings.
Focus on time spent vs money saved
In a time of crisis, and high anxiety, customers recall more positive memories when asked to remember time spent with a product or service, rather than the money saved.
It’s because our relationship with time is more personal than our relationship with money. Time is also a scarce resource and increasingly meaningful to consumers in a time of uncertainty.
Experience with a product or service over time helps foster feelings of a personal connection with customers. Therefore, marketers need to be more aware of the meaning that products and services bring to the lives of their customers before they start focusing on their marketing efforts.
It’s understandable that brands are worried about subscription anxiety amongst their customer base during the current pandemic, and the potential implications on customer churn.
To prevent damaging churn in what is a very different marketplace from a few months ago they need to have an understanding of consumer psychology, and therefore behaviour in a crisis. This means they must undertake research amongst customers to truly understand their anxieties and motivations, and use the findings to experiment with customer communications to optimise the customer experience across all touchpoints.
By taking this approach, and reducing customer churn, they will also maximise customer lifetime value, which will help them to prosper in a very challenging marketplace.